Prescription Blackmail.

The current national debate over prescription drugs is following a well-traveled course. In the late 1950s, Tennessee Democrat Estes Kefauver staged well-publicized Senate hearings accusing pharmaceutical giants of unfairly jacking up prices. The industry responded that any compulsory price reductions would hurt the sick and that controls would discourage the research on which new medical breakthroughs depend. Both sides in the contemporary debate make similar claims. Since each position is plausible, it is time to take a broader look at pricing and investment priorities in the drug industry.

Drug prices are currently rising at four times the rate of all health costs. Half of all prescriptions written for elderly Americans go unfilled because of their expense. The Clinton administration has proposed including prescription drugs under Medicare, with seniors being expected to pay part of the cost through higher Medicare premiums. While such an entitlement would lessen older Americans' drug costs, it may well create a virtually open-ended federal spigot for the drug industry.

A better proposal comes from Maine Democrat Tom Allen, who advocates legislation that limits drug company prices by requiring firms to give seniors the same volume discounts provided to large health-maintenance organizations. Mandating for all the same volume discounts that corporate HMOs enjoy is both good economics and sound ethics. The Allen proposal is fundamentally no different from late nineteenth-century legislation that prevented price discrimination in the rail industry. The Interstate Commerce Act outlawed kickbacks to large commercial shippers and thereby gave smaller farmers and rural communities more chance to survive the onset of industrial capitalism.

Today, every other advanced industrial nation makes drugs available to all consumers through some form of wholesale purchase arrangement. Comparable drugs are between a third and a half less expensive in Europe than in the United States. As Robert Kuttner points out in a recent Boston Globe op-ed, U.S. consumers are in essence subsidizing cheap foreign drugs through their top-dollar purchases.

From an ethical point of view, this industry is in an odd position to complain about "socialistic" intrusions into its business. Pharmaceutical corporations are already heavily dependent on the monopoly privilege patent protection affords them. Beyond patent protection, they also benefit from generous funding of basic research.

In addition, their products in essence receive the "Good Housekeeping seal of approval" every time the Food and Drug Administration licenses a new drug. Pharmaceutical executives periodically make perfunctory moans about FDA clumsiness. Nonetheless, I doubt that any responsible industry executive wants to lose the opportunity to cite FDA endorsement in the event of public criticism of or lawsuits against its drugs.

Well, turnaround is fair play. If the industry can enjoy the benefits of legal monopoly and subsidy on the production end, it surely has no right to complain about social collaboration on the purchasing front.

But would lower prices lead to lower profits and less industry research? In the first place, it is far from certain that lower prices would result in lower net profits. If more patients can afford to fill prescriptions, higher volume may make up for lower profit margins. There is, however, an even deeper element of dissimulation in drug-industry worries about future research.

The industry implies that all its hard-earned profits go into basic research. Yet while the current fight over drug prices boils on, our television screens are filled with expensive, primetime ads for prescription allergy medications, anti-fungal preparations, and, yes, even Viagra. Why Viagra--the beneficiary of more "free media" than any medication since the Salk vaccine--needs expensive ads is beyond me. And how beautiful couples exposing their toenails on the beach or sauntering through pastoral retreats contributes to patient education is a mystery only an ad executive could solve.

Even these ad campaigns, grotesque as they are, are only the tip of the iceberg. As David Himmelstein and Steffie Woolander of Harvard Medical School point out, "Each year drug firms spend several billion dollars on detailing, marketing activities intended to influence (and usually worsen) the prescribing habits of American physicians."

Advances by pharmaceutical firms have made immense contributions to our health. Nonetheless, the industry has a long history of both costly and inappropriate drug promotions and of pricing strategies that deny millions needed medications. Nor are its many legitimate advances solely its own. Perhaps more than any other U.S. industry, it has depended on the goodwill and the hard-earned contributions of our citizens.

It is an industry best seen as a kind of public utility. As a beneficiary of subsidy and legalized monopoly, its prices can and should be limited in ways that every other advanced nation pursues. If the industry giants respond by delivering on their threats to reduce already inadequate levels of basic research, the public's largess should go elsewhere.

John Buell is a freelance writer living in Southwest Harbor, Maine. His e-mail address is [e-mail].