The legislative battle to provide insured Americans with prescription drugs at reasonable cost is shaping up as one of the great political issues separating liberals from conservatives.
The number of Americans with good prescription drug coverage is dropping, while the price of prescription drugs soars. Part of the reason is new biotechnology; scientists keep devising better drugs, and that research costs money.
But drug inflation also reflects the unique power of the pharmaceutical industry, which enjoys generous patent protection as well as billions in government research subsidies and a seal of approval from the Food and Drug Administration. Also, uniquely, the drug industry charges most American consumers retail prices, while every other advanced nation in the world pays wholesale, thanks to the bargaining power of universal health systems overseas.
On average, drug prices are between a third and a half higher in the United States; American consumers and taxpayers, in effect, subsidize consumers in Europe, while we pay the world's highest drug prices.
This issue has reached crisis proportions because of managed care and the particular burden of drug inflation on senior citizens. For non-elderly people, stringent cost containment has led many health plans to limit what drugs they pay for and to add "co-pay" requirements, shifting costs to consumers.
For seniors, who now spend more money on prescriptions than on doctor bills, the cost crisis can be devastating. Roughly half the prescriptions written go unfilled because many elderly people literally choose between drugs and food.
Medicare has never covered prescription drugs because of the political opposition of the pharmaceutical industry. If that sounds backward, consider the politics and economics.
The drug industry knows that if Medicare ever covered drugs, Medicare would use its enormous economic power as purchaser to negotiate lower prices. The other large government drug purchaser, the Department of Veterans Affairs, does just that, and gets prices 30 percent to 40 percent lower than other health plans.
You would think that trading higher sales volume for lower prices would be a good deal for the drug industry, but the industry supports Medicare coverage only if it comes with no price discipline. This is politically improbable, so the stalemate has continued.
The Clinton administration proposed adding a Medicare drug benefit but fudged the key question of whether it would include negotiated prices. This at least is a beginning, and it gives Democrats a powerful election issue. Sen. Ted Kennedy and several House liberals have sponsored a better approach, explicitly tying Medicare prescription coverage to discounted drug prices.
What is the right's response? A recent Wall Street Journal editorial headed "Free Viagra!" is emblematic:
"[F]ar more dangerous than the inevitable runaway costs will be the inevitable price controls on drugs that will follow. As Milton Friedman once said, there's no such thing as a free lunch, and we'd add, especially if it's Viagra."
Viagra! You'd think that elderly people -- denied lifesaving prescriptions for heart disease, diabetes and other debilitating conditions -- were clamoring for government to subsidize better erections. The same Wall Street Journal, in a news series last fall, documented just how the drug crisis is leaving millions of Americans unable to afford prescription medicines.
The Journal editorial brightly adds that 65 percent of seniors already have "some kind of drug coverage" thanks to HMOs and supplemental private "medigap" coverage sold by insurance companies. What the Journal doesn't point out is that good medigap coverage, which covers expensive prescription drugs, costs upward of $200 a month and that only about 3 percent of seniors had such coverage.
With drug prices increasing at four times the rate of all health expenditures, 52 percent of all drug costs are now being paid out of pocket. And precious little of that is for Viagra.
If the political right thinks it can wish away this issue by denying the crisis and disparaging the needs of elderly Americans, it is profoundly out of touch with the daily experience of ordinary people. Free Viagra indeed.
Robert Kuttner is co-editor of the American Prospect.