Wall Street Journal Editorial Advises Against Price Controls in Medicare Drug Benefit

Pharmaceutical company Novartis' decision to move its research operations from Switzerland to Cambridge, Mass., provides more evidence that imposing European-style price controls on a Medicare drug benefit is a "bad idea," according to a Wall Street Journal editorial. Novartis' decision was prompted by Europe's government-run health care systems, which are "monopoly purchasers" of prescription medications that "push drug prices down to 40% to 60% of U.S. levels," the editorial says. The United States offers pharmaceutical companies an environment that "reward[s] innovation" through "strong patent protection and [a] comparatively free medical market," the Journal says. However, the editorial says that America's "competitive advantage" is threatened by proposals in Congress that would "add a prescription drug benefit to Medicare that, without a companion reform, is sure to mean European-style price controls on the 34% of drugs consumed by seniors." The editorial notes that competing Republican and Democratic proposals for a Medicare drug benefit both would give the government a "big say" in drug prices. However, government-mandated prescription drug price controls are a "bad idea," the editorial says, noting that such controls on Medicare reimbursements have prompted an "unprecedented" number of physicians to refuse to accept new Medicare beneficiaries. The Journal concludes, "America's growing dominance in pharmaceuticals is yet another reason to try again and do the drug benefit right" (Wall Street Journal, 5/8).