Monday, February 02, 2004
New drugs and medical devices increase competition
["Competition in Health Products Good for Consumers," Daily Policy Digest (Dallas, TX: The National Center for Policy Analysis, 30 January 2004).]
Often the claim is made that companies jump on the profit bandwagon by offering "me-too" products that treat the same conditions as previous products. The concern is that this is a burden on the health care system and is harmful to consumers.
A recent study in the New England Journal of Medicine shows that this is hardly the case:
Through the power of competition, these newly introduced drugs (or medical devices) actually serve to lower rather than to increase consumer health costs:
- For example, when drugs are first approved for consumer use, the product developers are rewarded with high prices, reflecting both the demand for new and better drugs, but also to offset costly research and development.
- Over time, new products are introduced into the marketplace by competitors as a result of ongoing research that, at times, has stretched back for decades.
- Because these newer products -- sometimes referred to as "me-too" drugs -- treat the same ailment as established first tier drugs, they can only be profitable if they are more effective or come at a lower cost.
["Competition in Health Products Good for Consumers," Daily Policy Digest (Dallas, TX: The National Center for Policy Analysis, 30 January 2004).]
Often the claim is made that companies jump on the profit bandwagon by offering "me-too" products that treat the same conditions as previous products. The concern is that this is a burden on the health care system and is harmful to consumers.
A recent study in the New England Journal of Medicine shows that this is hardly the case:
Through the power of competition, these newly introduced drugs (or medical devices) actually serve to lower rather than to increase consumer health costs:
- For example, when drugs are first approved for consumer use, the product developers are rewarded with high prices, reflecting both the demand for new and better drugs, but also to offset costly research and development.
- Over time, new products are introduced into the marketplace by competitors as a result of ongoing research that, at times, has stretched back for decades.
- Because these newer products -- sometimes referred to as "me-too" drugs -- treat the same ailment as established first tier drugs, they can only be profitable if they are more effective or come at a lower cost.
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