Guest Column:Comparing Apples to Anthrax

During the 2001 anthrax attacks, thousands of Americans who were possibly exposed to the deadly bacteria were given a powerful antibiotic, Cipro.

The drug, developed by Bayer HealthCare, was literally a lifesaver during the crisis — especially for vulnerable postal workers and Capitol Hill staffers. Many who weren't even at risk also obtained prescriptions simply for piece of mind. In New York City, for instance, demand became so great that many pharmacies could fill only 10-day orders of the drug.

At the height of the crisis, fearing that there wouldn't be enough Cipro in the event of a national outbreak, the U.S. government decided to purchase more than 100 million doses of the drug. By the end of the ordeal, Cipro was a household name and widely credited with helping avoid an even greater public health catastrophe.

What's usually not remembered, however, is how the federal government acquired the critical drug.

When the government decided to stockpile Cipro, Health and Human Services Secretary Tommy Thompson balked at Bayer's deeply discounted price and demanded that the company sell Cipro far below its market value. Thompson threatened to yank Bayer's patent on the product unless the company complied.

Bayer eventually succumbed to the government's demands and sold the drug for about 95-cents a pill. Previously, Cipro had retailed for just over $4.50 a pill.

Both Bayer and the government claimed that the discount was necessary to fight the war on terror. Nonetheless, the Cipro negotiation had a host of unintended consequences that our leaders are only beginning to confront today.

For example, the House of Representatives earlier this year passed a measure allowing the government to "negotiate" prices for prescriptions covered under the Medicare drug benefit. The Senate also plans to take up the measure. Supporters claim that "negotiations" will lead to lower prescription drug prices.

Shockingly, they often cite the Cipro negotiation as proof that the government can use its size and purchasing power to cut costs. This analogy is deeply flawed, and it's critical for policymakers to understand why.

First and foremost, the Cipro example proves that the government doesn't negotiate prices. It sets them. It held Bayer over a barrel and threatened to yank its patent rights if it didn't meet the government's price.