Prescribing away drug R and D. (Correction, Please!).

ITEM: "Prescription drug costs in the United States are skyrocketing," writes William Novelli, the executive director of the American Association of Retired Persons in the AARP Bulletin for July-August 2002. AARP, he says, "is working hard to solve the problem" - with legislation and litigation. "We are lobbying hard for drug coverage in Medicare...." Moreover, "we are also going to court to break anti-competitive practices that delay or prevent lower-priced generic drugs from reaching the market and bringing down high drug costs."

CORRECTION: While overall drug spending did rise by 13.6 percent in 2000, the average price of drugs only went up by 3.9 percent, comparable to overall increases elsewhere, as noted by Lawrence Reed, president of the Mackinac Center for Public Policy. When research and development time is taken into account, pharmaceutical profits are not markedly different from those of other industries.

Development costs to bring just one drug to market can run to $800 million, and the time needed for government approval means that the average drug only has about 11 years to recoup research and development investment and turn a profit. Nevertheless, as described in an American Enterprise Institute book by Patricia Danzon, Pharmaceutical Price Regulation, 45 percent of the new drugs sold worldwide come from the U.S. This compares to 14 percent in the U.K. and 8 percent in Switzerland (other countries without price controls), and 33 percent throughout the rest of the globe. That would change if price controls are imposed here.

Medicare is already in dire straits. Piling on another expensive entitlement would make a sick program even worse.