by Patsy Writesman
Americans are rightly frustrated with high prescription drug prices. But if we truly want lower costs and better care, price controls are not the answer. Importing European-style mandates – such as “Most Favored Nation” (MFN) pricing – would do more harm than good, crippling innovation and reducing access to future cures.
And, it will benefit our adversaries like China as more research and development along with production of drugs are moved overseas – the exact opposite of what we want in the R&D and manufacturing and supply pipeline.
While policymakers focus on list prices and caps, they overlook what really drives medicine costs and why America still leads the world in new treatments: market incentives and private-sector innovation. Government price controls, by contrast, have a long track record of undermining innovation and limiting access for patients.
A recent analysis explains exactly why MFN-style pricing hurts not only patients but caregivers too. By tying U.S. drug prices to the lowest prices in other developed countries, MFN doesn’t address the real drivers of cost and could discourage companies from investing in research that leads to future cures. European governments that impose centralized price controls routinely delay access to new medicines or restrict coverage altogether — a tradeoff Americans should reject. We’re the leader of the free world and the envy of economies around the world, and there’s a reason many people from around the world fly to America for medical procedures – we have the best and most innovative system in the world.
Advocates of price controls often argue that Americans pay more for drugs than patients abroad. That’s true – but not because drugmakers are price-gouging. The U.S. shoulders a disproportionate share of global pharmaceutical research and development because other nations suppress prices through government mandates. When manufacturers can’t recover R&D costs overseas, they rely on the freer U.S. market to fund innovation that benefits patients worldwide. This is a classic free-rider economic problem.
Developing a single new drug can take more than a decade and cost billions of dollars, all of which need to be recouped by the drug manufacturers. In return, manufacturers get set intellectual property rights to help recoup those R&D costs – which have also led Americans (and the world) to have access to new life changing and life changing therapeutics. However, price controls, by definition, cap the return on these investments. If policymakers want to lower costs substantially, they should target inefficiencies and distortions in the system – not impose blunt-force caps that shrink the pipeline of future cures.
Our leaders in Washington are combatting the wrong problem with health-care costs. Fixating on list prices instead of addressing opaque rebate systems which as 340B, misaligned incentives, and regulatory barriers ignores how innovation actually happens. Real reform means increasing competition and transparency – not replacing markets with bureaucratic price-setting. Congress can also look at PBM reform – pharmacy benefit managers tend to be middlemen in the system and can drive up costs for everyone. Commonsense PBM reform at the state and federal level makes sense. And, our own U.S. Senator Marsha Blackburn has been a champion on these exact issues.
America’s leadership in drug innovation did not come from copying Europe’s socialized systems. It came from private investment, competition, and strong intellectual property rights protection. European-style price controls have repeatedly produced shortages, delayed access, and fewer new treatments are available to patients until often years after American patients have had access to these same drugs and cures. Here’s the truth, America will not be successful if we duplicate Europe’s failures. Countries that rely on price controls often leave patients waiting years for access to therapies that Americans receive much sooner – if they receive them at all. Worse, these socialistic policies reduce the number of new drugs developed in the first place.
This isn’t just an economic issue – it’s a moral one. The most damaging effect of price controls is invisible: the cures that never materialize because the investment case disappeared and the drug was never invented or brought to market. Patients battling cancer, rare diseases, or chronic illness will never know what treatments might have existed if innovation had not been discouraged.
Helping Americans afford medicine is a worthy goal. But tying U.S. prices to systems that suppress innovation is a false solution. A better approach would encourage global cost-sharing, push wealthy European countries to pay their fair share for innovation, and reform the parts of the system that inflate patient costs without adding value.
Do you want the DMV handling drug discovery? No. We want private companies – driven by competition and accountability – doing what they do best: innovating, investing, and delivering life-saving breakthroughs.
Price controls may be politically tempting, but they are economically flawed and ethically shortsighted. If we truly care about patient access and future cures, we must reject socialistic price controls and strengthen the market-based system that has made America the world’s engine of medical innovation.
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Patsy Writesman is a Middle Tennessee nationally recognized health care speaker, consultant and owner of ManageHealthCareCosts.com.
