Drug Prices: Reform Still Waiting

Earlier this year, Sen. James M. Jeffords (R-Vt.) introduced a bill to allow Americans to buy U.S.-made drugs imported from Canada, where medications like Flonase, a nasal spray for allergies, and the antidepressant Prozac cost less than half of what they do in the United States.

Jeffords’ original bill was well intentioned, but the bill that Congress passed just before election day was a sham, riddled with devilish eleventh-hour loopholes. Under the legislation drug makers are able to strong-arm distributors into raising prices on the imported drugs and block the sale of imported drugs altogether by denying importers access to the U.S. labels that must be used on any prescription drug sold in the United States.

Health and Human Services Secretary Donna Shalala did the right thing Tuesday in announcing that her department will not implement the legislation. However, the status quo should not stand.

President Clinton said Wednesday that he will propose legislation to fix the defects in the current law. However, responsibility for reform surely will pass to the next Congress and George W. Bush. Democrats and the president-elect agree on two basic Medicare reforms: that Washington should provide prescription drug coverage for the lowest-income seniors and catastrophic drug coverage for all seniors who had spent $6,000 out of pocket on drugs.

There is still great disagreement over whether the new federal funding should be used as a lever to drive down prescription drug costs.

Canada’s prices are dramatically lower than those in the United States primarily because the prices of patented prescription drugs are regulated.

Bush opposed price controls as a presidential candidate, but they will be harder for him to dismiss as a president because of their growing popularity in state legislatures. Bush--who often said that his key health reform goal will be “removing regulatory barriers” that limit how states can spend federal health care dollars--will be hard-pressed to prevent states from spending new federal dollars in the ways they think best.

In the last year, Florida passed a law that uses state subsidies and political muscle to persuade pharmacies to offer discounted rates to Medicare patients. Maine approved a program to use the state’s purchasing power to “extract” rebates and discounts from pharmaceutical companies. Vermont began allowing uninsured residents to buy drugs at the same discounted prices available to Medicaid recipients, inspiring Iowa and Washington state to develop similar programs.

After he occupies the Oval Office, Bush will also be under pressure to contain U.S. health care costs, which are rising at twice the rate of inflation largely because of soaring prescription drug costs. Pharmaceutical companies, which gave generously to Bush’s presidential campaign, will work to derail any government action to control costs. But another strong force--Bush’s own respect for states’ rights--ought to free the states to act on their own.