Congress has made a lot of noise lately about tackling legislation to lower drug prices this fall. The politics of this issue make sense, but most of the policy proposals floated to this point do not. Some, in fact, would make it harder for Americans to access the prescription medicine they need.
One proposal backed by a number of Democratic presidential candidates and, sadly, some Republicans would impose foreign price controls on drugs covered by Medicare, a terrible idea that would hit the most vulnerable seniors the hardest.
This regulation would establish an International Pricing Index for Medicare Part B drugs. The IPI rule would set prices for certain drugs under Medicare based on prices paid in 14 other countries where anti-market price controls are in effect. These countries include Japan and the United Kingdom (UK) and also Greece, Slovakia and Portugal.
That plan is stolen straight from the Democrats’ songbook. In fact, Sen. Bernie Sanders (Vt.), a leading Democratic presidential candidate, has written legislation that would tie U.S. prices to controlled rates in other nations.
Other forms of this proposal have bubbled up in Congress and even the Trump administration. The premise is the same as the socialist Sanders bill: Europe knows how to do this better than the United States and the outcome will be the same: government dictating what medications are available to patients—not the conversation between patients and doctors. And, as all government programs expand their reach—the control will doubtless soon touch every aspect of the health care Americans can access.
The result: fewer options, less innovation, and millions of patients left never knowing something better for their health is out there.
European nations introduced prices controls a few decades ago and the continent has gone from an innovator to a follower since then. According to a report released last month by the U.S. Chamber of Commerce Global Innovation Policy Center, in 1986 Europe invested 24% more into research and development for new medicines and treatments than the United States. Thirty years later, after introducing reference pricing, Europe invests 40% less than America.
Additionally, according to the Milken Institute, before price controls were implemented, European countries nearly 70% of all new medicines came from Europe and less than one-third came from the United States. By 2010, the United States was producing more than half of new drugs.
According to the Chamber of Commerce analysis, importing European pricing controls through the IPI would drive down R&D by 25% a year on average. Importing the IPI to America will make us weaker. Outsourcing new drug development to repressive, totalitarian regimes like China, who, according to a new paper by the Information Technology and Innovation Foundation, poses a significant threat to the U.S. biopharmaceutical industry, would be a grave mistake for our country.
Advocates for cancer patients have been especially vocal about how the IPI would impact the search for new treatments. The American Cancer Society, for example, has warned the IPI will “make it harder for cancer patients, especially those living in rural areas, to find the right provider to treat their cancer with the right drug.” An IHS Markit study came to the same conclusion. It said if the United States had set prices the way Australia, Canada, France, South Korea and the UK did, survival gains for Americans with certain types of cancer “would have been cut in half.”
We have seen this result play out in Europe of the last few decades. Of the 74 cancer drugs that hit the market between 2011 and 2018, 95% are now available in the United States. Only 74% are available in the UK. In Japan and Greece that number is 49% and 8%, respectively.
To maintain the U.S.’s competitive advantage, elected leaders must focus on market solutions that reduce overly complex and duplicative government programs, increase transparency, expand competition, lower the barriers to innovation, and encourage engagement of patients in their own health care.
President Trump’s White House has warned against the dangers of imposing foreign economic models on our market for prescription medicine. In a 2018 paper, the U.S. Department of Health and Human Services warned price controls delay, “the availability of new cures to patients living in countries implementing these policies.”
That take is the right one and elected Republicans should consider it strongly before they make the mistake to align themselves with Bernie Sanders by imposing foreign price controls on many of the prescription drugs seniors need.
