Importing International Reference Pricing in the U.S. Jeopardizes Patient Access to Innovative Medicines

Importing foreign price controls in Medicare would be detrimental to patients and America’s scientists and researchers who are trying to develop new cures and treatments.

Adopting Foreign Price Controls Would Jeopardize Patient Access to Innovative Medicines

• In the debate over drug pricing differences between the U.S. and other countries, there is the oft-ignored and stark reality that the absence of price controls in the U.S. leads to more and newer medicines made available sooner to Americans, with better health outcomes for those with serious diseases. The differences in access are significant and offer a clear warning to those who want to import such systems into the U.S.[i]
  • Of the 74 cancer drugs launched between 2011 and 2018, 95% are available in the United States. Compare this with 74% in the United Kingdom, 49% in Japan, and 8% in Greece.
  •  Nearly 90% of all new medicines launched since 2011 are available in the U.S., compared to just 50% in France, 48% in Switzerland, and 46% in Canada.
• This lack of access presents real dangers to patients. A recent study highlighted these risks, comparing differences in health outcomes for patients being treated for locally advanced or metastatic Non-Small Cell Lung Cancer (NSCLC).[ii]
  • The researchers found that, if the access conditions for five ex-U.S. comparator countries (Australia, Canada, France, South Korea, and the United Kingdom) were to replace the actual U.S. access conditions between 2006 and 2017, aggregate survival gains due to innovative medicines would have been cut in half for U.S. patients diagnosed with locally advanced and metastatic NSCLC.
  • According to the authors, this reduction in health gains is due to the access delays experienced by patients in other countries compared to patients in the U.S.

Foreign Price Controls Would Stifle Investment and Research into Tomorrow’s Cures

• In addition to the serious access concerns outlined above, the decision to implement artificial price controls would come at a steep price in terms of future research into the most innovative medicines and cures of tomorrow.
• An analysis of H.R. 3 – which would impose foreign price controls in Medicare – found that it would have a devastating impact on the innovative biotechnology sector, resulting in fewer medicines coming to market and available to patients.[iii]
• The capital loss caused by H.R. 3’s foreign price controls would lead to 90% reduction in medicines developed by small U.S. biotech companies – or 56 fewer approvals over the next decade.
• The White House Council of Economic Advisors similarly found that as many as 100 fewer medicines would enter the market over the next decade as a result of these foreign price controls.[iv]
• CEA estimates the economic loss of the value these drugs would provide and cost of poorer health outcomes could reach $1 trillion per year over the next decade.
• As the largest market for pharmaceuticals in the world, the United States drives the innovation that ultimately improves the lives of millions across the globe. Prior to the adoption of price controls, European-based firms led the U.S. on prescription drug research and development by 24%.[v] By 2015, these firms had fallen behind their U.S. counterparts by 40%.[vi]
• Price controls in OECD countries reduced global R&D spending by between $5 billion and $8 billion, enough to fund the discovery of three to four new drugs per year.[vii]
• Economists have warned that, had foreign price controls been adopted in the U.S. from 1986-2004, 117 fewer new medicines would have been produced for worldwide use.[viii] Conversely, a 2018 study by researchers with Precision Health Economics found that eliminating price controls in OECD countries would lead a 12 percent increase in R&D and the development of 13 new drugs per year.[ix]
• Alzheimer’s disease is a devastating illness for 5.7 million Americans and their families and costs $277 billion each year, including nearly 20% of Medicare spending. Between 1998 and 2017, there were 146 unsuccessful attempts to develop medicines to treat and potentially prevent Alzheimer’s.[x] Despite these setbacks, biopharmaceutical researchers and the companies they work for are committed to finding new therapies to treat this disease, but foreign price controls will shift investment away from this research and leave little hope for patients and their families. The same is true for many other diseases where patients and their families hope for a successful treatment or cure.

Foreign Free-Loading is a Problem, but There Are Better Solutions

• While the United States does disproportionately support the profits of drug companies – which are reinvested into this remarkable innovation at rates higher than any other industry – the claims of excess profit are overblown. The biopharmaceutical industry ranks 36th among all U.S. industries in profitability. In fact, only 35 public U.S. biopharma companies make any profit at all selling brand name prescription drugs – less than 10% of all U.S. biopharmaceutical companies. That is, 90%+ of these companies are unprofitable/
• Foreign “free-loading” on American innovation is indeed a problem – and not just with drugs. Virtually every aspect of our healthcare system is more expensive than in Europe – hospital visits, diagnostic tests, etc.
• Rather than impose artificial price controls – including those adopted by foreign countries with single-payer health care – policymakers should focus on solutions that correct market failures, increase competition, and lower costs for patients. Such solutions also should export the American system by promoting fair trade agreements that force foreign countries to respect American intellectual property and fairly value American innovation.