Government Should Abstain from Imposing Foreign Pricing Regulations on Groundbreaking Medications
In a nutshell, the MFN (Most Favored Nation) policy for drug pricing is a seductive yet misguided idea. Take President Trump's proposal, for instance. This policy would set Medicaid's drug prices at the lowest prices charged in developed countries that impose price controls on medications. The problem? It'll make things worse, real bad.
The logic? Patients in countries like the UK or Canada, who pay less for meds, should pay the same in the US. But here's the kicker - the prices in many developed countries are low only because these nations enforce strict price controls - always expensive, mate.
First off, price controls reduce drug availability. In OECD countries, patients have access to just 29% of new medicines compared to the US's 85%. It's worse in Canada and the UK, where folks might wait years for new treatments and always run short of certain drugs. And adopting the MFN policy means we're outsourcing US health policy to these countries - not good, mate.
Now, let's not forget about innovation. Developing a new drug is risky, expensive (over $2.9B on average), and takes a massive 10 to 15 years from start to finish. Price controls make it harder for companies to recoup costs, reducing funds available for innovation. And that's a problem. According to the latest industry economic impact report, the biotech industry contributes a whopping $1.4 trillion to the US economy, supports nearly 2.3 million jobs, and pays hundreds of billions in taxes.
What's more important, though, is the lost innovation harms patients dealing with diseases that have limited or no treatment options. If price controls hit the US, patients with Alzheimer's, pancreatic cancer, or muscular dystrophy might never get the treatments they need.
The problem is simple: foreign countries impose price controls on drugs. This means patients worldwide benefit from US pharmaceutical innovation without paying their fair share. The solution isn't the MFN - that's a disaster waiting to happen. Instead, we should defend the intellectual property of US firms in trade negotiations. Negotiators could appoint a pharmaceutical trade negotiator at USTR for starters. This will take time, but it's worth the effort.
In the meantime, there are beneficial reforms Congress can enact right now to boost drug availability. The market suffers from inefficiency; more than half of drug revenue goes to hospitals, pharmacies, and other middlemen due to misguided policies. Reforming these policies could bring greater transparency to the 340B drug discount program and ensure it serves its intended population, improving the program's effectiveness while easing inflationary price pressures.
Another needed reform would address the current opaque drug pricing system, giving pharmacy benefit managers (PBMs) too much power. This often shifts costs to patients and encourages the use of costlier medications over cheaper alternatives. Taming PBMs would improve the market's incentives, lowering out-of-pocket costs for patients and preserving the incentives for innovation.
Lastly, the FDA approval process is slow and overly burdensome. Simplifying it could reduce the cost of developing treatments and make them more accessible to patients faster.
Our goal with US drug policy should be to promote innovation and wide accessibility. The MFN policy opts for foreign-imposed price controls, thwarting innovation and reducing patient access to meds. And while drug spending might drop, overall healthcare costs could increase as patients need costlier surgeries and hospital stays. Affordable drugs require hard work and smart policymaking - not quick fixes like the MFN.
- Science and technology play significant roles in pharmaceutical innovation, with an average cost of over $2.9 billion and a timeframe of 10 to 15 years to develop a new drug.
- The MFN (Most Favored Nation) policy for drug pricing, such as President Trump's proposal, would set Medicaid's drug prices at the lowest prices charged in developed countries that impose price controls on medications, potentially reducing drug availability.
- In the health-and-wellness sphere, strict price controls in countries like the UK or Canada result in less access to new medicines for patients, with only 29% compared to the US's 85%.
- Besides affecting drug availability, price controls may slow down the development of future therapies-and-treatments in the biotechnology industry, contributing trillions to the US economy and supporting nearly 2.3 million jobs.
- Engaging in personal-finance matters, the MFN policy could have adverse effects on patients dealing with diseases that have limited or no treatment options, impeding their access to essential medicines.
- Education-and-self-development encourages the exploration of alternatives in drug policy, focusing on preserving US pharmaceutical intellectual property through trade negotiations, appointing a pharmaceutical trade negotiator, reforming inefficient policies, taming pharmacy benefit managers (PBMs), and simplifying the FDA approval process.
