Efforts to make pharmaceutical industry “profits” the scapegoat for rising health costs ignore economic reality.

A recent poll by the Kaiser Family Foundation reveals that 80 percent of respondents believe that prescription drugs have a positive impact on the lives of Americans, yet nearly 60 percent also believe that prescription drugs increase overall health costs and 24 percent believe that drug company profits are the most important factor in rising health care costs.

Over the past two decades new medicines have had a profound impact in America by saving lives and helping to save health care resources by reducing hospitalizations. From 1980 to 2001, rates of hospitalization in America declined by 40 percent. New medicines have made a significant contribution to the shift in health spending from institutional care to outpatient care. According to the most recent national health spending data, prescription drugs account for only 11 percent of health spending.

In 2004, according to The Wall Street Journal’s annual ranking of a broad range of industries, the compound annual return for a shareholder who invested in the pharmaceutical industry was a loss of 3 percent. Last year an investment in America’s beleaguered airline industry would have produced a better return than an investment in the pharmaceutical industry. In fact, over the past five years the pharmaceutical industry ranks 73rd out of 76 industrial categories in terms of a return on investment.

Despite a negative economic and policy environment that discourages investment in medical innovation, some politicians and other pharmaceutical industry critics attempt to scapegoat the industry for “excessive profits” while ignoring issues, such as the excesses of medical litigation, that have a major impact on the affordability of health care in America. The interests of American patients and consumers would be better served by policies that support medical research and the affordability and accessibility of new medical innovation rather than by the rhetorical excesses of those who attempt to vilify an industry that leads the search for tomorrow’s cures.