Sunday, September 06, 2009

Throwing Darts at HR3200 - Day 7

William A. Jacobson continuesThrowing Darts at HR3200 - Day 7.

It seems the section covered here is intended to force drug manufacturers to increase the discount they already offer to Medicare. What could be wrong with that?

Well, for starters, people who are not on a government plan who will end up subsidizing the discounts. Am I wrong on this?

A Congressional Budget Office report in 1996 examined the effect of these rebates, and found:
Although the basic rebate has lowered Medicaid's expenditures on outpatient prescription drugs, spending on prescription drugs by non-Medicaid patients may have increased as a result of the Medicaid rebate program.
This makes sense. Unless pharmaceutical companies are to lower their research and development budgets, which are enormous, the companies have to make up the revenue from the private sector purchasers of their products.

There is no free lunch when it comes to rebates forced on the pharmaceutical industry by government. Either private purchasers pay, or society pays through decreased research and development.

IF you're satisfied with the state of medicine as of 2009, great! If, on the other hand, you have some condition that can't be cured yet, or even treated yet, you might want to avoid putting the brakes on research.

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