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Government price setting leaves behind families counting on new medicines

Nicole Longo
Nicole Longo February 23, 2022

Government price setting leaves behind families counting on new medicines.

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Rather than pursuing policies that would actually address our broken insurance system and lower costs for patients – while protecting medical innovation – policymakers keep going back to the same, tired and flawed government price setting proposals. Changing the name or structuring the policy differently doesn’t change the truth: government price setting leads to the development of fewer new treatments and cures, which means patients lose out on potentially lifesaving medicines.

For example, a study from economists at the University of Chicago found that one price setting proposal could reduce investment in the research and development (R&D) of new medicines by up to 60% between 2021 and 2039, resulting in 167 to 342 fewer new medicines approved. Another analysis found that one government price setting approach could lead to a 90% reduction in new medicines developed by small, U.S. biotechs alone over the next decade. On the flip side, research has also shown that if countries lifted current price setting policies, more medicines would be developed. One piece of research, for example, estimates that lifting government price-setting policies in non-U.S. OECD countries would result in 8 to 13 additional new medicines launching globally every year by 2030. 

Analyses of the impact price setting policies have had in Europe provide further evidence. A paper from NDP Analytics found that the adoption of government price setting and other anti-innovation policies across Europe in the 1980s and 1990s pushed R&D investment away from the continent to the United States, which had more pro-innovation policies. A recent analysis from Vital Transformation found that as price setting policies flourished in the European Union from 2003 to 2019, biotech investments remained static. During the same period, investments in the United States increased sixfold as R&D moved to where there were more favorable innovation policies.

And you see a stark difference when you look at the number of new medicines available in the United States and how quickly they become available compared to countries where the government interferes and sets medicine prices. Nearly 90% of new medicines launched since 2011 are available in the United States compared to just 48% in France and 60% in the United Kingdom – countries that each use some form of government price setting.

It’s no wonder that parents like Emily are so concerned with government price setting proposals. Her son Cooper has a disorder called autonomic dysfunction, which means his nerves that regulate involuntary body functions, such as heart rate, blood pressure and sweating, tend to dysfunction. Sadly, Cooper is unable to participate in sports like basketball because of his condition. Emily worries that if Congress implemented a price setting policy, Cooper may never have a cure for his disease because R&D would slow or halt.

Luckily, there are real solutions that could help patients afford their medicines while also continuing to support the important R&D that gives caregivers like Emily and patients like Cooper hope.

Learn more about ways we can fix our health care system.

Topics: Drug Cost, Medicare, Policy Solutions, Government Price Setting