By Kenneth E. Thorpe
March 12, 2019 at 5:00 am ET
As the national discourse on drug prices intensifies, we are still lacking a forthright, informed debate about the benefits and consequences of controlling the costs of medicine through the force of government power. Americans, particularly the patients awaiting treatments and cures for their severe health conditions, deserve that debate.
We’re reaching a pivotal moment on the drug pricing issue. Efforts to impose various types of government price controls are nothing new, but Massachusetts Gov. Charlie Baker (R) is now taking this effort to a new level by potentially criminalizing disagreements over cost.
The governor’s budget proposal includes a provision that, if a price cannot be agreed upon for drugs dispensed in the state’s Medicaid program, companies can be referred to the Massachusetts Health Policy Commission for hearings. If the commission decides that a drug’s price is unreasonable, the company can be subject to possible prosecution under consumer protection laws.
In other words, economic considerations on the pricing of complex products are going to be brought into the harsh and unforgiving light of politics, where decisions will not necessarily be made on the basis of what makes sense but rather what plays well in the media.
And it would be foolhardy to think Baker’s move won’t be replicated in other states. Other governors and attorneys general are going to quickly see the appeal of having a new tool to beat up on the pharmaceutical sector.
But if policymakers are going to use this level of heavy-handedness to dictate product prices, they owe it to their constituents to fully explain the ramifications of doing so. It is simply not right to suggest, even by omission, that prices can be kept artificially low without having a commensurate effect on unmet human health needs and the medical science that can address those needs.
The fact is that the impact of chronic diseases — cancer, heart disease, pulmonary illness and diabetes are prime examples — on our society is increasing. Today, over 30 million Americans have three or more of these diseases.
By the year 2030, that number will double, a disease escalation that will cost us trillions of dollars over this period in medical costs and lost productivity. Beyond these well-known illnesses, there are also 7,000 rare diseases — 95 percent of which have no Food and Drug Administration-approved treatments.
The good news is that we’re in an unprecedented period of medical innovation. We’ve seen 33 new cancer drugs developed over the past three years, including innovative therapies with origins in genomic research that offer cancer sufferers new hope. And dozens of new orphan drugs to attack those rare diseases are gaining FDA approval and being made available to patients each year.
But this progress only occurs because investment capital is flowing to biopharmaceutical development under the assumption that there will be a reasonable return on that investment. When governments apply draconian price controls or, in the Massachusetts case, use the threat of criminal sanctions to keep prices at an arbitrary, politically appealing level, those investment dollars are almost certain to go elsewhere, and the innovation pipeline begins to close.
This is particularly true at a time in which health insurers are shifting a greater share of financial burden to consumers, raising costs at the pharmacy counter and prompting more patients to either cut back on their medications or not take them altogether. We need more candor from the political class about these tradeoffs.
What also needs to be said is that this doesn’t have to be a binary choice between price controls and innovation. Affordability is critical, and innovation does little good for society if it’s not paired with accessibility.
Given that retail pharmaceutical costs make up about 10 cents of every health care dollar spent, policymakers would do well to look more holistically at how to contain costs throughout the system. But even on drug costs, there are alternatives to the heavy-handedness that will stifle innovation.
Many states are discovering that negotiated discounts and rebates are staying in the pockets of pharmacy benefit manager middlemen and not making their way to patients and consumers, and they’re beginning to address this problem. Also, value-based contracting between payers and drug companies that would base prices on how well a drug performs in improving patient health shows great promise.
By and large, though, elected officials are pursuing the politically popular avenue of controlling drug prices — even, in the Massachusetts case, exploring criminal prosecution as a lever. If they continue to pursue this direction, they need to be honest with their constituents that lowering costs in this manner will bring about a whole different set of societal costs in terms of patients not treated and diseases uncured. We deserve to be asked if that’s a price we wish to pay.
Dr. Kenneth E. Thorpe is professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease.
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