Why Drugs Cost So Much / The Issues '04: Why We Pay So Much for Drugs

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One reason the industry does so well in the capital is its potent lobby. It maintains more than 600 lobbyists--more than one for every member of Congress. It spent $435 million to influence Washington from 1996 to 2003 and handed out $57.9 million in contributions from 1991 to 2002, according to Common Cause. Says Representative Pete Stark, a California Democrat who has waged a decade-long war for lower Medicare drug prices, a move that government auditors say could save taxpayers nearly $1 billion a year: "These guys are awfully good. I only wish they were on the right side of the issues. They don't care about curing people. They only care about profits. They are very effective. My only hope is that sooner or later they are going to overreach."

The lobbying is about to reach critical mass with states and cities squeezed by runaway health-care expenditures in general and the unchecked increase in drug prices in particular. Both have grown irritated with Congress's failure to consider pricing alternatives and have become especially annoyed lately with the FDA's threats to initiate legal actions against any government that seeks to enter into buying arrangements with the Canadians to slash their prescription drugs costs for employees, prisoners and Medicaid recipients. The latter group represents a significant financial burden for the states. Although the feds kick in some Medicaid money, overall spending on drugs topped $23 billion in 2002, with New York accounting for $3 billion and California for $2.6 billion. The Democratic leader of the California state senate said last week that he would introduce a bill to require California to consider buying Canadian drugs under state programs.

Although no state has yet begun to do that, two local governments--Springfield, Mass., and Montgomery, Ala.--are buying drugs and saving millions. Some two dozen other cities and states have begun efforts to link up with Canadian suppliers. "Cash-strapped state and local governments are looking for relief in a logical place," says Representative Jo Ann Emerson, a Missouri Republican. Further fueling the states' animosity toward the feds, the FDA has threatened legal action against state and local governments that pursue the Canadian option, thereby increasing the likelihood of another congressional showdown.

NEEDED: A BETTER WAY TO CUT PRICES

While it may provide some short-term relief, buying drugs in Canada is indeed a roundabout way for the U.S. to address the high cost. And selling drugs over the Internet, with the FDA's refusal to even consider a regulatory framework, isn't the answer either. No one disputes that while there are many legitimate online pharmacies, the Internet at the moment also has its share of charlatans and hucksters offering dubious and possibly dangerous products. When TIME asked a PhRMA spokesman why the industry simply did not designate one or more Internet pharmacies as approved sites, he replied, "We really--we actually really don't have a position on that. It's the FDA that is investigating the Internet pharmacies and has some concerns about it."

And what's the FDA's position? Says Dr. Janet Woodcock, director of the Center for Drug Evaluation and Research: "There's no structure set up for regulating a pharmacy."