The Cost of Cures: Drug Price Controls vs. Biopharmaceutical Innovation

There is an increasingly intense focus in Washington on reducing the price of drugs to bring down health care costs. President Trump has proposed a plan that would use an international pricing index model for drugs covered under Medicare Part B. There are proposals from both sides of the aisle in Congress as well, including various forms of government-led arbitration and changes to U.S. patent laws. But much of this debate is taking place without systematic consideration of what effect, if any, mandated drug-price reductions would have on biopharmaceutical innovation and U.S. industry competitiveness.

On June 20, 2019, the Information Technology and Innovation Foundation and the American Action Forum (AAF) held an expert panel discussion in the Russell Senate Office Building to delve into this critical issue.

ITIF President Robert Atkinson set the stage by discussing the potential impacts of drug-price reductions. He noted that approximately 80% of all new drugs in the market in the last 15 years have lost money, and that drug price controls will come at the expense of reduced drug development in the future.

AAF President Douglas Holtz-Eakin then discussed how the United States does not have a single widespread drug problem. Instead, the current problems concern market power abuse among some specialty drugs and their efforts to intervene in markets for drugs that benefit relatively small populations. He noted how this potentially could diminish future drug innovation.

Holtz-Eakin also added that indexing U.S. drug prices off a relatively small number of countries relies on nations that are incomparable to U.S. demography. He suggested that the United States pursue better market incentives instead to maintain global competitiveness.

ITIF Vice President Stephen Ezell then continued the conversation on U.S. industry competitiveness. He noted how the implementation of a pricing and reimbursement system has enabled innovators to allocate the funds needed to support research that has been key to U.S. leadership in life-sciences.

Ezell also stressed that requiring federal negotiation of drug prices leads to a decline in R&D investment, which results in decreased production of new drugs. While innovative drugs are often blamed for increasing healthcare system costs, these drugs are important to finding cures.

Andrew Spiegel, Executive Director of the Global Cancer Association, then spoke about patient advocacy initiatives. He noted how drug innovation has greatly improved treatment. For example, twenty years ago, there was only one drug to treat colon cancer that was ineffective, whereas now patients can choose from over 15 approved drugs. Biomedical research and innovation have enabled people to live longer and healthier lives. Therefore, Spiegel stressed the importance of continued funding for biomedical research, including the production of new drugs.

Atkinson then discussed how the world continues to advance in biomedical innovation and technology, improving the quality of life for many people and ultimately improving the healthcare system, as well. He explained that the cost of drugs is not the same as price of drugs, and that the government could take initiative to decrease drug development costs. Holtz-Eakin also emphasized that drug pricing will still result in some innovation, but it will not yield breakthrough innovation.

Overall, the panelist agreed that drug-price control may increase accessibility, but it would be at the cost of decreased biopharmaceutical innovation.

Follow @ITIFdc and join the discussion on Twitter with the hashtag #ITIFdrugpricing.