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Drug prices and the Feds

A very interesting, if politically skewed, column claiming that the Veteran’s Administration’s ability to negotiate drug prices amounts to “drug price-fixing” appears in the January 21 issue of the LATimes.
The column is authored by an economist working for an institute which receives funding from the pharmaceutical research and manufacturers ass’n (PHRMA) and is somewhat breathtaking in its claims. For example, the author, Benjamin Zycher, senior fellow in economics at the Pacific Research Institute, states that the drug companies are forced to participate in the “price fixing” scheme required by the VA, for if they do not, they would be excluded from “a market accounting for roughly 10% to 15% of their sales.”
News flash to Mr. Zycher – for-profit companies do this all the time – if a potential customer can’t afford a Mercedes, Mercedes does not have to sell to them. Many companies would be delighted to have their products priced such that they are affordable for 85% of the total potential market.
Next, Mr. Zycher states
“Despite many casual assertions about “huge profits,” the truth is that pharmaceutical companies face enormous research-and-development costs

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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