Say Anything Blog

Throughout the health care debate I’ve heard politician after politician say that they want to “control health care costs” for us, and it always makes me cringe.  Because if there is one thing we don’t want it’s the government controlling health care costs.

Why?  This article from 2007 about how price controls on prescription drugs has retarded drug innovation in Europe (in direct contrast to America) is as good an example as any:

For those hoping that Europe might be redressing the imbalance in R&D innovation compared with the United States, two recent reports make gloomy reading. According to a competitiveness report published in November 2006 by the European Commission’s high-level Pharmaceutical Forum, the US has established itself firmly as the key innovator in pharmaceuticals since 2000. “That dominant position continues to expand… a disproportionate share of pharmaceutical R&D is performed in the US,” it laments.

The discouraging conclusion for European R&D is backed up by Kenneth Kaitin, Director of the Boston-based Tufts Center for the Study of Drug Development, which released a study on drug approval times and new drug availability in Europe and the US earlier this year. He says pharmaceutical companies are increasingly submitting their new drug applications in the US long before they apply in Europe — and as a direct result, they are focusing their R&D efforts in the US too. ...

Nor was this ‘drug gap’ due to faster FDA processing: both agencies have an identical mean approval time of 15.7 months. Instead, said Kaitin, drugs hit the US market first because the sponsors choose to submit them there first.

The advantage of the US is almost wholly down to its lack of price controls, says Kaitin. “Investors tend to invest in places where there is less control over prices, and it is always better to do your clinical trials in the countries where you plan to market,” he says.

America has the best prescription drug industry in the world because we don’t have price controls.  That means higher prices, but it also means more lives saved.  More suffering eased.  More diseases treated.

Sounds like a bargain to me.

But looking beyond just prescription drugs, imagine if the government started to control prices across the whole industry.  How many talented people would leave medicine because their ability to be compensated for their time and talent would be controlled?  How many researchers wouldn’t bother to innovate or invent the new procedures and technology that allow us to live longer and longer lives even as we, as a society, become fatter and more sedentary because the return on their investments of time and talent would be diminished by government?

The idea of controlling prices is a nice one.  We’d all like for things to be cheaper.  The problem is that in order to control prices the government must drag everything down to the lowest common denominator.