Expansion of Drug Price Controls will Harm Medical Innovation
By Wolfgang Klietmann
Lawmakers in Washington are getting even more heavy handed in their approach to prescription drugs.
House Democrats just proposed legislation to expand the dangerous price-setting provisions in last year's Inflation Reduction Act. This would decrease investment in cancer treatments and other medications -- and cause major job losses.
For the sake of our health and our livelihoods, Congress must abandon, not broaden, its price control schemes.
The IRA requires Medicare officials and pharmaceutical companies to "negotiate" the price of drugs. But that's not the right word: Companies that don't agree to government-proposed prices will face excise taxes of up to 95%. That's a shakedown, not a negotiation.
The government will announce the first 10 drugs subject to IRA price controls in September. Which means we haven't even seen this arrangement's worst effects yet. Nonetheless, some lawmakers already want to expand the existing provisions.
With their newly introduced bill, House Democrats are following in the footsteps of their Senate counterparts, who earlier this year introduced the SMART Prices Act, which would increase the number of drugs subject to price controls. But the House bill also goes a step farther, extending the controls beyond Medicare purchases to medications covered under private insurance plans.
A study by health analytics firm Vital Transformation shows that piling the SMART Prices Act on top of the IRA's drug policies would result in about 230 fewer new FDA-approved medicines and more than one million jobs lost over the next ten years.
That's because each new medication costs, on average, $2.6 billion in private investment to bring to market, and about 90% of drugs entering clinical trials fail along the way. Drug companies count on successful medications to cover the losses.
The IRA also singles out so-called small-molecule drugs for earlier price-control eligibility. Some of the most promising treatments in development for cancer, neurological disorders, and infectious diseases are small molecule drugs. But because of the looming price controls, pharmaceutical companies have already announced they are cutting back or modifying projects in this category.
There are better ways legislators could tackle drug costs. For example, the middlemen known as pharmacy benefit managers (PBMs) make billions of dollars a year by negotiating rebates from drug makers in exchange for favorable treatment by insurance plans. This has had the perverse effect of pressuring drug companies to raise list prices in order to increase the size of rebates and therefore PBM revenue. Americans would benefit from legislation that targets these predatory practices.
But enacting more price controls -- before the first ones have even taken effect -- would do far more harm than good to American patients and the future of medicine.
Dr. Wolfgang Klietmann is a former clinical pathologist and medical microbiologist at Harvard Medical School. This originally ran in the Boston Herald.
