(By Jeff Dunetz) – Americans pay nearly twice as much for advanced drugs as Europeans. It’s unfair that we foot the lion’s share of the bill for drug research and development, while our supposed allies use socialist price controls to shirk their share of the burden.
The president’s advisers will soon release a plan to combat this freeloading — but it falls short. It wouldn’t hold our allies accountable. It’d merely reward their mooching behavior while hurting American patients.
The plan would change how Medicare “Part B” pays for advanced physician-administered drugs. Patients depend on Part B for highly potent treatments for cancer, immune disorders, and multiple sclerosis.
Currently, participating physicians buy Part B drugs on their own. Medicare then reimburses them based on the average U.S. sales price of the drug.
The new proposal would overhaul that system. Medicare would reimburse physicians based on an average of the prices in foreign countries with government-regulated drug markets. The reference countries — which include France, Canada, and Japan — have fully or partly socialized healthcare systems that cap drug prices.
That would stall medical progress. Our comparatively free-market drug pricing system has made the United States the engine of global pharmaceutical innovation. We produce half of all new medicines.
Creating a breakthrough drug isn’t easy. Research and development takes years, even decades, and costs over $2 billion on average. Only 12 percent of medicines that enter clinical trials ever receive FDA approval. Drug companies price their products to compensate for these risks and costs. They earn most of their profits from the U.S. market.
If the United States adopts foreign price controls, companies won’t continue taking on enormously risky research projects. Patients will have fewer new medicines. By one calculation, indexing Part B reimbursements to foreign prices will lead to three fewer state-of-the-art drugs every year.
Patients in the reference countries have less access to breakthrough medicines. Companies often decide it’s not worth the regulatory cost to sell their products in those nations due to price controls.
If the plan were implemented, Americans would soon face the same life-threatening access barriers that many Europeans, Canadians, and Japanese face. On average, less than half of new medicines created over the last decade were available in those countries. By contrast, 88 percent were available to Americans.
Trump is rightly frustrated with foreign freeloading. American drug companies do the hard work of innovating and American patients pay full price — meanwhile, foreign patients reap the benefits.
But indexing reimbursements to artificially lower foreign prices doesn’t fix that problem. It simply spreads the suffering to the very patients they’re trying to help.
Trump promised to never allow America to become a socialist country. He can honor that promise by nixing the price control scheme cooked up by his advisers.
Jeff Dunetz is publisher of The Lid (LidBlog.com), a political columnist at The Jewish Star, and hosts the weekly Lid Radio Show.