http://www.washingtonpost.com/wp-dyn/articles/A29306-2003Aug21.htmlGreat editorial on a prescription drug pricing idea in the
Washinton Post today by a Northwestern University professor. The problem today with prescription drugs is that they are priced at a level that many people simply can't afford. But if we impose limits on what drug companies can charge, they will have a hard time recouping the massive R&D costs associated with creating a new drug. People can wail about drug companies making profits all they want, but the fact is that without proper incentives, no new drugs will be developed (NIH funding is a fraction of private R&D). In reality, drug companies make money from creating the idea for new drugs. The actual production of the drugs is quite mundane, but that is where the revenue comes from. So here is the solution:
First, massive awards would be made to the developers of safe and effective new patented pharmaceuticals. In effect, government would purchase drug patents; developers of successful new drugs would be rewarded for successful R&D. Second, use of the patents would be freely offered to any firms wishing to produce the pills. This would ensure active competition among generic producers and low prices, as competition forced prices down toward their low marginal production cost.
The two elements of the process, R&D and pill production, would be separated. Consumers would get low prices, and innovators would get financial awards. There are some major potential problems with the impementation of this program (determining the size of the award, making sure the system isn't abused...), but there is no reason why the details can't be worked out. Would it be too expensive? Does this reek of corporate welfare? Should government scientists research all new drugs? What do you think?