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New National UConn Poll Shows Public Strongly Believes
Prescription Drug Prices Unfair; Support Price Controls
Released: July 27, 2005

Release # 05059
Contact:
John Vernon,
School of Business
860-486-3123 (office)
860-454-0120 (home)
267-235-2716 (cell)

Christopher Barnes,
Pollster/Dept. of Public Policy
860-570-9094 (office)
860-906-4471 (cell)

Michael Kirk,
Media Relations
860-486-0715 (office)
860-680-8477 (cell)

STORRS , Conn.– A new national survey conducted by University of Connecticut researchers for UConn’s School of Business shows the majority of Americans strongly support price control measures for pharmaceuticals (60 percent) and also believe prescription drugs are priced unfairly (77 percent).

However, researchers also found a lack of economic understanding among those surveyed. John Vernon, a professor of finance at UConn and one of the study’s lead researchers says, the survey found that a majority of Americans do not understand economic concepts as they relate to pharmaceutical patents and research and development (R&D). This lack of knowledge plays an important role in the formation of the core opinions on the drug issue, said Vernon.

“The failure of such a high proportion of Americans to understand the most basic economic principles relating to this industry is troubling, but not terribly surprising,” Vernon said. “If public opinion based on economic ignorance leads to policy reforms, such as drug price controls, then public health in the U.S. could be significantly harmed in the long run. There is a good reason why some 99 percent of all economists denounce price controls.”

The study’s main findings reveal a large number of Americans do not understand the role of patents and intellectual property rights as a means to provide incentives for pharmaceutical research.   Without patents and intellectual property rights, Vernon explains, “Firms would not undertake the long and costly research and development required for new drugs. This is an economic reality. Similarly, drug price controls would significantly diminish the incentives to discover and develop new drugs. Economic theory and empirical research are unambiguous on this point, but our survey shows the majority of Americans believe otherwise.”

Other results include:

  • 55 percent of Americans believe that if the government were to set price controls on drugs, firms would continue to invest the same (or more) in R&D for new drugs.
  • 39 percent of Americans believe firms would continue to undertake new R&D even if patents were completely eliminated.
  • 49 percent of Americans believe profits and prices would be unfair and too high even if net cost savings to total healthcare system are realized (for example, through reduced hospital stays because of new drugs).
  • 70 percent of Americans believe that pharmaceutical company profits are too high. When told that drug companies earn about average profits compared to other brand name companies of their size, that number dropped to 54 percent.

According to Vernon, once a new drug has been brought to market the cost of manufacturing it is quite small, but drug companies spend a great deal of time and money getting to that point, by some accounts more than $800 million and 15 years per drug.   Patents are awarded so firms can charge a price that enables them to recoup the money invested and to earn a profit.   Without a reasonable return on investment, pharmaceutical R&D becomes an unattractive investment and firms will do less of it or stop altogether, Vernon said.  

“While there is an understandable need to help ensure Americans can afford their prescriptions today, Americans need to recognize there is no ‘free lunch,’” said Vernon. “Price controls today will certainly improve the affordability of today’s medicines, but this will come at a significant cost: fewer new drugs in the future.”

For full tables and poll results, visit: http://www.dpp.uconn.edu/ or call or e-mail Michael Kirk at Michael.Kirk@uconn.edu or 860-486-0715.

The survey was conducted by the Center for Healthcare and Insurance Studies at UConn’s School of Business and Chris Barnes of the UConn Department of Public Policy, with data collection by the Center for Survey Research & Analysis. It was based on a scientific telephone survey of 1,006 American adults.  Sampling error is +/- 3percent at the 95 percent level of confidence.  Interviews were conducted between April 18 – May 3.

 

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