By John E. Calfee, AEI Press, February 2000

Although pharmaceutical costs have aroused controversy for decades, debate has intensified over the past year. Discussions have zeroed in on several themes, including the escalation of expenditures, particularly for the elderly, and the prices of some drugs. And now proposals to add a drug benefit to Medicare are being floated, with the specter of price controls on drugs on the horizon.

But, John E. Calfee contends, the impulse to address the price issue through political means is deeply misconceived and could thwart today's dramatic improvements in health. Using up-to-date data and sources, the author details today's "third revolution" in pharmaceuticals with a coherent explanation of the new marriage of biology with progress in clinical trials, managed care, the dynamic biotechnology industry, and even marketing and promotion.

He navigates complex issues--the advances in pharmaceutical research and in the dissemination of information, the benefits to consumers, the dangers of price controls and disincentives to research--and urges Congress to exercise care in crafting changes to Medicare benefits while preserving the bright prospects for pharmaceutical advances

John E. Calfee is a resident scholar at AEI and the author of Fear of Persuasion: A New Perspective on Advertising and Regulation.

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