Americans are the envy of the world when it comes to accessing the medicines that save, extend and improve lives. Consider that 90 percent of the new drugs approved in the United States, Europe and Japan and launched in any country between 2011 and 2017 are available in the United States. Yet only half of those treatments are available in France, by contrast, and barely more than a third of them are accessible to Australians.
In my country, Austria, 30 percent of new medicines to treat cancer — an area of significant ongoing medical advance — are not available for patients who live there. If a new blockbuster treatment emerges from the drug discovery pipeline, it’s almost certain that patients in the United States will benefit from it.
Furthermore, the average delay in availability of cancer medicines in the United States sits at a far more favorable three months, compared to Austria’s 12 months. Finally, Austria’s reimbursement scheme for pharmaceuticals mandates is restricted to certain brands.
It’s bewildering as to why politicians in the United States would want to alter this favorable dynamic. That will likely be the consequence, though, if policymakers follow through on a proposal to align drug prices to those in other countries that use government mandates to force prices below market value.
The proposal that emanated from the Trump administration and has been included in legislation put forth by congressional leaders would essentially import the kind of heavy-handed government price controls that restrict patient access around the world, and has been always considered anathema in the United States.
I understand the political pressure to act regarding prescription drug prices, but the consequences of the international reference pricing proposals, like the International Pricing Index (IPI), are severe indeed. Your country may be sacrificing health, jobs, economic growth and future innovation in exchange for a political talking point.
The theory behind IPI sounds simple enough — if other countries pay less for drugs, then we should, too. But it’s imperative to understand how many of these countries establish their pricing levels for pharmaceuticals. Many believe that the laws of economics cannot be applied to health care.
So in a nationalized health care system, centralized government bureaucracies – not the market, not doctors, not patients — decide what drugs are available, who gets them and who doesn’t. Some companies will not launch new medicines in these nations because of the artificially-low government-mandated pricing, and the fear that other countries will reference those prices in setting their own.
Further, in Europe, prices and access are limited by a formula that places a dollar value on each patient’s life, an approach most Americans would greet with horror. In this value assessment process these nations use, people of advanced age or with disabilities are seen as having an inferior economic value and, thus, not worthy of the investment that expensive medications would require. This is the philosophy of health care governance that some U.S. policymakers wish to import.
But the greatest ramification for the U.S. health care system and for patients who hope that there will one day be a cure for diseases like cancer, Alzheimer’s and diabetes is that international reference pricing will significantly devalue the intellectual property underpinning biopharmaceutical development. If government-mandated, below-market pricing is imported into the United States, the investment value of intellectual property will decline precipitously.
If researchers aren’t empowered to do their jobs, innovation will fall back. Capital investors will not sink their resources into market sectors that don’t provide a fair return. And the U.S. Department of Commerce has previously reported that other countries’ use of price controls suppress worldwide investment in research and development by 11 percent to 16 percent.
Bring those controls into the United States and not only will investors go elsewhere with their money and future innovation will be stifled, but the incentive to invest in research and development in medicines for rarer diseases will also be diminished.
The differences in pricing policy mean that more innovative medicines are available here. Why would anyone in this country want to change that?
It is a fallacy, in fact, to suggest that forcing down drug prices will repair the ills of the health care system at large. Drugs remain a relatively small percentage of the overall cost of care. Wouldn’t it make more sense to increase transparency, encourage greater competition and negotiate stronger trade agreements to protect intellectual property abroad and press our trading partners to carry more of the financial burden of innovation?
If we are entering an era in which genomic research is going to spur a stronger flow of new personalized and targeted treatments and therapies that can arrest the progression of disease before pain and tragedy occur, then shouldn’t U.S. policymakers want their citizenry to enjoy the benefits of that innovation? It would be a serious mistake to let political imperatives be the enemy of such a greater good.
• Barbara Kolm is the director and founder of the Austrian Economics Center, a politically-independent research institute.