Price controls don’t put America first
/ ETTE5S T2 THE EDIT25
President Trump is reportedly planning his most ambitious e ecutive order yet. It would reTuire pharmaceutical companies to sell drugs to Medicare and Medicaid for the same prices they charge in other developed countries, where medicines are often far cheaper.
That might sound like the sort bold, America-first policy we need make drugs more affordable.
But the strategy would backfire. Price controls would yield short-term savings for patients and ta payers – – but they’d also deter future research investments and choke off the development of new drugs. /et’s hope the administration chooses a smarter way to reduce patients’ drug costs.
Medical innovation is a high-risk, high-e pense endeavor. /ess than percent of e perimental therapies that undergo human testing prove effective enough to receive FDA approval. Because of this high failure rate, it costs more than . billion to bring Must one new drug to market.
Investors willingly fund risky research proMects as long as there’s a chance to profit from a successful medicine. Big pharmaceutical companies poured almost billion into of to research and development alone. Smaller biotech firms billions more.
Thanks to such investments, 8.S. labs produce over half of all new medicines developed worldwide.
This innovation saves lives. Cancer deaths have fallen percent over the last three decades, mostly because of better drugs. Five-year survival rates for chronic myeloid leukemia have risen by almost percent since , when the first drug to treat the cancer was approved.
Price controls would eliminate companies’ incentives to invest in drug development. Why would firms spend billions on research if there’s no hope of turning a profit or even recouping their development costs
If the president’s potential e ecutive order goes into effect, patients would enMoy far fewer new cures.
Fortunately, the president can deliver savings to patients without resorting to price controls. His aides at the Department of Health and Human Services already developed – – but then shelved – – a great plan to reform the drug supply chain.
Each year, drug makers offer well over billion of discounts on their products to insurers and other middlemen in the drug supply chain. But in invested patients rarely benefit from these savings. That’s because insurers and middlemen capture these rebates themselves, instead of using them to reduce patients’ out-of-pocket costs.
The HHS proposal would have forced insurers and other middlemen to share those discounts directly with Medicare beneficiaries in the form of lower copays and coinsurance. The rule could have reduced Medicare beneficiaries’ prescription drug spending by percent and saved the federal government up to billion over the ne t decade.
These savings would have made it easier for patients to stay healthy. 8p to , Americans lose their lives each year because they don’t adhere to their prescriptions.
Imposing price controls on Medicare might generate short-term savings – – but it’d cut off the research funding that yields new cures. President Trump would be wise to shelve this proposal and concentrate on slashing Americans’ out-of-pocket drug costs.
Bob Beauprez is a former United States Representative, representing Colorado’s 7th congressional district from 2003-2007, and Republican candidate for Governor of Colorado.
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