Suggestions that the U.S. should emulate other countries on drug price controls or patents obscure how our present policies have allowed drug development to flourish.
The U.S. is the most important market for drug development. The country has rapid scientific reviews and drug approvals, and typically a quick and predictable pathway to reimbursement. It is unfortunate, then, that our policymakers are borrowing ideas from countries that have destroyed incentives to invest in their life sciences economies and reduced their citizens’ access to life-changing treatments.
If we borrow these bad ideas, we will also borrow their bad outcomes. To put a finer point on it, consider that in the last five years 42% of newly approved drugs in the U.S. were not launched in Europe; by contrast, only 6% of European-approved drugs were not marketed in the U.S.
U.S. laws and regulations have not only created more access to medicine; they have also encouraged billions of dollars in research drug development. For example, the Medicare drug benefit provided access to affordable medicine for older people and people with disabilities in a market-based system. It has thereby motivated investment in clinical development for diseases common to those populations. The number of clinical studies evaluating how drugs work in children has increased markedly with laws that extended the time a drug company can exclusively market a drug if it completes pediatric research.
Investment in drug development has resulted in transformative, but often expensive, new medicines. Moreover, the U.S. legal framework has resulted in generic and biosimilar drugs acting to govern prices. The vast majority of drugs, even those with multiple patents, have a lower cost generic competitor after 13–14 years on the U.S. market. The system was initially established 40 years ago with the Hatch Waxman Act and has evolved over time, allowing for a successfully developed drug to be profitable globally—mostly from U.S. revenues. Then, after years have passed, generics and, more recently, biosimilars enter the market at reduced costs.
Seeing this well-functioning system, some policymakers have thought to alter it on the false premise that profit, property protection and financial incentives don’t matter. The Biden administration is developing a plan to direct federal agencies to invalidate exclusive property rights for a drug based on its price. The authority to do this comes from a law intended to take charge of drugs developed with federal funding in the case of delivery failures such as shortages. With this plan, the administration hopes to get something for nothing. Undermining the patent system, particularly by seizing patents from patent holders such as universities who take money from the government, will make public and private collaborations toxic and reduce clinical study investment.
At the same time China, seeing the success of drug development in the American and global economies, is making reforms to its laws and regulations for innovative medicines. These include accelerating reviews for drug approvals and enabling patent term restoration, which allows a patent holder to seek additional exclusive time on the market to compensate for delays in drug reviews. These policies were pioneered in the U.S. While there remain lingering concerns about data protection in China, today companies headquartered there account for over one-quarter of all newly initiated clinical trials globally, up from 3% ten years ago. Many of these trials are for early-phase drugs, meaning the medicines of the future.
Price controls for drugs, another idea imported from other countries, limit supply. Price controls are being enacted in Medicare as a result of the Inflation Reduction Act. It has been well established that people living in countries with price controls don’t always get the medicines available in the U.S. They often wait for a year or more to get a new drug for cancer or another life-threatening condition because their government establishes a low price or has a slow review and reimbursement process.
In addition to the IRA at the federal level, more than ten states are experimenting with their own price controls, establishing or considering price review boards and upper limits, a trend that has been accelerating since 2017. Pharmacies may be unable to supply drugs at a low price point because the price controls don’t necessarily mean that drug manufacturers will lower their prices to the state.
Politicians who want to exert more government pricing power over medications compare the prices of drugs in other countries to the U.S. and complain about the unfairness of it. They don’t share what is lost in countries with centralized health systems, which often ration access to drugs, providing coverage only after a person has become very, very sick. A recent hearing on the price of drugs for weight loss neglected to say that in Germany, Canada, Japan and other countries whose prices were held up as the shining example of great policy, health systems don’t make these drugs available to people who need them. For example, Germany doesn’t cover obesity medicine in the public health system where 90% of people get care, Canada does not cover obesity medicine in its provincial health systems and Japan only covers the obesity care if the person has two or more weight-related comorbidities and very high BMI. Access restrictions aren’t limited to obesity drugs; in England there are significant delays to access and restrictions on drugs for serious rare diseases.
The U.S. has attracted scientists, clinical studies and investment in manufacturing plants because of a unique system that allows successful drugs to be profitable for a finite period of time. This has resulted in cures for rare fatal diseases, the vaccines that restarted the economy in the COVID-19 pandemic, huge increases in life expectancy for people diagnosed with cancer and more. The U.S. can lean into what has made it great, or follow a downward spiral of shortsighted policy that many countries have pursued and effectively ruined their biopharma economies.
