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Government-imposed price controls threaten innovation and access

Jay Taylor   |     May 9, 2017   |   SHARE THIS

It’s no coincidence that America leads the world in the discovery and development of new lifesaving medicines. U.S. biopharmaceutical innovators invest $60 billion in R&D annually – more than any other country – and support 4.5 million jobs nationwide.

The rest of the world depends on the U.S. biopharma industry to keep churning, yet the fruits of U.S. innovation and labor are too often diminished by egregious price controls. Whether the tactic is obscuring price negotiations, mandating price levels below market value or denying due process of pricing policies, the output is the same: other countries disproportionately reap our rewards, and global public health is threatened.

And price controls don’t just threaten U.S. innovation and allow other countries to benefit from our hard work and investments—despite what many of these countries think, these tactics often aren’t ultimately that effective. In fact, the U.S. Chamber of Commerce finds that price control mechanisms “reduce social welfare by depressing the number of new drugs” brought to market and also “delay or reduce the availability of some innovative medicines.”

Looking abroad, data from India show price controls have limited impact and do not improve access for the neediest patients. However, price controls have existed in India for decades. Congruent with the study, essential medicines are largely inaccessible to India’s low-income patients, even though India’s price control regulations have produced a market with some of the lowest prices of medicines in the world. So, if access isn’t improved, who benefits from India’s price controls? The same study found that the primary beneficiaries of price controls have been India’s wealthy elites, while the country’s poorest citizens, as well as our biopharmaceutical industry, lose out.

It’s not just India either—South Korea has taken similar steps. Despite obligations set forth by the U.S.-Korea Free Trade Agreement (KORUS), South Korea implements heavy price control regulations. The Korean government institutes drastic price reductions on the off-patent and generics market, and then bases prices of new, innovative medicines on the weighted average price within that therapeutic class, which includes those now heavily discounted medicines. This price control scheme has resulted in reimbursement for innovative medicines falling to less than half of the OECD average. As a result, patients get the short end of the stick with severely reduced access to innovative medicines.

Price controls handicap U.S. companies, threaten 4.5 million jobs and, as studies have proven, fail to legitimately improve access to medicines. It’s time to protect biopharma innovation and eliminate unfair price controls.

Jay Taylor

Jay Taylor Jay Taylor is Vice President of International Advocacy at PhRMA. Prior to Joining PhRMA, Jay was a partner at the international law firm, McDermott, Will & Emery, where he specialized in international trade policy, export controls and Foreign Corrupt Practices Act (FCPA) matters. Previously, Jay served as Associate General Counsel at the Office of the United States Trade Representative (USTR), where he managed and litigated numerous international trade disputes, and drafted and negotiated several free trade agreements. Mr. Taylor received his undergraduate degree from Princeton University, and a law degree from Tulane University.

Topics: Access, Intellectual Property, trade

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