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Are Pharmaceutical Companies Allergic to Competition?

by Pat Pending

We have recently seen in the news that insurance companies have applied to the Food and Drug Administration to convert Claritin and other allergy medicines from their current status as prescription-only drugs to over-the-counter drugs.  According to the news reports, the pharmaceutical companies are opposing this change, because they believe the price of these medicines will drop dramatically when they are no longer prescription drugs.  For example, Claritin now costs about $60 per month as a prescription drug, whereas they expect its price would drop to about $11 per month as a non-prescription drug. 

Something about this story doesn’t pass the sniff test!  Why would the price of the same medicine be so much less as an over-the-counter drug than as a prescription drug?  Are consumers so much more powerful than the insurance companies that their everyday purchasing decisions can push the price of drugs down while insurance companies cannot?  What has happened to the all-powerful insurance companies and their clout in the market?

It has been suggested that the reason the insurance companies do not push the price down is due to the government regulations on the insurance companies.  Because of government regulations on the prices the insurance companies can charge, they do not have the same incentive as consumers to demand price reductions.  I don’t know whether that is true, but it is an interesting question.  If any of our readers have any insight into the answer to this question, we would love to hear from you!

If the insurance companies do not have the same incentive to demand lower prices for our medicines as we do, what about their incentives to demand lower prices for other goods and services we are buying as medical consumers?  Do government regulations also cause us to pay much more for doctors’ services, for hospital services, for CAT scans, and so forth than we would be paying if we were purchasing these services directly?  Has anyone determined how much these regulations that supposedly protect us actually end up costing us? 

Is it possible that, instead of standing on his podium during the presidential race and criticizing the pharmaceutical companies for patenting their inventions and making their prices so high, what Al Gore really should have been doing is promising to dismantle the government regulations on health insurance that prop up the high prices?  Instead of adding more layers of regulations to the mess it has already created, perhaps it is time for the government to begin peeling back the layers that have made the mess in the first place.  If consumers would be able to bring the price of Claritin down from $60 per month to $11 per month just by their purchasing decisions, which would bypass many government “protections”, imagine what we could get if more of the “protections” were removed or bypassed.  Heck, if we could get Ted Kennedy and all his regulations out of the way, we might even be able to find a doctor who makes house calls again!