Tuesday, October 20, 2015

Hillary on Drugs

Not long ago ago Democrat presidential candidate Hillary Clinton declared a war on drug prices. At a forum in Iowa she said that asking people to pay thousands of dollars for pills they need to stay alive is not how the market is supposed to work and was a sign of "bad actors making a fortune off of people's misfortune."

Indeed, a recent Kaiser Family Foundation poll showed that more than 70 percent of Americans think drug costs are unreasonable and want limitations on what drug companies can charge for medicines that treat serious illnesses.

Real events feed this sort of thinking. Turing Pharmaceuticals, for example, has come under fire for a dramatic hike in the price of Daraprim, which has been used for decades to treat toxoplasmosis and more recently to treat AIDS and cancer patients. Turing purchased a quantity of the drug along with marketing rights, and hiked the price to $750 per tablet from $13.50. Such a steep increase appears to defy reason, and to make Clinton’s case, although the economic factors involved in the price hike are not discussed when Turing is getting run through the wringer.

Clinton concludes that high prices are routinely due to price gouging, as appears to be the case with the Turing price hike. That is the populist’s first response. But she either lacks understanding of how businesses work, and in particular the realities of developing needed pharmaceutical products, or she uses this emotional response to her benefit, or perhaps both.

As reported on earlier this month, “In the United States, it takes an average of 12 years for an experimental drug to travel from the laboratory to your medicine cabinet. That is, if it makes it.” And if that isn’t sobering enough: “Only 5 in 5,000 drugs that enter preclinical testing progress to human testing. One of these 5 drugs that are tested in people is approved. The chance for a new drug to actually make it to market is thus only 1 in 5,000. Not very good odds.”

Does Clinton have even a suspicion of the huge investment pharmaceutical companies have to make in the 1 drug in 5,000 that actually gets to market? reported that the Eli Lilly company blog contained a post noting that “The average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billion.”

And Hillary Clinton thinks the cost of pills is too high? How many pills must be sold to recoup that investment? And the lower the price, the more pills have to be sold to pay for developing a drug to help people with serious health problems.

Her solution, predictably, is more involvement by the federal government, the Democrat solution to nearly everything.

However, more than a little bit of these incredibly high investments is due to the federal government. “Regulating pharmaceutical drugs to a certain extent is important to prevent dangerous medicines from being released on the market, yet the current amount of regulation is stifling competition,” according to Scott Gottlieb, a medical doctor and resident fellow at the American Enterprise Institute writing in the Wall Street Journal. “The FDA has increased the security on the manufacturing process and as a result several U.S. drug plants have closed their doors. The time intensive process of approval and the recent shutdown of plants is creating drug shortages and monopolies, causing the prices of drugs to skyrocket.”

The reality is that the cost of drugs amounts to about 10 percent of health-care spending, and the amount of health-care spending used on drugs has not changed in 50 years. That could be changing.

If Clinton is really interested in bringing down the price of drugs, she would acknowledge the role over-regulation and slow approval processes play in the price of drugs, and pledge to streamline the process instead of demonizing drug manufacturers and proposing even more government intervention.

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