Peter Rost Just Doesn’t Get It

Published December 30, 2004

Dear Editor:

I am writing in response to the shocking essay by Peter Rost, vice president of marketing at Pfizer, who condemns his own industry’s pricing policies and calls for legalizing drug importation from Canada and other countries [“Big Pharma’s Dirty Little Secret,” December 26].

Mr. Rost must know that drug prices in the U.S. rose only about 3 percent last year, about the same as the overall rate of inflation. What is driving higher spending on drugs isn’t corporate greed. It is higher utilization, as new medicines are discovered and doctors prescribe drugs more frequently, and excessive regulation, which adds nearly a billion dollars to the cost of bringing a new drug to market.

While name-brand drugs tend to be more expensive in the U.S. than in other countries, generic drugs are actually much cheaper and more readily available here. So the average American spends about the same amount for a given set of prescription drugs as his or her Canadian and European counterparts.

Mr. Rost reports that drug companies charge lower prices to some buyers, such as the Veterans Administration, and suggests this means the industry acts unethically when it charges others higher prices. But charging different consumers different amounts is commonplace: Restaurants, airlines, movie theaters, and countless other industries give discounts to some customers that are not available to others. Economists know this practice benefits consumers by increasing total sales.

Mr. Rost’s article is filled with other errors. Suffice it to say that importing drugs from Canada and other countries is indeed a risky business, the net savings would be small or nonexistent (as a new Health and Human Services study just documented), and the poor and needy in the U.S. have many ways to get the drugs they need for free or at steeply discounted prices.

Joseph L. Bast
President, The Heartland Institute
Chicago, Illinois

Joseph L. Bast ([email protected]) is coauthor of Why We Spend Too Much on Health Care and publisher of Health Care News, a national monthly newspaper.