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The Daily Wildcat

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The Daily Wildcat

The Daily Wildcat



    With twin announcements from Elizabeth Edwards, the wife of presidential candidate John Edwards, and Tony Snow, the White House press secretary, that their respective cancers have returned, public debate has again focused on the expense of cancer treatments. With prices that can peak at more than $50,000, some are urging Congress to set price caps on these life-saving drugs. Should the government be involved in setting drug prices?

    Price caps not enough

    Although Genentech has voluntarily capped the price of Avastin, this cap ($55,000 annually, regardless of insurance or income) does not remedy larger problems within the drug regulation process.

    This is a step forward, but it isn’t enough. $55,000 per year is far more than many cancer patients can afford for this life-prolonging drug.

    The Food and Drug Administration grants patents to drug companies, but patents do not expire for 20 years, thus permitting a company to be the only manufacturer of a drug for a generation.

    This setup of the American drug industry undermines capitalism. When one seller controls the market on a new drug, competition does not exist. Capitalism requires multiple sellers and buyers, so the price may regulate itself. Competition is required for this to occur. This situation is essentially government-approved monopoly. Price caps do not change the fact that demand for drugs is inelastic and only one company can own a drug.

    Also, the inelastic demand for prescription drugs creates other problems. If one drug that treats a condition is the only drug available, patients do not have other options. The situation is compounded by the extremely harmful side effects of many drugs.

    Drug price caps are insufficient to remedy the myriad ways that patients are powerless in the face of pharmaceutical companies.

    For example, Norplant, a contraceptive drug sold in the ’90s, caused depression, ovarian cysts and heavy, irregular bleeding. It was one of two drugs that accomplished the same results; both have serious side effects, leaving consumer without other options.

    The FDA removed it from the U.S. market after 50,000 women filed lawsuits against Wyeth, the drug’s manufacturer, citing the slow response time and number of women affected. Wyeth won the case.

    Norplant is still sold abroad, despite its serious health implications for women, and is essentially dumped on the markets of countries with even less consumer power than the U.S.

    When companies act unethically, the FDA’s recourse includes fines and retraction of approval. The FDA can also put black labels (indicating the dangerous side effects) on drugs. This, however, still doesn’t fix the fact that consumers do not have alternatives.

    Norplant is an extreme example, but Congress can change FDA rules to protect individuals. If the new Democratic majority decided to prioritize the health care of Americans, it would do well to propose new penalties for unethical marketing of dangerous drugs.

    The argument against price caps dictates that price regulation eventually hurts people. I’m fairly certain that patients who need drugs they cannot afford (because no competing provider exists) would disagree.

    Genentech capped the price of Avastin voluntarily, after industry professionals and patient groups put pressure on the company. I commend this decision and look forward to a more comprehensive reform of health care policies.

    Ultimately, however, capping the price of drugs does not fix FDA policies that allow dangerous drugs to stay on the market. Other solutions, such as reducing patent lifespan or raising the standards of the drug approval process, have the most potential to help consumers. Until the market offers more sellers of pharmaceuticals, consumers will be at the mercy of the monopolized market.

    Price cap or no price cap, economists cannot measure the impact that prescription drugs have on the lives of individuals.

    Allison Dumka is a political science senior. She can be reached at

    Price caps hurt the consumer

    As far as I can tell, this is what makes markets for pharmaceuticals so complicated: Unlike other goods, cancer drugs don’t seem to have a whole lot of substitute goods, and the demand for them may be completely inelastic; that is, the demand for life-preserving drugs doesn’t decrease too much as prices increase.

    For instance, if Coca-Cola starts raising prices through the roof, consumers either stop drinking soda or get on board with Pepsi. Easy enough. In fact, that kind of consumer initiative is even beginning to happen more and more with oil.

    As the price of gasoline gets higher, consumers look to alternative fuels, Japanese cars or public transportation, pressuring oil providers to cap their prices where they will maximize profit by retaining customers.

    But the problem of applying this standard logic is difficult when the demand for certain goods is so inflexible. As the price of many drugs rise, consumers may have few other options – drug companies operate semi-monopolistically. A cancer patient doesn’t have the luxury of boycotting his medicine until his drug provider caves and lowers the price, and, often, competitor’s goods are just as expensive.

    So the answer, cry consumer advocates everywhere, is to use Congress, the (supposedly) most powerful force of the people, to simply force pharmaceutical companies to put a cap on how much they can charge.

    Yet we would do well to acknowledge that government price controls are the broadest tool we, as consumers, can wield. From the oil price caps in the 1970s to the rent control laws in New York City, state-mandated prices disrupt markets and end up making most people worse off time and time again. There is a reason few serious economists support sweeping government price regulation.

    But the problem of choice is very real for millions of Americans, and, unfortunately, it seems that the government may need to play some small role in helping foster the kind of competitive business that prevents a monopolistic environment where pharmaceutical companies can charge limitless prices to consumers who have no other options.

    But it is overly simplistic and foolish to think that because drug companies make large profits when they could operate successfully with less, the government should get involved in price regulation.

    After all, the promise of making big money fuels big research, which has lead consistently over the years to drugs that have dramatically improved the quality of living. (The fact that some drugs have negative effects and some unethical pharmaceutical companies have suppressed information about others does nothing to lessen the positive impact that prescription drugs have had overall – think penicillin, not Prozac).

    If the government must get involved in private business, it should do so in a way to foster more business (and thus competitiveness) or in order to strengthen HMOs so that consumers present more of a threat to big pharmaceuticals.

    We should expend all of our energies in trying to adjust markets in the most minimal way possible, instead of just looking for quick fixes like ridiculous price controls that will ultimately fail to improve both the quality of life and the strength of the economy.

    Only in that way can we achieve healthy competitive business and a less gloomy future for sick Americans.

    Stan Molever is a philosophy senior. He can be reached at

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