We Need A Cure For The Arrogance Of Drug Price Control Advocates

“Three hundred forty-five billion dollars in savings versus the cost of eight to 15 fewer drugs over 10 years, I frankly think it’s worth it.”

Rep. Darren Soto (D-FL), hearing before the House Energy and Commerce Committee

In the above quote, Representative Soto is defending H.R. 3, the drug price control bill Speaker Nancy Pelosi is advocating. While the Congressman believes that the costs of price controls are “worth it”, patients living with diseases that lack an effective treatment may disagree.

While there has been impressive progress recently, there are still too many diseases that devastate the lives of patients and their caregivers, but lack an effective treatment. Patients that are living with these diseases – such as pancreatic cancer, Alzheimer’s disease, and muscular dystrophy – all have hope that an effective treatment is just around the corner.

So, when the advocates of price controls admit that they are willing to forgo future innovations, which patient group are they willing to tell that their treatment will be sacrificed?

Currently there is no effective treatment for pancreatic cancer, but there is growing hope. The five-year survival rate for pancreatic cancer was 9% in 2017, which is awful, but it is double the rate from 2012. And, building on this momentum, researchers are learning how to manipulate a person’s immune system. Researchers believe this could lead to the development of “more tolerable medicines that allow for a good quality of life”. Are the advocates for price controls willing to tell the patients living with pancreatic cancer that their treatments need to be sacrificed?

Perhaps effective treatments for Alzheimer’s disease should be sacrificed instead?

The cost of Alzheimer’s disease in the U.S. was $277 billion in 2018. On a per patient basis, the health care costs alone are $341,000. While medicines can currently only relieve the symptoms of Alzheimer’s, researchers are learning about the neurodegeneration that patients experience and are exploring how new compounds (such as 3K3A-APC) can block the inflammation in the brain that is associated with the disease. Researchers are hopeful that medicines that block this inflammation can become an effective therapy for early-stage Alzheimer’s.

If not these patients, are effective treatments for patients with muscular dystrophy worth sacrificing? Muscular dystrophy is actually a group of diseases, all of which cause progressive weakness and loss of muscle mass.

Muscular dystrophy typically begins in childhood, mostly in boys. For specific disease types (e.g. Duchenne), patients will experience heart problems, will need a wheelchair early on in their lives, and will ultimately have significantly shorter lifespans. Researchers are currently exploring many different treatments that will, hopefully, enable these young children to live long healthy lives. For example, by leveraging the CRISPR “gene editing” technology, researchers are attempting to repress the malfunctioning genes that cause Facioscapulohumeral muscular dystrophy (FSHD), offering the potential for an effective treatment for patients living with this form of muscular dystrophy.

It is a safe bet, even without survey data, that none of the patients living with these diseases is willing to trade 15 future cures in order to save the health care system $345 billion. Nor should they. Price control advocates are searching for answers in the wrong place, which is why they keep coming up with the wrong answers.

Attempts to impose arbitrary price controls on medicines create an unnecessary tension between ensuring that medicines are affordable today and developing the new cures for tomorrow. But, there is no reason why there must be a tension between these two important goals.

Instead of imposing ineffective and arbitrary price controls, the best way to promote the twin goals of affordability and innovation is to fix the current disincentives that are driving the current unaffordability problem in the first place.

At the heart of the problem is innovative biologic medicines, which are cutting-edge medicines derived from living organisms. Many of the cutting-edge medical innovations to treat cancer, arthritis, and autoimmune diseases are biologic medicines. These medicines are also driving the growth in drug spending.

As the Council of Economic Advisors noted, biologic medicines are “used by only 2 percent of the U.S. population, [but] they have come to comprise between 27 percent and 40 percent of U.S. drug spending.” IQVIA data confirm that the biologic drug class accounts for a disproportionate share of the growth in expenditures. In 2018, for instance, nearly 75 percent of the increase in total net spending on medicines was due to spending for biologic medicines.

Competitors to the most expensive originator biologics exist, and as I have argued previously, these medicines (referred to as biosimilars) can generate significant health care savings. For example, while there are many more biosimilar competitors relative to those approved in the U.S., I estimated that just the medicines that are currently approved in the U.S. can generate up to $7 billion in annual savings if they obtained a 75% market share.

Given that biosimilars exceed this market share in many EU nations, and generic medicines are 90% of the market for chemical medicines in the U.S., such a market share is clearly obtainable with reforms. The necessary reforms must eliminate the systemic biases that favor more expensive originator biologic medicines over the less expensive, but just as efficacious, biosimilar medicines.

Other savings are also possible. The industry supply chain is rife with distortions and inefficiencies that unnecessarily raise the cost of medicines and impose an excessive burden on patients. Policy reforms that make prices more transparent and the supply chain more efficient would meaningfully reduce the costs of medicines.

Unlike price controls, reforms that target the disincentives driving health care costs higher can reduce the costs of medicine without jeopardizing the development of future medicines. As such, these reforms will improve the health care system today, and tomorrow.

Congress will continue to wrestle with the question of drug costs. As it does, it is imperative that members recognize that price controls impose unacceptably large costs on patients who lack effective treatments today and generates health care savings by denying hope to patients. It is inconceivable that such a trade-off is ever “worth it”.

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I am a Senior Fellow in Business and Economics at the Pacific Research Institute and the Director of PRI's Center for Medical Economics and Innovation. My research explo...