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3-2-2019 - Price controls would kill medical innovation

Tuesday, March 5, 2019 - 10:45am
Sandip Shah

Department of Health and Human Services Secretary Alex Azar recently proposed sweeping reforms to Medicare. He hopes the changes will reduce the price of many cancer drugs and other advanced therapies. 

The proposal may accomplish that goal -- but at great costs to patients' health. The overhaul would stifle innovation and smother the cures of tomorrow.

The proposal targets Medicare Part B drugs, which include advanced cancer treatments, immunotherapies, and other medicines administered under physician supervision. 

According to HHS, these drugs cost 80 percent more, on average, in the United States than in most European nations. 

Drugs are more expensive in the United States since other wealthy nations impose price controls on medications. Regulators in the United Kingdom conduct a cost-effectiveness analysis on each drug and refuse to cover medicines priced above an arbitrary limit. Canadian regulators outright dictate drug prices.   

Sec. Azar wants to import this price control model by indexing Medicare drug payments to the average sales prices of drugs in 14 other developed nations.

Price controls would impede investment into new medicines. Right now, drug companies have a financial incentive to launch medicines in America. Last year, 92 percent of all new medicines approved around the world were made available first in the United States. 

By contrast, patients in price-controlled nations wait months to access the same treatments. From 2011 to 2018, patients in Germany and the UK waited an average of nine months longer than U.S. patients did for new oncology drugs.

A few months could make the difference between life and death for patients with serious illnesses.

Price controls would also stifle innovation. The United States leads the world in drug development. Biopharmaceutical companies have invested more than $500 billion in research and discovery since the turn of the century. 

Thanks in part to this investment, Americans are living a full decade longer than they were in 1950.

Consider breakthroughs in treating hepatitis C, a potentially fatal liver disease. Roughly a decade ago, an older generation of therapies cured only four in ten patients after 48 weeks of treatment. Today, the latest drugs cure 90 percent of patients in as little as eight weeks. 

But research investments are risky. It takes $2.6 billion and 15 years to bring a new drug to market. The vast majority of drug compounds never make it out of the lab.

Capping the price of drugs would make it much harder for companies to recoup their investments. Firms would lose the incentive to develop new cures -- and patients would suffer as a result.

There are 7,000 drugs in development worldwide. But these drugs may never exit the lab if the United States imposes price controls. Sec. Azar should scrap his Medicare proposal to protect patients and taxpayers.

Sandip Shah is the founder and president of Market Access Solutions, a global market access consultancy, where he develops strategies to optimize patient access to life-changing therapies.

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