By Lisa Seachrist
WASHINGTON - The cost of prescription drugs and remedies to lower those costs have hit the top of the agenda for both state legislatures and Congress.
Just this week, the Maine legislature delivered a "fair pricing" bill to Gov. Angus King; President Clinton released a study showing drug prices had increased at a rate higher than inflation; and Sen. Slade Gorton (R-Wash.) introduced legislation to lower drug prices. The flurry of activity signals the cost of prescription drugs will be a major issue during this election year. Unfortunately for the biotechnology industry, most of the activity this week suggested price controls of one form or another.
"Both parties see enormous opportunity to make great gains this year," said Carl Feldbaum, president of the Biotechnology Industry Organization (BIO). "The debate on this issue is very political. We are pulling out all the stops to make sure no price controls move forward."
The "Maine Prescription Drug Fair Pricing Act" was dropped on the governor's desk late Wednesday evening. The bill calls for the establishment of a fair drug pricing board, which would determine the cost of drugs and biologics throughout the state.
Patrick Kelly, director of state government relations for BIO, said the legislation was ill-conceived because it would stifle innovation and investment in Maine's biotechnology industry.
"Anything that smacks of a price ceiling will cause the capital markets to collapse," Kelly said. "There are a lot of better-looking investments out there if the price of drugs becomes fixed."
Kelly noted the bill still had a long way to go before it becomes law. First, the governor must sign it into law, and he has reservations about it. Second, should it become law, it will almost certainly become the subject of lawsuits claiming it violates the interstate commerce clause in the Constitution.
Sen. Gorton's approach looks to interstate commerce law as a model for his legislation.
Like many legislators of border states, Gorton recently led a group of senior citizens on a bus trip to Canada to buy prescription drugs. He reported the 22 seniors collectively saved $12,000 on their medicines compared with what they would pay in the U.S. Gorton, however, didn't assail pharmaceutical companies for being greedy, but for being unfair.
"Every single day of the week, Americans leave our country, either across our northern or southern boarders, to purchase products that were manufactured here in the United States, that were developed here in the United States, that benefited from American tax credits and from our appropriations to the National Institutes of Health," Gorton said in a press conference Wednesday. But, he said, they can buy drugs for far lower prices in Canada or Mexico or, for that matter, Europe.
The senator acknowledged drug companies needed to recoup the cost of research and development, but he questioned why American citizens needed to shoulder the bulk of those costs.
"There is one overwhelming reason for this price disparity," Gorton said. "Drug companies, obviously and logically, need to recover the cost of research and development for drugs. But, they impose all of those costs, or almost all of those costs, on American citizens and sell those drugs across our borders for simply the marginal price of manufacturing additional numbers of pills and a very small profit."
Gorton's attempt to deal with pricing disparities found between his home state of Washington and Canada centers around the expansion of an antitrust law known as the Robinson-Patman Act. This 60-year-old legislation prohibits price discrimination by manufacturers and wholesalers selling goods in interstate commerce.
Gorton's bill would extend that concept to the sale of prescription drugs across the borders. In effect, Gorton said his bill would create a basis for U.S. drug manufacturers to tell other countries that under U.S. law they must offer the same price for the drug to everyone. As a result, Gorton maintained the worldwide price would drop to roughly halfway between the present low foreign price and the high American price.
"My goal, my overwhelming goal, is to see to it that Americans pay less," Gorton said. "And I am absolutely convinced that they will pay less if the costs of research and development, legitimate costs by legitimate companies, are spread over all of the purchases of that company's product and not just over the American purchases."
The problem with the Gorton legislation is the fact it's unlikely to work because it's impossible to enforce, Feldbaum said.
"Senators and members of Congress up for re-election this year who live in the states bordering Canada and Mexico are under a lot of pressure to just do something," Feldbaum said. "But they just need to take a look at the drug innovation in any of these other nations to see price controls don't just stifle innovations, they strangle it."
The president took his shot at the price of prescription drugs by releasing a study conducted by Families USA noting the prices of the 50 drugs most commonly used by seniors had risen at nearly twice the rate of inflation in 1999 alone. Clinton took this study as an opportunity to push his Medicare prescription drug benefit plan.
"These debates on prices and the prescription drug benefit were predicted and predictable this year," Feldbaum said. "There is a slightly increased chance that one of these proposals will reach the floor of either the House or the Senate. We just want to make sure the debate focuses on access to drug through insurance coverage, not price controls."