November 14, 2016 at 5:00 am ET
After a year of Pharma Bros and EpiPens, we certainly don’t need more proof that Americans are deeply frustrated with prescription drug prices. This frustration is rooted in a simple fact: Though most Americans can afford their medicines, some patients with serious chronic illnesses are struggling to afford their drug co-pays.
Fixing that relatively discrete problem — the vast majority of drugs sold today are inexpensive generics that Americans can buy for less than two tickets to their local movie theater — should be the focus of the Trump administration and Congress in 2017. Together, they can not only expand access to more affordable and innovative medicines, but extend American leadership of a vital global industry and generate more high-paying, U.S.-based manufacturing jobs.
Over the years, Congress has developed and supported policies that have transformed the American biopharmaceutical industry into the world’s medicine chest. Defending those policies means advancing innovation, market-based competition, and patient-focused health care reforms.
Simply put, we need better ways to make medicines more affordable for patients without stifling innovation. In product classes with robust competition — including the latest Hepatitis C medicines — patients have access to more effective therapies and prices have fallen by nearly 50 percent. Those prices are lower than in price-controlled countries, and U.S. payers continue to work with manufacturers to treat more patients. Partnership and collaboration in the service of patient access is the right way forward.
If enacted, price and profit caps, as well as other one-size-fits-all solutions, will only hinder the industry’s ability to attract the financial investment required to develop new, lifesaving drugs. Make no mistake: if we embrace the price-control path of our European competitors, we will slow our ability to deal with the most devastating diseases and people will suffer and die unnecessarily.
Drug prices have generated most of the headlines over the past two years, even while government actuaries and independent analysts expect drug spending to stay level — at about 15 percent of total health care spending — over the next decade. That means 85 percent of U.S. health care costs are generated elsewhere. In fact, health care labor costs continue to rise faster than drug costs.
The real enemy is disease. Premature death and prolonged disability are what make health care ruinously expensive, not prescription-drug spending. The Alzheimer’s Association projects that if a drug which delays the onset of Alzheimer’s by just five years is developed by 2025, Medicare costs would decrease by $345 billion over the next decade, and patient out-of-pocket costs would fall by $228 billion.
If policymakers are serious about slowing runaway health costs, what we need most are new insurance models that ensure that patients with serious chronic illnesses benefit from the discounts offered to health insurers and PBMs and don’t pay full list price at the pharmacy. Health plans eligible for health savings accounts should be allowed to cover the costs of drugs for chronic illnesses before any deductible kicks in. Insurers should also be allowed to offer long-term insurance contracts that provide better incentives to focus on disease prevention and management.
New reimbursement contracts should focus on reducing the 85 percent of health costs generated by health services. These pay-for-performance contracts can encourage doctors, insurers, and drug companies to coordinate on delivering higher quality care as efficiently as possible, especially for our sickest patients.
The costs of medicines are easy to see, since drugs come with sticker prices and monthly co-pays. The benefits are less visible because they’re everywhere and often play out over years or even decades. Consider three examples:
None of these developments was inevitable. If we handled prescription drugs in the way that critics suggest, it’s likely that fewer of those medicines would have made it to market; many of those that did would have taken longer to arrive.
Now apply that analysis to the future. There are new technologies on the way that promise to do even more to lower medical costs and improve health, technologies like gene therapies that can restore sight to blind children or stem cells that can regrow a working pancreas for diabetics.
Shouldn’t we be doing everything in our power to get those treatments to the people who need them as fast as we safely can?
Rhetoric surrounding drug pricing often doesn’t reflect reality, and risks demonizing the vast majority of researchers and companies who spend their entire careers trying to cure deadly diseases. These people are part of the solution to our national health care woes, not part of the problem.
Balancing innovation and affordability is a bipartisan goal. The 21st Century Cures legislation, and the Cancer Moonshot, are demonstrations of how Americans in both parties have rallied around the sickest, and most vulnerable among us.
By signaling support for these efforts, and continuing to expand them in 2017, President-elect Trump could notch some early goodwill in the patient and research communities, and signal that he’s willing to build bridges across partisan lines. This includes reaching out to skeptics in Silicon Valley, who are also working to make quantum leaps in the battle against cancer and other diseases.
President-elect Trump says he wants to accomplish truly great things. He can start by rallying the nation in pursuit of a true path to affordable cures.
Paul Howard is a senior fellow and director of health policy at the Manhattan Institute for Policy Research. This column is adapted from a recent Intelligence Squared debate. He is also the co-author of the new book Unlocking Precision Medicine, with Peter Huber, and a member of the Manhattan Institute’s Project FDA.
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