Prescription drug costs have skyrocketed and become a growing financial burden, but the
White House
’s drug price controls will not solve the drug affordability crisis. However, they will threaten the development of future cures and harm patient
health
.
The Biden administration recently announced the first drugs subject to price controls under the Inflation Reduction Act. Federal bureaucrats will determine what prices pharmaceutical companies can charge
Medicare
. If companies refuse to “negotiate,” the government threatens an extortionary excise tax of 65% to 95%.
MEDIAN HOUSEHOLD INCOME FELL IN 2022, ADJUSTED FOR INFLATION, CENSUS BUREAU SAYS
The act’s architects are right to seek to lower drug costs. Since 2000, annual drug costs have
tripled
from $122 billion to $378 billion. Americans pay
more than double
what citizens in other developed countries pay.
One in 5 seniors
skip filling prescriptions because they cannot afford them.
Unfortunately, Biden’s heavy-handed price controls will harm patients. While the Congressional Budget Office estimates the Inflation Reduction Act will cancel five drug developments, a
University of Chicago
study estimates it will decrease spending on research and development by nearly 20% by 2039 and lead to 135 fewer new drugs. The study estimates price controls will lead to people living 331 million fewer years over this period. For comparison, COVID-19 led to Americans living 10 million fewer life years.
Healthcare “reform” should not come at the expense of families. Congress should empower patients, not bureaucrats.
America can lower drug prices by expanding generic competition.
Food and Drug Administration
data show introducing a generic competitor reduces drug prices by 39%. Two competitors lower prices by 54%. Six competitors lower prices by 95%. Generic competition saved patients over
$2 trillion
in the past decade.
Burdensome government barriers deny patients lower prices for biologics, large molecule drugs made of living organisms. Small molecule drugs are simpler medicines derived from chemicals.
Since 2013, the cost of biologics has
skyrocketed
from $90 billion to $211 billion. By 2018, biologics accounted for 0.4% of prescriptions but nearly half of spending. Between 2013 and 2020, annual spending on small molecules
decreased
from $170 billion to $148 billion.
The FDA offers a simpler pathway for small molecule generic competition: five-year exclusivity, public patents, low-cost equivalence studies, and pharmacists can dispense. This process costs $1 million to $4 million and takes two years.
FDA barriers prevent biosimilars, generic biologics, from competing: expensive clinical trials, 12-year exclusivity, patents not disclosed, and burdens for pharmacists to dispense. This process costs
$100 million to $300 million
and takes six to nine years.
The vast majority of biologics have no generic competition. One analysis in the American Journal of Managed Care estimates patients could save up to $124 billion over five years by increasing biosimilar availability.
The FDA requires biosimilar developers to conduct expensive, time-consuming, and unnecessary clinical studies that provide incomplete information compared to more accurate tests already required and account for 65% of development costs.
The Biosimilar Red Tape Elimination Act empowers pharmacists to substitute biosimilars. The European Union has allowed this since 2007 and confirmed biosimilars provide patients with high levels of safety and efficacy at lower prices.
The FDA gives biologics 12 years of exclusivity — longer than other countries. The Priced Act narrows this gap. In Australia and New Zealand, biosimilars compete after five years. The European Union provides 10 years, and former President Barack Obama proposed seven years.
The Federal Trade Commission should crack down on manufacturers’ abuse of America’s patent system. The
Biologic Patent Transparency Act
requires developers to disclose patents. After a brand drug enters the market, its maker often erects a “patent thicket” of dozens or
hundreds
of patents to
delay
the introduction of generics for years. Drugmakers often conspire with first-mover generics to abuse their exclusivity period.
Congress must also address the role pharmacy benefit managers play. Insurers and employers hire PBMs to negotiate with pharmaceutical companies. However, the Robinson-Patman Act
prohibits
PBMs from receiving direct discounts. Congress should allow PBMs to negotiate discounted drug prices rather than relying on complex indirect rebates and kickbacks that seemingly benefit intermediaries.
Employers often do not know if their PBM is negotiating the best deals for their workers. The House
Ways and Means
and
Energy and Commerce
committees have proposals requiring PBMs to disclose rebates, copays, and other payments. The
State-Based, Market-Oriented, Prescription Drug Negotiations Act
allows insurers to pool their purchasing power.
The
Lower Costs, More Cures Act
establishes a pharmaceutical trade representative to ensure other countries are not threatening patents, dictating artificially low prices, and shifting research costs to American patients.
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Congress should require pharmacies to allow patients to transfer prescriptions easily, and the FDA should convert prescription drugs to over-the-counter status as appropriate.
Policymakers can give patients greater power to demand lower drug prices without resorting to heavy-handed price controls that stifle innovation. They can remove barriers to competition, deliver affordable choices, and ensure drugmakers compete for patients’ dollars.
Bobby Jindal served as governor of Louisiana, from 2008-16, and a U.S. assistant secretary of health and human services, from 2001-03. Charlie Katebi is deputy director for the Center for a Healthy America at the America First Policy Institute.
