The tragic toll of drug price controls in America

by Andrew Spiegel, opinion contributor - 05/06/17 1:00 PM ET

Colon cancer is one of the biggest killers in the developing world. The disease claims more than 600,000 lives every year.

Breakthrough treatments can contain this disease and dramatically extend life. However, many colon cancer patients are currently denied access to these breakthrough treatments because of short-sighted government policies.

{mosads}In hopes of driving down drug costs, public authorities all over the world have installed price controls in the pharmaceutical market. This approach, though it generates some short-term savings, is ultimately counterproductive. Price controls significantly restrict patients’ access to life-saving medications, condemning many to die from eminently treatable conditions.

One of the most popular forms of drug price controls is “reference pricing.” Officials group drugs into therapeutic classes, based on how the drugs attack disease. They then set a single price for each class. In fact, several forms of reference pricing do not distinguish between innovative new medications and older generic alternatives. So, for instance, a new, breakthrough medication gets priced exactly the same as an older, less effective drug that’s been off-patent for years. By doing this, reference pricing fails to value the innovative nature of the next generation of treatments and cures.

The Canadian province of British Columbia has incorporated reference pricing into its public health system. So have Italy, Spain, and Germany.

Less developed economies have resorted to even more nefarious means.

By issuing so-called “compulsory licenses,” they have broken patent protections on innovative medicines. Compulsory licenses were designed to be used only in the event of a public health disaster, but some countries are now using them to drum up discounts for drugs without any plausible connection to an emergency. In Indonesia, compulsory licensing is an industrial policy tool. If a new treatment isn’t manufactured locally, anyone can petition the government to break the patent on that product.

And, of course, several major economies have installed straight-up caps on drug prices. South Korea’s public insurance system imposes some of the most stringent caps in the world, tightly controlling even generics. Newly introduced generics can’t be sold for more than 60 percent of the price of the brand name upon which they’re based. And that cap drops to 53 percent after a year. Likewise, India’s National Pharmaceutical Price Authority aggressively controls product prices, dictating down the cost of diabetes drugs by 40 percent over the last year and cancer drugs by nearly 90 percent.

And these controls are only going to get tighter. Just this February, the World Health Organization released a draft report criticizing industry pricing practices and sketching out a spreadsheet for governments to calculate a “fair price” for medicines. That’s a barely disguised call for lower caps.

The justification for these controls rests on a simple story: drug prices as a whole are spiraling skyward, preventing sick patients from affording needed medications.

That’s pure fiction. Drugs actually represent a relatively small slice of global medical spending. Just consider: over the next decade, spending on prescriptions will account for less than 10 percent of total healthcare spending growth in the OECD, the economic association encompassing the United States, Canada, and much of Europe.

And the price control process significantly degrades patient well-being. Pharmaceutical firms have to undergo a long, drawn-out negotiating process every time they want to sell a new medication in a controlled market. All the while, sick people aren’t getting the medicines they need.

In America, which has a relatively free drug market, the average medicine is approved 90 days quicker than in Europe and about a year quicker than in Canada.

This delay can be deadly, especially for colon cancer patients. The drug industry has invented advanced drugs proven to beat back this disease, including specialty chemotherapy agents such as panitumumab and “angiogenesis inhibitors,” which prevent colon cancer cells from growing by cutting off their blood supply.

Obviously, these drugs can only help patients if regulators approve them. Too often, that approval is slow to come. And such delays are now common across a wide variety of drug classes, leading to serious carnage: some 600,000 European deaths could be avoided each year if the continent’s healthcare systems simply offered “timely and effective medical treatments,” according to the European Union’s own data.

This fatal foot-dragging, and the accompanying wave of price controls, must end. That’s why my organization, the Global Colon Cancer Association, and 50 other groups have sent a letter to President Trump and other government officials asking them to pressure foreign allies to expand access to lifesaving medicines.

Everyone wants lower healthcare costs. But it’s counterproductive to blame companies that create lifesaving therapies. Foreign leaders would better serve their citizens by expanding access to treatments that improve health and lower long-term costs.

Andrew Spiegel is the executive director of the Global Colon Cancer Association.

The views of contributors are their own and are not the views of The Hill.

Tags drug importation drug prescriptions prescription