Balancing value and prices
Simple and neat solutions are tempting but often wrong. One case is President Trump’s proposal to adopt a policy for the most favored nation (MFN). MFN sets the price of Medicaid for a drug at the lowest price charged to other developed countries, each of which has drug price checks. If implemented, this policy will make a bad situation much worse.
The logic for the application of MFN is simple – if patients in the United Kingdom or Canada pay less money for a drug, then patients in the US should be needed, but prices for innovative drugs in many OECD countries are only lower because these nations impose strict price controls.
Initially, price checks reduce drug availability. Thanks to price controls, patients in other large industrial countries (OECD) only have access to 29% of new drugs, while patients in the US have access to 85%. Worse still, patients in Canada and the United Kingdom can expect years of access to latest treatments in some cases and at any given time in Canada, there is a shortage of between 1,500 and 2,000 drugs.
In those cases where medicines are available to foreign nations, the adoption of MFN policy entrusts these countries to US policy. The US should not impose price controls, but if it does, drug pricing decisions should not be assigned to external partners in the EU, the United Kingdom or Canada.
The adoption of MFN will also harm innovation. The development of a new drug takes a lot of time and money. On average, the development of an innovative drug takes over $ 2.9 billion (including spending after purchase) and between 10 and 15 years. It is also a dangerous effort. About 9 out of 10 medicines that reach the clinical trial stage will eventually fail.
Drug price checks make it difficult for innovative businesses to cover their capital costs, which reduces the amount of money spent on new innovations. Chicago University Issuing short The Philipson and Durie found that “that revenue reduction by 1 % leads to a 1.5 % reduction in R&D activity”.
The consequences of discouraging innovation would hit the US economy. According to the latest industry Financial Impact ReportThe biotechnology industry immediately contributed $ 1.4 trillion to the economy in 2023 (about 6.8% of private sector GDP), backed nearly 2.3 million jobs and paid hundreds of billions of dollars in federal government.
Perhaps even more important, lost innovation from price controls harm patients who are currently living with diseases that have inadequate or no treatment options. If prices in the US are adopted, then patients living with Alzheimer’s disease, pancreatic cancer or muscular dystrophy may end up waiting in vain for effective treatments.
After all, the problem is that foreign governments impose drug price controls. The result is that patients around the world benefit from American pharmaceutical innovation without paying their fair share of innovation.
The best way to deal with this problem is to defend the intellectual property of US businesses in trade negotiations. Performing this objective could include the appointment of a pharmaceutical trade in USTR to defend the interests of US companies. However, completing these negotiations is a long -term project.
There are beneficial reforms that Congress can now apply to promote the most drug availability in the meantime. These reforms should face the many ineffectiveness that affects the US drug market. For example, more than half of the income from drug sales go to hospitals, pharmacies and other intermediaries thanks to the policies of misleading.
These policies that are included include the 340B discount program, which now has the contradictory impact of increasing total drug prices. Reforms should require greater transparency in the program and the 340B command only serves its population intended. These changes will improve the efficiency of the 340B, while relieving the inflation pressures of prices created by the program.
Another necessary reform will deal with today’s opaque drug pricing system that strengthens Pharmacy Affairs (PBM) managers at the expense of patients. Thanks to the abused system motives, the cost is inappropriate to patients. The deterioration of the problem, the system often encourages the use of more expensive drugs rather than lower cost alternatives. Reining on PBMS will improve drug market motives that will lead to lower costs out of pocket for patients without reducing innovation incentives.
The FDA approval process is also slow and overly burdensome. Reforming this process can reduce the cost of developing new treatments while urging their availability to patients.
The goal of US drug policy should be to promote the double goals of innovation and economic access. The MFN policy adopts external price controls that will discourage innovation and reduce patients’ access to medicines. While medicine costs may be reduced, overall health care costs are likely to increase as patients are over demanding more expensive surgery and hospital stay.
Promoting more affordable drugs is not simple. It requires the hard work of understanding what the problem and implementation of policies that correct them are directly. MFN is a shortcut that patients will come quickly to regret.
