The Placebo Effect

The widely publicized pledge by the Pharmaceutical Research and Manufacturers of America (PhRMA) is welcome news--but only as a beginning, not an end.

The proposed $80 billion in savings over 10 years is not enormous when put into perspective. According to a Health Affairs journal article that breaks down 2007 U.S. health-care expenditures, this country spends $230 billion annually for prescription drugs, with 20 percent paid by Medicare. The annual growth of these costs has averaged 6 percent, with even higher increases for Medicare. As baby boomers age, these drug expenditures will climb. It's a sure bet -- and PhRMA knows it.

American taxpayers and employers must pick up this growing tab. Unlike other countries, our government does not use its purchasing power to reduce Medicare pharmacy prices. My Detroit patients can cross the bridge into Canada and enjoy a substantial discount for most medications. This is because our friends to the north negotiate "hard-ball" with drug companies. This is the outcome that PhRMA fears will happen in the U.S.

The pharmaceutical companies have contributed mightily to improving health around the world and deserve our thanks. They have also been rewarded with large profits, the majority of which are earned in the U.S. Like all sound businesses, they have recognized the opportunity and seized it. This has been good for their shareholders--but not so good for U.S health-care costs.

While PhRMA's latest offering sounds attractive, it is a placebo for a more fundamental and politically tough issue. Americans need the pharmaceutical industry--but they do not need prescription drugs priced more expensively than anywhere else in the world.

The big question is whether our government will use its considerable purchasing power to cure this problem--or be satisfied with a sugar pill.

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Mark Kelley

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The Placebo Effect