House Democrats are making yet another push to implement government price setting on prescription medicines — this time, in the middle of a pandemic with an “all hands on deck” race underway by biopharmaceutical companies to develop vaccines, and treatments for COVID-19. It begs the question, is this a serious proposal?
The measure in question — the Affordable Care Act stabilization bill — seeks to expand ACA insurance subsidies and increase the affordability of ACA exchange plans.
For the first time this year, lawmakers are insisting on paying for this expansive package by adopting foreign reference pricing — a practice that ties the cost of U.S. medicines to the average prices paid in other countries. It would heavily fine manufacturers who don’t comply with the cap.
Such government price controls would bring about devastating consequences. It would drastically stem medical innovation and deprive Americans of new treatments when needed most.
This isn’t speculation. House Democrats are using Title I of the Lower Drug Costs Now Act of 2019, which passed last year, as the basis for its proposal. Doing so would empower the government to cap the prices of 250 common brand-name medications. The prices could not exceed 120 percent of the average prices paid in six other developed nations. And if manufacturers refuse or are unable to comply, they would face extraordinary penalties — up to 95 percent of their sales revenue.
On its face, the legislation might seem like an effective way to increase access to prescription medication. But it would have the opposite effect. A report from the Congressional Budget Office found that act would translate to 45 fewer new drugs coming to market in the next two decades. Among those lost 45 drugs, any number may have been a medication that brought us one step closer to ending COVID-19.
This inevitable downturn in medical innovation boils down to simple dollars and cents. If drug manufacturers have less money coming in to spend on research — an extraordinarily expensive process — they’ll have to reduce the number of drug development projects. In fact, cutting drug prices by 40 percent to 50 percent would lead to up to 60 percent fewer research and development projects being undertaken, according to a report from the National Bureau of Economic Research.
And it’s not just the availability of new cures that would be curtailed. This type policy could also prompt shortages of existing brand-name drugs and restrict more than 200 million patients’ access to the medications they already rely on to stay healthy.
That would prove particularly harmful for Americans with chronic or underlying illness, who are 12 times more likely to die of COVID-19. If lawmakers deprive them of the treatments they need to manage their conditions, the pandemic’s already devastating toll could skyrocket.
The world economy has been shut down. The only industry with a shot of getting us back to normal are the drug manufacturers, and leaders in the House are advancing a bill that independent experts say will delay or cancel major, innovative research projects. The approach defies common sense.
Congress is right to look for ways to provide Americans with affordable access to the care they need, but it shouldn’t come at the cost of a treatment or vaccine for COVID-19. There are dozens of proposals that would do so, and that have bipartisan support. Let’s hope Congress gets the message before it’s too late.
Joel White is president of the Council for Affordable Health Coverage. He wrote this for InsideSources.