Medicare drug proposal will prevent new medicines from coming to market

Woven within the fabric of our country is the core understanding that leadership comes with both great opportunity and cost. We have long led the world in pharmaceutical innovation, a distinction we’ve proudly maintained as mergers and acquisitions have reshaped the highly competitive industry. Studies estimate that nearly two-thirds of all new pharmaceuticals originate in the United States, a percentage that has grown over the past thirty years, fueling a booming biotech industry that provides front-line products combatting our most vicious diseases.

A new threat has emerged to our country’s position as the global leader in pharma innovation and it comes from within our borders. The administration's new proposal to tie Medicare reimbursement to the price control rates paid by European single-payer states will undoubtedly harm competition and reduce the number of new medicines coming to market. As a former secretary of the Department of Health and Human Services (HHS), I want to suggest another way to get to the same result rather than foreign price controls as a reference price for Medicare drugs.

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The most innovative health-care leaders are continually seeking to improve their offerings and they are not afraid to look outside of our borders when circumstances warrant. Not once in my memory have price controls ever been something that the best and brightest have sought to emulate.

Despite its current advocacy, the negative impact of price controls hasn’t been lost on key policy makers, with the White House Council of Economic advisers stating earlier this year, "If the United States had adopted the centralized drug pricing policy in other developed nations twenty years ago, then the world may not have highly valuable treatments for diseases that required significant investment.”

Perhaps the greatest evidence of the negative impact of price controls are that many of the successful foreign owned pharmaceutical operations choose to run their most ambitious and successful research and development operations in the United States, recognizing a market that provides opportunity to find both top talent and demand for the world’s best cures and treatments.

Recent research has demonstrated that while Medicare and Medicaid patients have access to about 95 percent of new cancer medicines being developed, citizens of Japan and Greece, two countries that would form the price control index HHS has proposed, have access to 49 percent and 8 percent of those drugs, respectively.

As the White House's own Council of Economic advisers stated in a report released just last month, "Unlike other developed countries with single-payer systems, which nearly all impose some sort of price controls, the U.S. market is less financed by the public sector and more open to market forces. In a free market, prices of products reflect their value as opposed to prices in government-controlled markets, which reflect political trade-offs.

The harm, ultimately, will be felt in the medical breakthroughs that never happen. Contrary to the assurances of the administration, there is ample evidence that the new proposed scheme will severely harm the research and development of new drugs for several reasons.

First, the magnitude of the cuts is significant: HHS estimates the amount involved is $17 billion over five years. Given that this would come from a relatively narrow subset of drugs, it would be a significant portion of the R&D spent on that subset.

Secondly, the subset in question, physician-administered drugs, is one where an outsized share of medical innovation is taking place in recent years. This is among the worst places to start imposing price controls, if you had to choose.

But thirdly and most importantly, the international pricing index scheme introduces a huge amount of uncertainty into the market because the rates would become highly variable and unpredictable.

There are far too many moving pieces to accurately forecast the political trade offs occurring in 16 foreign nations that result in the arbitrary prices they force on American businesses. Uncertainty is toxic to economic growth because it prevents companies from being able to confidently plan for the future. Instead, they often pull back, harming growth and new treatment and cure breakthroughs.

President TrumpDonald John Trump Former US ambassador: 'Denmark is not a big fan of Donald Trump and his politics' Senate Democrats push for arms control language in defense policy bill Detroit county sheriff endorses Booker for president MORE has demonstrated an admirable loyalty to American interests, refusing to accept the status quo when other nations take advantage of our country's companies and its workers. I would recommend that my former colleagues at HHS work with the U.S. Trade Representative and the White House to press for a more level playing field in trade negotiations with these countries, like President Trump is doing across the globe.

Our standards should not be to embrace price control rates set overseas that will undoubtedly hurt competition here in the United States and reduce research into new medicines. The research community and health-care consumers who are continually seeking tomorrow’s innovative treatments would be better served having the Administration pivot from its current proposal and open up a real trade discussion regarding these unfair and unrealistic price regimes imposed abroad.

Tommy G. Thompson is a senior adjunct advisor with Akin Gump, a firm that lobbies for many industries including, health care. He is a former U.S. Health and Human Services secretary and four-term governor of Wisconsin