By Jeff Stier, Esq., Henry Miller
Posted: Sunday, November 15, 2009

EDITORIAL
Publication Date: November 15, 2009

This piece first appeared in the Orange County Register on November 15, 2009:

The Pelosi health care juggernaut, if it becomes law, will hurt critical industries and endanger all Americans. After decades of life-saving and cost-cutting scientific innovations from innovative drug and medical-device companies, the government appears about to step in and stifle the research and development that is our best hope for improving health outcomes (and for a robust recovery from the recession).

The House health care overhaul championed by Speaker Nancy Pelosi may cost the pharmaceutical industry $150 billion over a decade -- nearly double the amount the companies conceded when they cut a White House-approved deal this summer with Sen. Max Baucus, the Democratic chairman of the Senate committee that sent its bill to the Senate floor.

The Pelosi bill is a prescription for fewer new life-saving drugs. By stifling innovation, it will hurt not only industry, but all of us who would benefit from new drug development.

Democrats in Washington are out to cut health care costs at the expense of the research-intensive (as opposed to generic) pharmaceutical industry. Yet drugs often improve the span and quality of life in a remarkably cost-effective way. Innovative new drugs have helped many patients avoid costly hospitalization, for example. From 1980-2000, the number of hospital days per 100 population fell from 129.7 to 56.6, a drop of 56 percent -- so that Americans avoided 206 million days of hospital care in 2000 alone, according to Medtap International, which provides health economics and outcomes-research services.

And a study in 2000 sponsored by the Agency for Health Care Policy and Research concluded that increased use of a blood-thinning drug would prevent 40,000 strokes a year, saving $600 million annually. A 1997 study by the National Bureau of Economic Research found the costs of treatment per episode of major depression fell by 25% from 1991-95, largely as a result of new medicines.

New drugs are also generally better than older ones at reducing mortality. In a study of patients who took prescription drugs between January and June 2000, those who took newer medications were less likely to die by the end of 2002.

Yet Washington has grown increasingly hostile to the industry. R&D investments per new drug introduction nearly doubled between the early '80s and early '90s -- but government approvals have been dropping. Even after drugs are approved for marketing, only about three in ten recoup their development costs.

And now Congress is out to make the climate for new drug development significantly worse. The president has bragged that he intends to eke out huge cost savings at drug companies' expense, "The pharmaceutical industry has already said they're willing to put $80 billion on the table," adding, "We might be able to get $100 billion out or more." The industry was willing to "give" back its profits because it was told it wouldn't have a seat at the negotiating table if it didn't go along.

But now Speaker Pelosi has set up her own "negotiating table" -- nearly doubling the amount Washington would confiscate from the industry and planning vast new cuts in what Medicare would pay for drugs -- a provision that the industry was assured was off the other table. Give 'em a hand, they'll take an arm.

Another of the insidious solutions under consideration is redolent of H.L. Mencken's quip that for every complex problem there is an answer that is clear, simple and wrong. Thus, if we want to spend less on drugs, why not just legalize a system to let us import cheaper drugs from Canada? This is a smoke-and-mirrors solution. In fact, there's nothing intrinsically less expensive about drugs from Canada; it's only that the Canadian government imposes price controls. If huge amounts of these lower-priced drugs began to be imported into the United States, in order to prevent drops in revenue the drug companies would simply raise the prices in Canada. Abracadabra: End of savings!

Nor are the drug companies the only target. The Pelosi bill has $20 billion in "user fees" (read: taxes) on medical-device manufacturers. New devices such as artificial joints, pacemakers and insulin pumps are often developed by small start-up companies -- those least capable of paying these punitive up-front regulatory expenses. And the working Senate bill aims at $40 billion from the device industry.

The tactics employed by the administration and Congress add up to sheer bullying -- and while they're battering the drug industry, patients are the ones ultimately who will get beaten up.


Henry Miller: Physician, former FDA official and fellow at Stanford University's Hoover Institution.  Jeff Stier: Associate director at the American Council on Science and Health.