DRUG ADDITION

The threat of imported prescription drugs has the pharmaceuticals industry and its free-market friends warning of the end of health care innovation -- a wildly overblown theory.

Friend Ted Bunker, the business editor at the Boston Herald, cites drug imports as “plainly a back-door method of imposing price controls on drug makers” and, as evidence that price controls would be deadly, challenged his readers Monday to name “a life-saving drug or medical device invented in Canada, where care is rationed and prices are controlled.”

Gosh, I can’t. But saying Canada can’t invent drugs because it has price controls is ignoring the fact that drug companies have no reason to be in Canada, not when there’s a place they can go that offers much and takes, especially in the form of price controls, little.

That would be the United States.

Industry goes to where conditions are most salutary. Our states and communities sacrifice and bribe to attract industry, competing all the way to the bottom whether it be a biotech company, prison or sports team, and the sacrifices and bribes are not always worth winning the prize. On the national scale, manufacturing has fled across borders and oceans to where people toil in sweatshops to earn pennies on the U.S. dollar, but the Mexicans who worked themselves and their environment to illness are finding themselves expendable as Asian nations commit to being the next lowest on the chain. Let’s not raise a loophole to the level of a virtue.

Instead, consider a world in which the playing field was level, and price controls existed in the United States. The country would have to find other reasons to be a favored location for the pharmaceuticals industry, with the drug infrastructure already in place here being a help. But the industry would have less money to spend and be able to buy less equipment or pay less for it.

That sounds like disaster, but I’m willing to let the supply-siders do the work for me here. The free-market beloved Say’s Law dictates that “if inventory doesn’t sell, then prices will be cut until it does,” according to the folks at fiscal-conservative Web site Friesian.com. So the makers of technology that feeds the pharmaceuticals industry would have to cut prices to stay in business. And so, therefore, would their suppliers, and so on down the line, until there were suppliers who could stand firm against the cuts.

Inevitably, I think, expenses elsewhere would take a hit, including some wages and salaries. Being a member of a fairly low-paying profession, I sympathize for those who would be hurt, which would most likely be in the middle class. Certainly people would have to be taking jobs in the industry for love of science, rather than to make a lot of money, if that’s the case now.

But this could also affect executive pay, and perhaps the best possible outcome of all this conjecture -- aside from cheaper prescription drugs -- could be if this helped close the gap between the richest and poorest in the United States. I’m reminded, actually, of another Herald article that brilliantly points out the difference in pay scales for U.S. executives and their counterparts in Canada.

The article, an Oct. 4 piece by Jon Chesto, is about the financial services industry, not pharmaceuticals, so it works only by example. In the purchase of Boston’s John Hancock Financial Services Inc. by the Canadian Manulife Financial Corp., it turns out that Hancock CEO David “D’Alessandro's $2.1 million in cash pay last year was supplemented with a long-term incentive payout of $7.9 million, restricted stock worth an estimated $11.7 million and stock options valued at up to $19.1 million. By comparison, Manulife’s chief got $2.7 million [total] last year.”

I think there’s room to even that out a bit -- and that it’s unlikely such excess isn’t a factor in a Tufts University figure Bunker cites showing “the average cost of bringing a drug from initial idea to pharmacy shelves has nearly tripled, to $897 million.” (Tripled since when? Is the figure adjusted for inflation? Lacking this information, the number’s meaningless.)

I even ponder, not unpleasantly, a world in which the free-market fears come true and scientific creativity and ability dries up without the money being wrung from the American people. In that world, the U.S. government places a priority on diseases that need curing and diverts money to do so from weapons research.

Price controls the end of health care innovation? Doubtful. Could America lose its place at the top of the pharmaceuticals hierarchy? Possibly, and all the pharmaceuticals companies would move elsewhere.

But then we’d have no reason not to create federal price controls, since we’d have no drug industry to protect, and the cost of our drugs would be ... well, probably about the same as Canadians pay for theirs.