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Comparing Apples to Anthrax

Comparing Apples to Anthrax

During the 2001 anthrax attacks, thousands of at-risk Americans were given Cipro, a powerful antibiotic.
The drug, developed by Bayer, was a lifesaver - especially for vulnerable postal workers and congressional staffers. Many who weren't at risk also obtained prescriptions.
At the height of the crisis, fearing that there wouldn't be enough Cipro in the event of a national outbreak, the U.S. government purchased more than 100 million doses of the drug. By the end of the ordeal, Cipro was a household name.
What's usually not remembered, however, is how it was acquired.
When the government decided to stockpile Cipro, Health and Human Services Secretary Tommy Thompson balked at Bayer's deeply discounted price and demanded that the company sell Cipro far below its market value. Thompson threatened to yank Bayer's patent unless it complied.
Bayer eventually succumbed to the government's demands and sold the drug for about 95-cents a pill. Previously, Cipro had retailed for $4.50.
Both Bayer and the government claimed the discount was necessary for the war on terror. Nonetheless, the Cipro negotiation had a host of unintended consequences.
For example, the House of Representatives recently passed a measure allowing the government to "negotiate" prices for prescriptions covered under Medicare. The Senate also plans to consider the measure. Supporters claim that "negotiations" will lead to lower drug prices.
Shockingly, they often cite the Cipro negotiation as proof that the government can use its size to cut costs. This analogy is flawed, and it's critical for policymakers to understand why.
First, the Cipro example proves that the government doesn't negotiate prices. It sets them. It held Bayer hostage and threatened to yank its patent if it didn't meet the government's price.
It's one thing for the government to demand lower prices at the height of an emergency - as with the anthrax scare. But it's quite another thing to dictate prices for drugs that seniors take on a routine basis.
What company would spend billions developing a new drug when the government could dictate a below-market price at any moment or, worse yet, pull its patent?
As Senators debate these provisions, they should remember what they personally witnessed during the anthrax attacks. Thousands of staffers and many lawmakers received Cipro after several Hill offices came into contact with anthrax.
Just imagine what would have happened if Cipro had never been invented.

Grace-Marie Turner is president of the Galen Institute.

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