[Congressional Record Volume 151, Number 75 (Wednesday, June 8, 2005)]
[Extensions of Remarks]
[Page E1162]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                   BIGGER THAN SOCIAL SECURITY CRISIS

                                 ______
                                 

                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                        Wednesday, June 8, 2005

  Mr. KUCINICH. Mr. Speaker, I wish to bring the following article to 
the attention of my colleagues. This article discusses how the savings 
from creating a truly competitive market for prescription drugs, as is 
proposed by the Free Market Drug Act, could be used to eliminate any 
projected shortfall in Social Security. The American people demand that 
we focus our attention on the very real crisis that the soaring price 
of prescription drugs presents to their daily lives.

     [From the Center for Economic and Policy Research, Apr., 2005]

     Bigger Than the Social Security Crisis: Wasteful Spending on 
                           Prescription Drugs

                            (By Dean Baker)


                           Executive Summary

       President Bush started a national debate on the future of 
     Social Security when he announced his plan for private 
     accounts shortly after the November election. In order to 
     promote his plan, he has argued that Social Security faces a 
     serious long-term funding gap.
       It is easy to show that the projected funding gap for 
     Social Security is relatively minor. The Social Security 
     trustees estimate that the gap over the program's 75-year 
     planning period is equal to 0.6 percent of GDP over this 
     period. The non-partisan Congressional Budget Office (CBO) 
     estimates this gap at 0.4 percent of GDP. By comparison, the 
     increase in annual defense spending since 2000 has been equal 
     to 1.0 percent of GDP, more than 1.5 times the size of the 
     shortfall projected by the Social Security trustees and 2.5 
     times as large as the shortfall projected by CBO.
       Given the size of the projected Social Security shortfall 
     it is reasonable to argue that attention should be focused on 
     bigger problems. One glaring example is the soaring price of 
     prescription drugs, which is imposing huge costs on both the 
     private and public sectors. This paper examines the 
     relationship between the potential savings from creating a 
     free market in prescription drugs and the size of the Social 
     Security shortfall.
       Specifically, it calculates the savings that the federal 
     government could accrue in Medicare if drug research was 
     publicly financed and then the resulting patents were placed 
     in the public domain, as proposed in the Free Market Drug Act 
     (FMDA). This would allow prescription drugs to be sold in a 
     competitive market, like other products. By eliminating 
     government imposed patent monopolies, drug prices would 
     decline by approximately 70 percent.
       This paper calculates that the savings to the federal 
     government from having drugs sold in a competitive market 
     could reach $110 billion annually by 2014. By the end of the 
     period (in 2080) the annual savings would be equal to 1.2 
     percent of GDP. The cumulative savings over the 75-year 
     planning horizon would be $3.3 trillion (in discounted 2005 
     dollars); this is slightly larger than the $3.2 trillion 
     Social Security shortfall projected by the CBO. In other 
     words, if the federal government's savings on prescription 
     drugs from the FMDA were attributed to the Social Security 
     trust fund, it would be more than enough to make Social 
     Security fully solvent over its 75-year planning period.
       The enormous potential savings from developing a free 
     market in prescription drugs should be a powerful argument 
     for moving in this direction in any case, but the possibility 
     of using the savings to eliminate the projected Social 
     Security shortfall could make the policy even more 
     attractive. Of course, the savings to the private sector from 
     having drugs sold in a free market would be even larger than 
     the savings to the federal government.
       However, the most important benefit is that the FMDA would 
     eliminate the incentives that government patent monopolies 
     create to conceal or misrepresent research findings, as was 
     recently exposed with drugs like Vioxx and Celebrex. If 
     research is no longer financed by government patent 
     monopolies, the perverse incentives they create will be 
     eliminated. This will lead to better health care, in addition 
     to much lower drug prices.

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