Counterpoint: Drug price controls would cost plenty
And we can’t predict who would suffer as a result.
When it comes to policy debates, any claim that you can have your cake and eat it too should be taken with an extra helping of skepticism. So it is with Rep. Zack Stephenson’s and Sen. Kelly Morrison’s claim that their bill to impose price controls on prescription drugs “won’t reduce patient access to new or existing drugs” (“Counterpoint: All we have to fear is high drug prices,” Opinion Exchange, March 3; “Price controls would harm state’s biotech economy,” Feb. 23).
The lawmakers made this claim in response to criticism from investors in early-stage life science startups, who they lump in with the “‘pharmaceutical corporations’ prolific lobbying campaign.” This reveals their strategy to frame the issue as a battle between drug company profiteers and people struggling to afford high-cost drugs.
In truth, the real battle line is between people who need a new drug to treat their illnesses vs. people who want their existing drugs to be cheaper.
Unfortunately, there’s no fair debate across this line because those harmed by price controls are unknown and voiceless. We can’t name who will be harmed because there’s no way to predict which drug treatments will be stopped or delayed by future price controls. But it will happen and, quite possibly, to someone you know.
However, naming people who might benefit from lower-cost existing drugs is easy. Stephenson and Morrison name Margaret with Crohn’s disease who told them about her $6,000 per dose drug.
The nameless people who will be harmed by price controls need to rely on drug companies to make their case — drug companies that aren’t exactly popular. In fact, among the 25 business sectors Gallup asks about in annual polling, the pharmaceutical industry sunk to the most poorly regarded in 2019.
With the deck thus stacked against people who need new drugs, let’s not dismiss them because their interests happen to align with the drug industry. They deserve a fair hearing.
That starts with acknowledging the trade-offs. Price controls will reduce access to new drugs by some degree. By design, price controls lower a drug manufacturer’s expected revenue from future drugs. That, in turn, leads to less research and development investment, which naturally results in the advent of fewer new drugs.
No one seriously disputes this logical progression. Last summer the debate over federal drug price controls in the Inflation Reduction Act (IRA) was not over whether the law would reduce the number of new drugs, but how many.
The Minnesota bill is part of a national movement and modeled after legislation that has already passed in six states and been introduced in at least 10 more. Success in Minnesota will beget success elsewhere and enlarge the footprint of state price controls. The combined harm from state and federal drug price controls on access to new treatments and cures will be substantial.
This is in stark contrast to the likely minimal benefit prices control will provide to people like Margaret. To the extent drug prices are too high for some, there are better ways to address affordability that don’t undermine access to new drugs.
Few people must pay the full price for high-cost drugs. Federal and state programs cover nearly the entire cost of drugs for low-income people. Employers and the individual market tend to offer drug benefit options with affordable copays. When we hear about a high price, there’s often an affordable therapeutic alternative in the health plan’s formulary. For people without access to affordable copays, drug manufacturers often offer savings cards. I personally used a savings card with a high deductible plan before a generic became available.
For someone like Margaret who might need a $6,000 drug, a 50% price drop would mean the drug still costs $3,000 per dose. Covering that level of cost is why people need insurance. If there is no affordable insurance option, that’s an insurance problem and not a drug price problem.
This is not a defense for current drug prices. Health care costs are too high across the entire system, including drugs. But the solution to high prices should focus on competition, not price controls.
Our system shields health care prices from cost-controlling competition by keeping them hidden. Several bills are moving through the Minnesota Legislature to increase price transparency, including a bill to force drug manufacturers to reveal their list prices. This is where lawmakers should focus.
Peter Nelson is a senior policy fellow at Center of the American Experiment and former senior adviser to the administrator at the Centers for Medicare & Medicaid Services.
This article was originally published at the Star Tribune.