President Trump recently issued four new executive orders aimed at lowering the cost of prescription drugs. One of these orders, if finalized, would establish an international pricing index which would tie the prices of certain Medicare Part B drugs to the average drug prices of other developed nations.
Some countries have price controls in place preventing companies from charging what the drug is worth. To compensate for lost revenue, companies sometimes over price drugs when selling them to the U.S. The result? Patients in the U.S. can pay more, sometimes far more, than what patients who live in countries with price controls pay for the exact same drugs.
It’s absolutely unfair that Americans pay more. But we can’t ignore the fact that drugs are priced based on the amount of research and development put in, and the cost of researching and developing new drugs is high. Without this revenue stream, researchers and developers won’t be able to fund and bring vital drugs to market.
As we’ve written before, pharmaceutical price controls can suppress medical treatments and innovations. The best way to combat the coronavirus crisis is to develop treatments and vaccines. Now more than ever, the focus should be on expanding access to life-saving treatments that will help bring this pandemic to an end.
Instead, policymakers can focus on lowering the cost of U.S. health care spending to make prescription drugs more affordable. Greater price transparency in health care, which would arm patients with pricing information and allow them to shop for health care, can help bring prices down.
The U.S. should also negotiate for a more equitable distribution of research and development costs so that this responsibility is shared among the nations.
To learn more about this issue, check out Two Truths And A Lie: Pharmaceutical Price Controls.