You get what you pay for with new Medicare proposal: Stifled innovation

You get what you pay for with new Medicare proposal: Stifled innovation

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Steven M. Tepp

The Trump administration claims its latest drug pricing proposal will be a boon for patients struggling to afford their medications. Unfortunately, this isn’t the case.

The plan would impose price controls on complex medicines covered through Medicare. Like all price control schemes, the move would backfire; sacrificing patients’ access to lifesaving medications and undermining future innovation to pinch a few pennies.

When it comes to medical innovation, you get what you pay for.

Many other countries have government-run health systems that set the price of drugs. The politicians in those countries tout lower prices, but fail to appreciate the downsides — namely, lack of access to new drugs.

Because U.S. drug prices are determined by the market, drug companies actively seek to introduce their products in the United States. Patients in the United States had access to twice as many new medicines as patients in Japan, Canada, and France between 2011 and 2017.

The result? From 1997-2012, the United States reduced the cancer mortality rate more than countries with government-run systems.

Disregarding the health consequences, foreign governments continue to weaken patent rights and outright price fix to undercut U.S. innovators.

Instead of getting other countries to pay their fair share, the United States would cave to their tactics under the proposed plan.

Medicare drug prices would no longer be set through negotiation. Instead, Medicare would fix reimbursements at a percentage of the average price paid by certain foreign governments.

It makes no sense to try to reduce healthcare costs by punishing one of the most innovative sectors in the American economy.

U.S. biopharmaceutical research and development is the leading source of medical innovation. Drug companies invest some $90 billion annually into U.S. research efforts, which produce half of all new medicines.

Research companies’ substantial investment is riddled with risk. It takes $2.6 billion and 10 years to create one new medicine. Only one in eight experimental drugs that enters clinical trials reaches pharmacy shelves. If the government can dictate artificially low prices, it won’t allow companies to recoup their development costs and deliver a return. Investors will flee to less risky industries. This would jeopardize the 4,000 therapies currently in development in the United States for debilitating diseases.

That’s bad for us all. Breakthrough treatments keep patients healthy and thus avoid hospital costs that can be 10 times the cost of the medicines themselves.

Healthcare costs deserve serious attention. But the solution should be approached with pro-growth, pro-innovation policies that offer us not only a future we can afford, but one that is better than today.

Steven M. Tepp is the president and founder of Sentinel Worldwide and professorial lecturer in law at George Washington University Law School. He previously served as senior counsel for Policy and International Affairs at the U.S. Copyright Office and chief intellectual property counsel for the Global Intellectual Property Center at the U.S. Chamber of Commerce.

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