OP-ED: The high cost of the White House's drug pricing plan
The Trump administration will soon roll out a new plan to slash drug prices.
In 2018, the administration proposed pegging the price of certain advanced drugs to the prices paid in other developed countries. Now, the administration wants to go much further, by setting U.S. drug prices equal to the lowest price paid anywhere else in the developed world.
This plan might trim the costs of today's medicines. But tomorrow's medicines would never make it to the market, as such a scheme would obliterate our research industry. That's a lousy trade.
The administration's proposed rule, which is expected in the coming weeks, would apply to advanced physician-administered medications covered by Medicare. Currently, these drugs cost 80 percent more, on average, in the United States than in other developed countries.
Originally, the administration planned to set reimbursements 26 percent higher than the average prices in more than a dozen mostly European nations. But now, it wants to set reimbursements below the international average.
The administration says this plan will level the playing field between the United States and countries like Canada and the United Kingdom, which use price controls to keep drug spending artificially low. Government-run health systems in these countries refuse to approve or cover certain medicines unless manufacturers offer enormous discounts.
These strong-armed tactics are unfair. They force Americans to shoulder a disproportionate share of the global research burden.
But the White House's plan would simply copy these socialist tactics. Price caps would slash research companies' revenues and dissuade them from funding future drug development projects.
Developing a single drug is an arduous and risky process. Close to 90 percent of experimental medications fail in clinical trials. It can cost over $2 billion and take more than a decade of research to bring a new medicine to market.
But investors still fund these high-risk projects because of the possibility for equally high rewards. Biopharmaceutical companies invested almost $100 billion in U.S. research and development in 2017. Thanks to such investments, U.S. researchers invent more than half of the world's new therapies.
The resulting medical breakthroughs save millions of lives. In the United States, cancer death rates have declined 26 percent since the early 1990s. Almost three-quarters of these survival gains are attributable to new treatments. HIV-related deaths have decreased by almost 90 percent since the introduction of antiretroviral therapy "cocktails" in 1996.
Price controls in the United States would derail research into new treatments. In the long run, forfeiting these treatments would cost the government far more than it would save.
President Trump wants America to get the "best deal" on drugs, but his approach misses the mark. A plan that cripples research will cost countless American lives in the future.
— Drew Johnson is a columnist and government watchdog who serves as a senior fellow at the National Center for Public Policy Research.