“The most favored nation would reduce access to new medicines in America, slow innovation and market incentive disorder,” writes Expert Health Sally Pipes.
Getty pictures
It was a great year for revives. There is a new one Jurassic Park movieA 1990s reunion tour of reunion rock band oasisand a Harry Potter’s TV series in the works.
President Trump is also trying to revive some of the policies he tried to establish during his first term. Recently gave a executive order With the aim of urging the pharmaceutical company to sell medicines in the United States at the lowest price available in other developed countries. He returned the ante late last month by writing several large drug companies – including Pfizer, Eli Lilly and Johnson & Johnson – informed them that they had to comply with the class of the “most favored nation”.
This command is just an attempt to introduce foreign price controls. With the ability of manufacturers to determine prices for their products, the most favored nation could reduce access to new drugs in America, slow down innovation and disrupt the market incentives provided by the general -priced general drugs that represent the overwhelming majority of the country.
Most foreign governments cover drug prices as a means of controlling costs in the healthcare systems that manage the government. Germany and Canada, for example, are relegated to drug discovery about 90%.
Trump’s administration sees the discrepancy between the United States and foreign countries on drugs as a bad deal. Therefore, the instruction on the introduction of foreign prices here.
But drug companies are unlikely to simply succumb to the president’s order that they reduce their prices.
Suppose the order is legally enforceable – a dubious proposal. Drug manufacturers can respond by pulling their products from reference countries – if available at all. They may delay the introduction of new drugs subject to the most favored nation prices in the United States. Or they can raise prices abroad so that reference prices do not lead to any savings here.
These are not hypothetical. Drug manufacturers often respond to the threat of foreign countries for price controls in their new medicines by delaying or even refusing to start their products there. Fewer than one in four new drugs that started between 2012 and 2021 made its debut in Europe. And all the new drugs that started in this time frame, less than four in ten They were available to the G20 developed G20 team on average in October 2022.
On the contrary, Almost 60% of new drugs It started between 2012 and 2021 debut in the United States. And 85% of those drugs were available in the United States since October 2022.
Foreign governments are willing to sacrifice access to new medicines for salvation for price controls. This is the trade that would make the most favored nation for Americans – whether they like it or not.
Now let’s assume that the most favored nation delivers the savings of supporters’ promise. In this way, it will deprive the revenue of drug manufacturers they use to discover the next generation of effective therapies and deliver them to patients. The US ShouldersAbout 55% of $ 276 billion dollars spent In 2021, that the investment would have to fall under the most favored nation.
Then there is the possible effect of the order on generic medicines. These non -branded copies of innovative drugs that can hit the market after the end of the intellectual property of the innovative, take into account About 93% Of all the recipes completed in the United States. And the generics are anywhere between 80% and 85% cheaper From branded drugs, on average. The more general competitors enter the market, the more prices fall.
The most favored nation destroys the motivation for generic manufacturers to enter the market. With branded medicines subject to price checks, there is no room for generic manufacturers to capture the market share by competing with price.
Since economic reality is no surprise that generic prices in other countries are higher than in the United States. Combine this event with the huge volume of generic distributions and the prices of pure public sector drugs are actually 18% lower, on average, in the United States than in peer countries, according to three survey University of Chicago Economists.
It is understandable to consider lower drug prices abroad with envy. But these low prices come at a significant cost to access. The introduction of these low prices through the most favored nation remains a bad deal for American patients.
