The Trade-off for Price Controls: Are We Willing to Accept Fewer Medicines?

It's possible to strike a balance between innovation and efficient spending, and to implement policies ensuring that resources are being invested in treatments, procedures and public health efforts that bring the most value to patients.

The United States leads the world in drug development and in ensuring that patients have broad access to new and curative therapies. Our system’s incentive structure supports research and development of these innovations, which, once they have been approved as safe and effective, have transformed the lives of patients with serious, chronic and sometimes life-threatening diseases.

Through this innovation, we have seen system improvements that range from better cancer treatments to better control of communicable and chronic diseases. For example, a 2019 study found that physicians attributed more than half of patient outcome improvements on the eight leading causes of death to innovative medicines, far more than any other intervention, including diagnostic testing, medical devices or surgical procedures.

Policymakers and the general public may not believe that imposing government price controls on prescription drugs will harm innovation. But the nonpartisan Congressional Budget Office estimates that price controls could lead to nearly 40 fewer drugs on the market in the next 20 years, and other research suggests an even greater reduction in the number of new drugs.

The research does not predict which drugs these would be or what diseases they would cure. So the question for policymakers and other health care stakeholders needs to be: which treatments and cures are worth giving up?

Sustaining and improving patient health should be the goal of policymakers and every health care stakeholder. Maintaining incentives for innovation that promote high-value care, care that makes real progress against life-threatening diseases and life-challenging chronic conditions, should be a top priority.

Michael Ciarametaro, MBA Vice President of Research, NPC

We already know that regulating biopharmaceutical innovation incentives presents long-term trade-offs for patient health. Recent research on budget caps, for example, showed that capping spending at the pharmaceutical level, compared to aggregate budget caps, led to worse health outcomes for eight of the most commonly occurring conditions including ischemic heart disease, asthma and rheumatoid arthritis.

We risk real long-term damage to patient health if policies hurt a healthy innovation infrastructure. We can and should strike a balance between innovation and efficient spending, and our policies should ensure that resources are being invested in treatments, procedures and public health efforts that bring the most value to patients.

Conversely, this effort would mean discouraging spending on care that is shown to be of lesser value. Unnecessary, inefficient services waste $340 billion of the $2.6 trillion we spend on health care in the U.S., a significant sum. Spending on services like vitamin D screening tests, prostate-specific antigen (PSA) screening for men 75 years old or older, and diagnostic testing and imaging for low-risk patients before low-risk surgery are just some examples of care that could be largely avoided.

It is certainly true that patients are facing serious affordability challenges when it comes to paying for all health care treatment, not just medicines. The main culprit is our outdated payment and delivery system. We are developing transformative medicines, but insurance benefit design, in addition to failing to promote value-based care, is not keeping up with how to reimburse for these medicines.

Sustaining and improving patient health should be the goal of policymakers and every health care stakeholder. Maintaining incentives for innovation that promote high-value care, care that makes real progress against life-threatening diseases and life-challenging chronic conditions, should be a top priority.

On May 26, I will be joining experts from academia and other industries in a webinar to explore the tradeoffs between price controls and access and innovation. This webinar, hosted by the Council for Affordable Health Coverage, will focus on specific policy proposals that either directly or indirectly control the price of drugs, including international reference pricing, price inflation rebates and Medicare benefit redesign, among others.

As the conversation continues around how the current administration will approach drug pricing policy, understanding the implications of these policies is of critical importance.

Biopharma Innovation

Innovation Matters

Regulating incentives for biopharmaceutical innovation presents long-term trade-offs for patient health. How can we strike a balance between maintaining the U.S.’s healthy innovation ecosystem and efficient health care spending?

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