SDB has a great post up that explains how the FDA is the root of many American health care problems, from unnaturally expensive drugs to the illegality of some "miracle cures".

The approval process is so long and so involved and requires such a mountain of data to be collected, that it is massively expensive. The total cost for development and approval can exceed $100 million per drug. And a lot of money can be consumed during the testing and approval for drugs which are ultimately rejected.

Pharmaceutical companies have to recoup that cost, and the money can only come from sales of drugs after approval. That's why drugs which are still under patent are so expensive compared to generics after patent expiration. Generics are priced based on a markup over manufacturing and distribution costs, whereas drugs under patent are priced to amortize the cost of development and regulatory approval, as well as to amortize the money spent on other drugs which were rejected.

The amortization premium paid by Americans is all the greater because most other nations in the world "free ride" on American drug development. (The majority of that development is done here, even by European pharmaceutical companies.) They pay something like the generic price even for drugs still under patent, letting the US alone pay the amortized development cost. When it comes to nations like Zambia and Botswana, I think it's reasonable, but not for nations like Germany and the UK. There's no excuse for them not paying their share of the development costs, and the only reason they don't is that we let them get away with it. If other wealthy nations did not free-ride that way, the drug companies could spread the amortized cost over a larger number of sales and reduce the price we Americans pay.

See my previous entries about the FDA, if you're interested in some specific examples of when the FDA's over-cautious policies have cost hundreds of thousands of lives.



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