Drug price setting is selfishly shortsighted
Prescription drug price-setting proposals keep coming up in Congress with the purported aim of lowering prescription drug prices and improving Medicare. In fact, the Biden administration’s Build Back Better Act (BBBA) contains such provisions, and some usually level-headed members of Congress have recently expressed openness to passing those drug price-setting provisions as a scaled-back, stand-alone bill. Yet all such proposals are selfishly shortsighted and ultimately lead to lower quality, fewer options, diminished health outcomes, and establish price controls that could exacerbate inflation or lead to shortages.
Provisions of the BBBA would allow government bureaucrats to set prescription drug prices based on a legislated formula. The earlier version of this proposal, H.R. 3, based drug prices on what is paid in six foreign countries (Australia, Canada, France, Germany, Japan, and the United Kingdom). The theory is that, by importing foreign price controls from these countries, Medicare, Medicaid, and private payers could save billions of dollars in the next several years.
Lower drug prices like those found abroad might sound attractive. The problem is, those nations set artificially low reimbursements for medicines—they employ heavy-handed, socialist systems of drug price setting and access restrictions. Now, many of those countries rely on the United States to provide life-saving innovations, therapies for rare diseases, and complex treatment options. The BBBA moved away from explicit foreign reference pricing, but kept the same aggressive price control infrastructure.
Drug price-setting schemes would devastate the American pharmaceutical industry. We would certainly see a drastic reduction in investment in biomedical research and development. This, in turn, would lead to pain, suffering, and early death for many more American patients—much like happens today in those socialist countries. As we’ve seen in other sectors, price controls can be so market distorting that they often exacerbate inflation or could lead to shortages (both issues we don’t need any more of).
Drug price-setting policies would dramatically curtail the development of new therapies to treat some of the world’s most pressing health challenges: not only cancer, but also rare diseases, lupus, Alzheimer’s disease, and many others.
Just think about this: In the United States, we wait less than two months, on average, from the time a new cancer drug is developed before patients are being treated with it. Patients in Germany and the United Kingdom wait for about a year. Canadian and French patients wait 14-16 months, and Australian and Japanese patients wait nearly two years.
Now think of the number of people who literally die waiting for treatments that already exist because they live in countries with socialist drug-pricing policies that hinder or block the flow of new drugs into their medical systems. Sacrificing future innovations to achieve short-term financial savings, as countries with socialist price-setting policies do, is just incredibly selfish.
Indeed, the concept of “paying it forward” could hardly be more compelling than in the case of discovering life-saving therapies and treatments for our most pressing health care challenges. The selfishness implicit in injecting prescription drug price-setting into the pharmaceutical market is astounding.
And the BBBA has an even darker underbelly. What we see in foreign countries (like Canada or many European countries) that control prices like the BBBA would, make drug reimbursement and coverage decisions based on cost-effectiveness assessments tied to the quality-adjusted life year (QALY). QALY assessments are based on what officials consider to be the value of living with a medical condition in comparison to being in “perfect health.”
As such, QALYs assign a lower value to treatments for people who are expected to live fewer years, to treatments for populations that are expected to have shorter lifespans, and, by default, to treatments focused on populations that have faced historical inequities in the health care system. Thus, the BBBA would have us import drug price-setting provisions that are not only socialist but also sexist, racist, and biased against people with disabilities. In short, the BBBA would take selfishness to a new, dark level.
That’s why Congress should once and for all abandon prescription drug price-setting schemes and instead focus on helping everyone to have the means to access the elite care we have in our great country.
Kent Kaiser, Ph.D., is executive director of the Trade Alliance to Promote Prosperity. More information is available at www.promote-trade.org.