With COVID-19 still raging, it’s unlikely that trade negotiators from the United States and the United Kingdom will finalize a bilateral agreement before year’s end.
Hopefully, the delay will afford both parties time to reflect on their priorities.
One trade issue that should be at the top of Prime Minister Boris Johnson and U.S. Trade Representative Robert Lighthizer’s negotiating list? Changes to the United Kingdom’s drug pricing and evaluation regime. Addressing pharmaceutical pricing will be challenging, but it’s necessary to safeguard the future of biomedical innovation — especially amid the coronavirus pandemic.
For years, the U.K.’s National Health Service has imposed government price controls on American pharmaceuticals. That has allowed Britons to freeride off American consumers and taxpayers, instead of shouldering their share of the research and development burden. And now, during the worst pandemic in 100 years, this unfair pricing regime threatens to undermine the ability of U.S. innovators to continue developing lifesaving therapies.
Fortunately, Ambassador Lighthizer and his team can address this disparity during negotiations with their U.K. counterparts — they just need to seize the opportunity. Promoting market-based drug pricing in any final U.S.-UK trade deal would benefit American and British patients alike.
You don’t need to have an advanced degree in behavioral economics to understand that price controls are bad policy.
For starters, they limit pharmaceutical companies’ ability to recoup research and development costs. This keeps firms from pursuing future research projects and developing more new treatments. And unfortunately, scaling back R&D efforts can cause massive layoffs and subsequent economic ruin. When you consider that the U.S. biopharmaceutical industry supports more than 4 million U.S. jobs and contributes $1.1 trillion to our economy each year, it’s clear just how much we have to lose by letting price controls endure.
A wealth of research demonstrates the advantages of a world without price controls. A 2020 Council of Economic Advisers report, for instance, concluded that “reducing foreign price controls would increase profits and innovation, thereby leading to … lower prices for U.S. patients.” And according to a 2018 analysis from consultancy Precision Health Economics, lifting price controls in OECD countries could result in eight to 13 new drugs invented each year by 2030.
Such new medicines tend to be highly innovative. Fifteen of the 46 new drugs approved by the U.S. Food and Drug Administration in 2017 were first in class, meaning they treat diseases differently from any other existing therapy. Many of the other newly approved treatments offer significant improvements over older therapies.
Recent drug advancements have saved millions of lives. For instance, the cancer mortality rate has declined by 26 percent since its peak in the 1990s; new and improved medicines account for nearly 75 percent of that drop. Antiretroviral regimens have transformed HIV/AIDS from a death sentence to a manageable condition. New gene therapies and immunotherapies are restoring sight to the nearly blind and healing cancer patients who were near death.
An unquestionably strong, positive, causal relationship exists between market-based drug pricing and innovation. Negotiating a trade deal that helps lift the United Kingdom’s pricing restrictions wouldn’t merely incentivize more R&D and pave the way for future new medicines. It would also result in faster drug launches for medicines already in the development pipeline for patients in both countries.
British patients would benefit from broader and quicker access to such lifesaving treatments. Of the 243 new drugs launched worldwide from 2011 to 2018, only 160 — 66 percent — are available in the United Kingdom. Americans, by contrast, have access to 213 — 88 percent — of those drugs, thanks to the United States’ comparatively free-market drug pricing regime.
And the majority of those drugs were launched in the United States first. The ones that ultimately made it to the United Kingdom were delayed by a median of seven months. Faster drug launches would spare U.K. patients from early deaths and avoidable suffering.
It’s more important than ever before that the United Kingdom stop free-riding on U.S. innovations. American biopharmaceutical firms are hard at work, using their own capital to research and develop countless COVID-19 therapies. These firms will continue to feel comfortable making this risky investment only if they remain confident that the price of their discoveries will be dictated by market forces.
The United Kingdom’s history of using price controls to set drug prices challenges this much-needed assurance. And when the U.K. government ultimately devalues U.S. COVID-19 therapies, that could lead to fewer active research and development projects in the United States and across the globe.
President Trump has long sought to reduce other developed nations’ use of pharmaceutical price controls. His administration can make this vision a reality by making drug pricing a priority in U.S.-U.K. trade talks.
• Charles Boustany is a retired physician and former congressman from Louisiana.