Most industrialized nations other than the U.S. impose price-control regimes on prescription drugs. As a result, patients in those countries have less access to newer medicines and lifesaving benefits than patients in America. Unfortunately, if Speaker Nancy Pelosi has her way, we will soon import a similar price-control system.
Under Pelosi’s “Lower Drug Costs Now Act,” the federal government would identify the 250 most expensive drugs every year and “negotiate” prices for at least the top 25. The negotiations, however, would be rigged. The bill forces a pharmaceutical company to accept a price for its drug that is no more than 1.2 times the average price of that drug in the countries of Australia, Canada, France, Germany, Japan, and the United Kingdom. If a company refuses to enter into negotiations for its drug, the federal government will impose a punitive excise tax of 65 percent on the gross sales of the drug. That tax will increase by 10 percent every quarter until it reaches a maximum of 95 percent.
The governments in many foreign countries first decide whether or not a drug is cost-effective before they will agree to pay for it. Then they force drug manufacturers to negotiate prices. This means that patients often wait months, if not years, to get access to new drugs. Sometimes they don’t get access to them at all.
A report by the Galen Institute found that Americans had access to 89 percent of new drugs released worldwide from 2011–18. By contrast, Germans had access to only 62 percent, the French 48 percent, and the Japanese 50 percent. The disparities were similar for cancer drugs. While the U.S. had access to 96 percent of new cancer drugs during that time period, Germany had access to only 73 percent, France 66 percent, and Japan 50 percent.
Even if Americans still had the same amount of access to new drugs, the delays that could result from a price-control scheme would have life-or-death consequences. In the U.S. it takes about 30 days for a new drug to come to market after it is approved by the Food and Drug Administration. Due to government regulation it takes much longer in other nations. Consider Kadcyla, a drug that can extend the life of women with late-stage breast cancer. Kadcyla was approved for use in the U.S. in 2013. Yet due to government regulation, Kadcyla wasn’t effectively available in the market in France until 2014, Australia until 2015, and the United Kingdom until 2017.
The leading cause of cancer death around the world and in the U.S. is non-small cell lung cancer. A study by IHS Markit found that from 2006–17 the U.S. population gained over 200,000 life years due to the relative speediness with which new drugs to treat lung cancer are available. It took on average over 300 days in France for new lung cancer drugs to come to market after government approval and over 600 days in Australia, Canada, and the United Kingdom. The same study found that if Americans were to face similar delays, they would lose over 100,000 life years. If the Pelosi bill lengthens the time that it takes to get a new drug to market, Americans will pay with their lives.
Proponents of Pelosi’s bill also claim that spending on pharmaceutical research and design (R&D) won’t suffer under price controls, but the evidence is against them. In 1990, spending by U.S. pharmaceutical companies on R&D was only 70 percent of what was spent by companies in Europe. Yet years of increasing price-control regulations in Europe have taken their toll. By 2015, R&D spending by pharmaceutical companies in Europe amounted to only about 40 percent of R&D spending in the United States. That, of course, means fewer new drugs with life-saving benefits.
Currently there are new drugs in the development pipeline for diabetes, cystic fibrosis, Alzheimer’s, lymphoma, leukemia, bone marrow cancer, and stage IV melanoma. Pelosi’s price-control prescription would reduce the number of life-saving drugs being developed and make it more difficult to obtain the drugs that do come to market. Americans would pay the ultimate price with their lives.
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