A new study from economists at the University of Chicago examined the impact that government price-setting policies for medicines, like those in H.R. 3, could have if implemented. The economists found that a policy like H.R. 3 could reduce investment in the research and development (R&D) of new medicines by up to 60% between 2021 and 2039. The results reinforce why so many Americans have raised concerns over price-setting policies.
To put a finer point on it, policies like H.R. 3 could result in as many as 342 fewer medicines coming to market during that same time. Those lost medicines could include critical future treatments and cures that would never make it to patients, impacting life expectancy as a result. In fact, the economists at the University of Chicago concluded that the loss of life over 10 years if policies like H.R. 3 are implemented could be as much as 20 times larger than the loss from COVID-19 to date in the United States.
It is clear government “negotiation” can have life threatening consequences for patients.
This new research is consistent with a previous study from Vital Transformation which predicts price-setting policies could reduce the number of new medicines developed by small U.S. biotech companies by 90%. Even the cautious Congressional Budget Office (CBO) estimates a significant reduction in R&D, and consequently medicine approvals, resulting from policies like H.R. 3. It is worth noting numerous other studies suggest CBO significantly underestimates the impact of H.R. 3-style policies on innovation. It’s alarming, but perhaps not surprising, that the University of Chicago’s estimates of R&D reduction are 550% to 1024% larger than CBO’s projections.
As the Office of Health Economics (OHE) raised in their recent blog series, H.R. 3 is expected to substantially reduce R&D and innovation while not addressing the real problems of patient affordability and cost growth driven by other health care sectors. Collecting insight from venture capital investors, pharmaceutical executives and academic economists, OHE identified markups by wholesalers and hospitals as a large factor driving the cost of medicines. Despite this, pharmaceutical companies are a key focus of misguided proposals like H.R. 3, which consequently fail to address systemic issues across our health system.
Our collaborative research ecosystem means America leads the world in researching and developing life-saving vaccines, treatments and cures. But that is likely to change if policies like H.R. 3 give the government the power to set the price of medicines – discouraging continued drug development and impacting Americans’ access to future medicines.
Government price setting is the wrong approach to fix the health care system. Instead of risking R&D of new treatments and limiting people’s access to medicines, we need to take a holistic approach to lowering what people pay out of pocket for medicines. Learn more at PhRMA.org/BetterWay.