Government urged to cap prices on drugs it develops CLINTON ADMINISTRATION Products at issue are marketed privately

With health costs soaring, some economists and health-care specialists think the government should try to restrain prices on a costly group of drugs over which it has some nominal authority. These are drugs developed by federal researchers but marketed by pharmaceutical companies.

These experts argue that the companies, in marketing drugs the government discovers, should be required to charge no more than a "fair" price, as called for in contracts they sign. And they say that when the government pays for research on drugs owned by private companies, the price of the drugs should reflect the public's investment. A thorny issue, however, is who should determine what is a fair price and how.


Dr. Alan Garber, an economist and internist at Stanford University, said the public pays twice when drugs are developed with generous help from the federal government. It pays first for research and development, he noted, and then again to buy the drugs.

Rep. Henry A. Waxman, a California Democrat who heads a House health subcommittee, is planning hearings on the issue. Donna E. Shalala, the secretary of health and human services, is preparing a policy statement.


Critics of the current policy complain, for example, that Ceredase, a drug used to treat a rare inherited disorder called Gaucher's disease, which causes anemia and severe bone pain, can cost $300,000 a year.

Yet the drug was discovered and developed by federal scientists and academic researchers supported by federal grants before it was turned over to a Boston company, Genzyme, to market. Genzyme said the high cost reflected the expense of making the drug, which is extracted from human placenta.

Another drug, Levamisole, which was marketed for years to cure sheep of worm infestations, has turned out to be a stunning success in treating colon cancer. The studies that determined its effectiveness against cancer were conducted entirely by government scientists.

But Johnson & Johnson, which markets both versions of the drug, charges 100 times as much for the human version as it does for the identical drug for sheep. The drug costs cancer patients an average of $1,200 a year.

Johnson & Johnson points to the extra cost of training doctors to use Levamisole as a reason for the higher price for the human version.

Representatives of major drug companies were unanimous in asserting that the present system for setting drug prices is necessary to cover the high costs of research on new drugs and of training doctors in their use. The companies say that if the government controlled the prices of the drug it paid to develop, valuable drugs might never come to market, and others might be delayed.

The National Institutes of Health, in accord with its mission to discover therapies and speed them to the market, invites pharmaceutical companies to market the drugs. The agency awards exclusive licenses for the drugs based on such criteria as the company's manufacturing ability and speed of delivery. The price the company will charge is not considered.

The NIH also invests heavily in developing drugs already owned by pharmaceutical companies. The system provides incentives for the companies to bring new drugs to the market but few to hold down the prices.


"Everyone feels these prices are just too high," Dr. Bernadine Healy, director of the NIH, said in an interview. "That's an appropriate response. But then you have to step back and say, 'What can we do about it without wrecking a very important system?' The U.S. pharmaceutical industry is the envy of the world."

In the case of Levamisole, Dr. Charles Moertel, a cancer researcher at the Mayo Clinic, protested that the drug's development "was paid for just about in full by the American taxpayer." Dr. Moertel said he was outraged when he was told by a scientist working with a Johnson & Johnson affiliate that the drug would be marketed in Europe at a price "considerably lower than in the U.S."

"It just infuriated me," said Dr. Moertel, one of those who think the government should control prices of the drugs it helps develop. "It is so unfair. To put this burden on American cancer patients when our country paid the bill in full for development and to give Europe a bargain just sent me up a tree."