Price control on drugs – What it really means for the health of Americans

Health care costs continue to rise in the United States. Some elected officials have targeted prescription drugs as one of the main drivers of these increased costs. Prescription drugs account for only about 10 percent of overall health care spending in the U. S., but this area of spending is often out-of-pocket costs for the average patient.

The Biden Administration placed price controls on certain pharmaceuticals in the Inflation Reduction Act of 2022. The current federal Administration is pushing for further price controls on drugs, although there is currently bipartisan opposition in Congress.

The proponents of price controls believe that Americans should pay the same amount that patients in other countries pay for prescription pharmaceuticals. The fashionable term for this is “most favored nation” pricing.

It is well known that Americans pay more for their drugs, but a bit of background is necessary. Health care systems in other countries are controlled by the government, which decides what medicines to make available. Bureaucrats negotiate directly with drug manufacturers and essentially tell the companies what they are willing to pay. If the company doesn’t like the financial deal, the country simply goes to another company, or in many cases, denies its citizens the use of that particular drug. The consequence of these negotiations is that new drug availability is much worse in these other countries.

The expense of making a new pharmaceutical is in the research and development (R&D). It can take over ten years at a cost of billions of dollars to bring a new drug to market. The cost of actually manufacturing the drug is minimal. Consequently, a company will accept any payment from another country once the R and D is completed.

So, yes, Americans are footing the bill for R and D, but what do drug price controls mean for the health of Americans? Researchers at the University of Chicago released data on the impact of price controls on drug research and development and pharmaceutical availability to patients in the U.S. The Chicago study estimates that R and D dollars would drop by 30 percent to 60 percent by 2029, which translates to 167-342 fewer new drugs being brought to market.

Add to this fact that U.S. pharmaceutical companies develop two-thirds of all new medications offered worldwide.

If public officials really want to bring prices down and increase competition in the drug industry, they should streamline the drug approval process to reduce the time and money manufacturers devote to bringing a new drug to market. There is even a backlog of generic drugs awaiting government approval, even though they have been approved and available in patent form.

Throughout our economy, a vigorous and creative free market, without third-party interference, results in better products at lower prices every day with constant improvement. Allowing patients, in consultation with their providers, to decide which drugs are best clinically and financially for them should be the goal of health care reform, not damaging price controls.