Steve Moore: Congress Should Think Twice About Importing Drug Prices
Almost all Americans want to see lower prices for prescription drugs. Americans don’t deserve to be gouged when they need life-saving drugs. It’s also unfair that Americans often pay higher prices than customers in developed nations around the world. To solve these issues, too many in Congress want to impose state-mandated price controls.
The research is clear that this would only inhibit the development of such life saving drugs — which can cost as much as $1 billion to develop in the first place. It’s simple economics. When the government arbitrarily sets the price of any good, the costs are felt elsewhere.
In the case of prescription drugs, price controls remove the incentive for firms to innovate and develop new and better drugs. The U.S. leads the world in pharmaceutical innovation. Price controls, if they delay the introduction of new drugs, would therefore be detrimental to the race for the cure of deadly and painful diseases — from cancer to MS to Alzheimers — that benefit Americans and billions of people around the world.
The solution to the high domestic costs of prescription drugs is not to import other nations’ price controls. Sen. Rick Scott (R-Fla.) and Bernie Sanders (I-Vt.) have put forward nearly identical plans to index the price of U.S. prescription drugs to those of socialist health-care systems overseas in order to presumably save patients’ money.
Price controls are a defining aspect of socialized health-care systems that are endemic to Europe and other developed nation. These countries hold down costs by merely free loading off of American innovation without paying a fair price. The solution is for Uncle Sam to enforce American patent rights so that each nation pays for the cost of developing the drugs in the first place. This would increase funding for new cures.
The Department of Commerce found that price controls in just a small number of Organization for Economic Co-operation and Development (OECD) countries had reduced funding by up to $8 billion per year, preventing the development of three to four new drugs annually.
Another study using data from the National Institutes of Health found that if all developed countries lifted all price controls on prescription drugs, the resulting increase in pharmaceutical R&D investment would yield eight to 13 new drugs per year through 2030. What if one of these delayed drugs is a cure for colon cancer, Parkinson’s or Alzheimer’s?
The U.S. accounted for nearly two-thirds of all new medicines introduced between 2011 and 2016. The U.S. also leads the world in accessibility to breakthrough drugs.
When these new wonder drugs are introduced to the market, they are often very expensive. But over time, as the patents expire, these drugs are available at low prices for time immemorial. Hence, the sooner drugs are developed, the sooner they are available to everyone across the planet. Drugs are also much cheaper forms of treatment for disease than surgery or other costly, painful and invasive procedures.
Americans shouldn’t have to tolerate a situation where foreigners pay much less for made-in America drugs than we pay ourselves. That’s not fair. The solution is to enforce patent rights and get tough on nations that cheat. This isn’t just a good outcome for Americans. This is the best path towards improving health outcomes across the world.
With price controls come a reduced incentive to innovate. If Republicans truly cared about the private sector and the free market, and Democrats truly cared about providing the best health outcomes for everyone, both would agree that price controls represent a major step backwards.