Attacks on Medicine, Attacks on Small Business

What’s the deal with politicians picking on pharmaceutical manufacturers? After all, what do these companies do that’s so bad? Oh, that’s right, they make medicines that improve and save lives.

But this costs a lot of money in terms of research, development, etc. And many politicians just think – contrary to basic economic common sense – that government can wave its magic wand and make those costs just disappear, at least for consumers.

Consider a few points from an article in the January 23 Wall Street Journal titled “Pharmaceutical Industry Faces Increased Scrutiny.”

• All the leading Democratic presidential candidates and, on the Republican side, Arizona Sen. John McCain, support importing less-expensive drugs from Canada. Democrats also back allowing Medicare, the federal health-care insurance program, to negotiate with the industry over pharmaceutical prices.

• Democrats' plans to expand health care to more Americans, though they could add customers to the drug companies' rolls, also risk granting Washington even more influence over the industry's revenue.

• On the campaign trail, Sen. Clinton told a crowd recently at the California State University Northridge campus that she wants to "give Medicare the opportunity to bargain to get cheaper drug prices." The New York Democrat added, "We pay for clinical trials...and then we end up paying the highest cost in the world because other countries drive a better bargain." Her rhetoric echoed similar attacks by her Democratic rivals, and even Sen. McCain, in a debate on Jan. 5, asked, "Why shouldn't we be able to reimport drugs from Canada?" answering himself, "It's because of the power of the pharmaceutical companies." When former Massachusetts Gov. Mitt Romney urged him not to cast the drug makers as the "big bad guys," Sen. McCain countered, "Well, they are."

What’s being talked about here is the imposition of price controls. There’s a reason why the U.S. is the global leader in developing new drugs. It’s because, unlike most other nations, we do not have price controls. Businesses and investors have a chance to earn a return for their massive risk taking and investments. Inflict price controls initially through Medicare, or indirectly through re-importation, and there goes the U.S. pharmaceutical industry’s leadership. And with it will go many high paying jobs.

And by the way, this is not just about big companies. According to the latest data (2005) from the U.S. Census Bureau, 55 percent of U.S. pharmaceutical and medicine manufacturers have fewer than 20 employees, and 90 percent less than 500 workers. A political attack on the pharmaceutical industry amounts to another political attack on small, entrepreneurial U.S. firms.