PRESCRIPTION DRUGS….With the battle for majority leader out of the way, Nancy Pelosi can now begin to concentrate on her legislative agenda. One of the top items on that agenda is allowing the federal government to negotiate prescription drug prices with pharmaceutical companies, a common-sense proposal that would result in lower costs for both the government and for senior citizens on Medicare.
But wait. If the feds negotiate prices, then prices will go down. And if prices go down, pharmaceutical companies might make less money. And if pharmaceutical companies make less money, they’ll do less basic research and churn out fewer lifesaving drugs. As Jonathan Cohn says in The New Republic, this is “a potent argument.” It’s also probably wrong:
The most important basic medical and scientific research that leads to major medical breakthroughs usually takes place under government auspices ? typically, through grants from the National Institutes of Health. In other words, taxpayers ? not drug companies ? are the ones financing the most important drug research today. So, even if the pharmaceutical industry did reduce its research and development investment because of declining revenues, what we’d lose probably wouldn’t be the next cure for cancer ? it would be the next treatment for seasonal allergies, and likely no better than the ones we have already.
Cohn also addresses some of the other arguments for insisting that the government should pay above-market prices for prescription drugs, and finds them all wanting. Read the whole thing.