Economists Opposed to Pharmaceutical Price Controls

If you click on the link, you will see the list of economists who signed this letter. I guess that we will find out if it helps the fight. The surprise to me is that this debate keeps on having to take place. (Ben Zycher at the Manhattan Institute did all the heavy lifting on this.)

We are deeply concerned about proposed legislation that would lead to negotiation of pharmaceutical prices by the federal government for the new Medicare Part D drug benefit.

Under current law, negotiations over prices are conducted between the pharmaceutical producers and private firms administering drug benefit programs for Medicare beneficiaries. With federal spending on pharmaceuticals is projected to grow to about $100 billion in 2007 — over 40 percent of the U.S. total —some policymakers now advocate federal negotiation of prices with the pharmaceutical producers, in order to use the large size and bargaining power of the federal government to achieve sharply lower prices.

Federal price negotiations would represent a policy change carrying significant risks for research and development investment in new and improved medicines. A substantial body of research shows that similar federal drug programs impose prices substantially lower than those negotiated in the private sector, and that such lower prices inevitably will reduce research and investment in new and improved medicines. This slowdown in pharmaceutical innovation will yield highly adverse effects upon future patients in terms of reduced life expectancies.

We urge Congress not to support negotiation of drug prices by the federal government.