Con­fu­sion in the mar­ket­place

Med­dling with the price of generic drugs can be risky busi­ness

The Washington Times Daily - - COM­MEN­TARY -

The Mary­land leg­is­la­ture has just sent a bill to Gov. Larry Hogan that will, if he signs it, sow con­fu­sion in the state’s generic drug mar­ket­place and sub­ject con­sumers to con­sid­er­able harm. It’s bad eco­nomics laced with a large dose of pol­i­tics that begs him to pull out his veto pen and lim­ber up his writ­ing hand.

House Bill 631 is the brain­child of At­tor­ney Gen­eral Brian Frosh, a Demo­crat who is thought to be con­sid­er­ing a race against Gov. Hogan if the gov­er­nor seeks re-elec­tion next year. If he does he will have a hard climb, and uphill. Mr. Hogan is a bright red gov­er­nor in a heav­ily blue state, but ac­cord­ing to the polls one of the coun­try’s most pop­u­lar gov­er­nors, red or blue (or even pur­ple).

Mr. Frosh is in search of an is­sue he can hang his hat on, and he is try­ing to set him­self up as a friend to con­sumers, to pro­tect them from evil, and the greedy gougers who would do them harm. Sir Gala­had, come to Mary­land.

There have been some prob­lems with cer­tain com­pa­nies that man­u­fac­ture generic drugs, but none so se­vere as to com­mend price con­trols (which short of war never work as in­tended), or med­dling by the at­tor­ney gen­eral in what the leg­is­la­ture pre­scribed.

Ac­cord­ing to the U.S. Food and Drug Ad­min­is­tra­tion the price of some gener­ics are about 20 per­cent of name brand equiv­a­lents. For those on a fixed in­come, which in­cludes most Mary­land se­niors, that’s a big sav­ings. For pa­tients and tax­pay­ers of the na­tion that comes to $3.7 bil­lion, ac­cord­ing to the most re­cent in­dus­try sur­vey. That fur­ther in­cludes $700 mil­lion of what the state spends on Med­i­caid.

The bill now mov­ing to­ward the gov­er­nor would make it dif­fi­cult to pre­serve th­ese sav­ings. In­stead it would put the generic in­dus­try on guard against state in­ves­ti­ga­tors who have new, al­most un­prece­dented power to in­ves­ti­gate com­pa­nies ar­bi­trar­ily and to im­pose penal­ties that would in­evitably force prices up­ward across the in­dus­try. Man­u­fac­tur­ers of gener­ics have a dif­fer­ent busi­ness model than com­pa­nies that in­vent and pro­duce drugs un­der a patented name for a fixed num­ber of years.

Gener­ics typ­i­cally show very low profit mar­gins. In­creases in the reg­u­la­tory bur­dens like those At­tor­ney Gen­eral Frosh wants for Mary­land could push a num­ber of un­prof­itable drugs off the shelves of phar­ma­cies ev­ery­where. This would leave doc­tors and pa­tients with lim­ited op­tions, re­quir­ing them to turn to less ef­fec­tive med­i­ca­tion, switch­ing to higher priced name brands, or sim­ply do­ing with­out which, when a med­i­ca­tion is pre­scribed to save lives, is hardly an op­tion.

The mar­ket in generic drugs works rea­son­ably well for doc­tors, pa­tients, hos­pi­tals, and man­u­fac­tur­ers. The be­hav­ior of a few greedy ex­ec­u­tives is no ex­cuse for putting the en­tire in­dus­try un­der the heavy hand of ar­bi­trary scru­tiny. If At­tor­ney Gen­eral Frosh wants to play pol­i­tics with health care, he should look else­where for cam­paign is­sue.

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