Monday, March 27, 2006

Competing to be the party of big government

"Dems Lambast Prescription Drug Benefit" reads the headline. You'd think, considering how the Democrats are trying to reinvent themselves as "fiscal conservatives," that their criticism of the prescription drug behemoth is its size. But they're not criticizing that the program could grow to be the most expensive piece of legislation ever:
WASHINGTON Mar 25, 2006 (AP)— Seniors need another six months to sign up for the Medicare prescription drug benefit, a Democratic congressman who's also a pharmacist said Saturday.

Rep. Marion Berry of Arkansas also said the government needs to think long and hard about meaningful Medicare reform.

Berry said people eligible for the prescription benefit are confused by the various offerings, and some are even paying more for medicine now than they were before they joined the program.

"We need to extend the sign-up period by six months to give seniors more time to make sense of this benefit, and we need to eliminate the Bush administration's prescription drug tax," Berry said in the Democrats' weekly radio address....

"I will never forget one conversation I had with a pharmacist from DeWitt, Ark., who had given away $60,000 in free medications in just one week because he knew his customers might die if they did not receive their refill that day. Medicare Part D is the FEMA of health care," Berry said.

Medicare could bargain for lower drug prices to save money for the government and for the elderly, he said.

"Every American deserves the best health care we can provide. We do not have to accept a failed benefit and we do not have to tolerate a culture of corruption or leaders who are afraid to admit their mistakes. Democrats have the answer, and under a Democratic Congress, we will give seniors the prescription drug benefit they were promised years ago. Together we can do better," Berry said.
The Democrats aren't criticizing the Medicare bill because it's a waste of $700 billion over the first ten years. They're criticizing it because it doesn't go far enough! This is yet another manifestation of Democratic hypocrisy, particularly when Democrats can get all sorts of misleading headlines from sympathetic mainstream media. Once again, "we" must provide this and that, but just who's picking up the tab? Who will bell the cat?

The one thing Berry got right is equating "Medicare Part D" with FEMA: both should be abolished, and that can't happen too soon.

Berry gave a sob story about a pharmacist who gave customers "$60,000 in free medications in just one week." Don't believe it for a second. He simply distributed the drugs, knowing the federal government would later pay him -- by taking money from everyone else. Let's not kid ourselves: the pharmacist knew what he was doing, and he certainly knew he was doing no act of genuine charity. As a matter of economics, government again skews supply and demand curves, because it takes wealth from some people and gives it to others.

It's yet another fallacial notion about the pharmaceutical industry that a government can "bargain" to buy drugs at lower prices. Drug companies can only go so low, because if marginal revenue falls below marginal cost, they will stop selling. Even if marginal revenue still exceeds marginal cost, if it's not profitable enough, then the company will pursue another drug or possibly shift to different endeavors. Let's say that in the natural equilibrium of the free market, consumers might value life-prolonging drugs more than drugs to treat, for example, erectile dysfunction, and pharmaceutical companies are happy to offer the former because of higher profit. So when government makes it too expensive to make Lipitor, which cuts into profit margins because consumers aren't willing to pay the higher prices, then let's not be surprised when we have more Cialis.

If politicians were really serious about making drugs more affordable, they would eliminate all the FDA red tape (preferably abolish the FDA altogether) that drives up pharmaceutical companies' costs. Because of the studies and years required to obtain FDA approval, it costs an average of $800 million to bring a new drug to market. That $800 million used to come from individual customers, but now with the Medicare prescription drug bill, the federal government can pay it via the taxpayer's wallet. Am I the only one who sees the senselessness in government "bargaining" to reduce prices that it drove up in the first place? It's as senseless as the "War on Drugs," one of whose effects is making criminalized drugs more scarce, and hence a much more profitable and attractive business than before.

While environmental activists suggest we can find cures for cancer in the rain forests, it would be more effective to let pharmaceutical companies do the research without having to jump through all the bureaucratic hoops. And if a particular drug has certain dangers, whether it's a "clot-buster" for stroke victims or a drug that suppresses a transplant patient's immune system, then caveat emptor. Let the buyer beware and assume the risks, because someone might consider the possibility of death worth the chance at life. You, I and no one else -- and that includes government -- have no moral right to deny someone that choice.

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Blogger septagon said...

Another example of how good intensions make for bad government. We all feel that people should have access to life enhancing and prolonging drugs, and people and politicians are quite happy to use government coersion to do it. Your rightful property (i.e. wages) is lawfully stolen through taxes to be used in a purpose which is not constitutional ie Medicare and the FDA. This results in a poorer society through the misallocation of resources.

Having the government pay for prescribtion drugs is a subsidy. This essetially lowers the cost of drug use which has numerous unidended affects:

1. It allows the drug user to continue using the drug beyond what they would otherwise be able to afford. Taking a pill is a lot easier than other possible treatments for medical conditions. Enabling people to be placed on a maintenace of drugs essetially addicts them and decreases the necessity of actually curing the condition the drugs are supposed to make livable.

2. It allows doctors the easy why out by simply proscribing something for what ails you. Cost is not an issue since the government will be picking up the tab. Confronting patients to make lifestyle changes are difficult and time consuming. It also decreases the doctors necessity to find better and permanent solutions to health issues.

3. It provides the Pharmacuetical companies with a guarenteed market for their products. There is less pressure to make the drug discovery process cheaper and more efficient because the government is picking up part of the tab. Companies cannot make money if they cannot sell their products. A drug that is too expensive for people to purchase will not be as profitable because the market for it will always be small, but if the government is paying for it there is less incentive to improve the drug development process.

I believe that placing people on maintenance regimens of drugs to improve or extend life is essentially drug addiction. You have not cured the underlying causes of the disease or condition and you have lessened the needed to actually find a cure. Meanwhile, this is all made possible by the government stealing money from its own people to spend on drugs that would otherwise be allocated to other things

The FDA is not a protection for the drug users from unsafe drugs nor does the FDA take on the liability for drugs it approves. Even with the enormous cost of compliance with FDA regulation unsafe drugs are being used by the public everyday and new ones are being approved every year while possibly efficatious drugs languish in the approval process. What would be the difference without the FDA?

1. The cost of compliance is akin to a hidden tax for pharmacuetical companies. The bureacratic red tape wastes scarce resources pleasing government bureacrats instead of being investing in drug develpoment.

2. Companies will always ensure that their drugs are safe. Killing or injuring your customers is bad for business. Voluntary measures will always be more effective than goverment dictates.

3. Companies would want to streamline the release process of drugs to market as much as possible thus getting good drugs to the market faster. The investiment by the company and the shareholders cannot begin to payoff until they start deliverying to market. They would make darn sure they are safe since the liability would be disasterous.

Having government stick to its true task of protecting your rights and leaving healthcare to the professionals and the market will make us all better off. Resources would become better allocated through market forces which would make us all healthier and richer in the long run.

Tuesday, March 28, 2006 3:58:00 PM  

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