Foreign Reference Pricing Schemes Would Jeopardize Seniors' Health
By Saul Anuzis
It's a good time to be an American senior. Average life expectancy has risen steadily for most of the last century. Quality of life is going up too.
Much of this improvement comes from new medicines. Cancer death rates have declined 26 percent in the United States since the early 1990s, with most of the gain in survival due to novel treatments.
Of course, new medicines cost money, which is why lawmakers are trying to lower out-of-pocket drug expenses for seniors. Amid these efforts, though, an idea that would do more harm than good has gained traction.
Foreign reference pricing, as it is known, is the centerpiece of H.R. 3, a bill recently reintroduced in the House, and has popped up in other legislation. Unfortunately, it would put many life-saving treatments out of reach, and dry up funding for research into future medicines.
Foreign reference pricing schemes tie the price of prescription drugs in the United States to the amount paid in foreign countries. H.R. 3, for example, says that drugs sold in the United States cannot cost more than 120 percent of its average cost in six other countries -- Australia, Canada, France, Germany, Japan, and the United Kingdom.
As it happens, the reference countries have socialized medical systems in which governments dictate drug price. They also have significant problems with access to medicine.
Wherever they are enacted, drug price controls reduce the number of new medicines available to patients. This usually happens because companies, unable to afford the immediate financial hit of below-market prices, delay introducing their products in those countries.
Of 220 new drugs that came to market worldwide between 2011 and 2017, 87 percent were available in the United States. But in Germany, only 71 percent were available, in Great Britain, 67 percent, and in Japan, Canada, and France, the figure was less than half.
Shortages also crop up. Canadian pharmacists routinely report scarcities of everything from EpiPens to heart medication. French and British pharmacists have likewise reported shortfalls of essential medicine in recent years.
Foreign reference pricing would also curtail new drug development, which would be even worse for seniors in the long run.
Slashing drug-company income through price controls will slash the amount they invest into research and development. Estimates suggest that H.R. 3 would cut the industry's research and development budget by $200 billion over a decade. We would never know what didn't get invented as a result.
Finally, price controls would lead us toward a drug evaluation system that is dangerous to seniors.
Government-run healthcare systems have to choose which medicines to cover, and so have turned to a metric called a "quality-adjusted life year," or QALY.
Medicines that deliver a year of "perfect" health to a patient receive one QALY. A drug that adds a year of less-than-perfect health is worth a fraction of a QALY, and deemed less cost-effective. In countries like Canada and Great Britain, drugs with low QALY scores go un-reimbursed. But this system discriminates against patients who, due to age or chronic conditions, will never meet the bureaucracy's definition of "perfect health."
Lowering out-of-pocket pharmacy costs is critical, of course. But foreign reference pricing would come with negative side effects -- and bring our upward trajectory of better health for seniors to a halt.
Saul Anuzis is President of 60 Plus, the American Association of Senior Citizens. This piece was originally published by the Southern California News Group.
