- Medical costs continue to soar, and pharmaceutical drugs are often blamed for those increases
- Scott W. Atlas: New FDA director should help by removing unnecessary regulations and eliminate taxes
The newly nominated head of the Food and Drug Administration, Dr. Scott Gottlieb, will likely confront drug pricing as soon as he takes office. The key to addressing prices without slowing innovation in drug discovery is to rid the system of unnecessary regulations, facilitate competition and eliminate taxes that are ultimately passed on to consumers.
But before we address the specifics of how to improve the system for patients, it’s worth noting some important facts about prescription drugs in the United States.
Second, Americans enjoy access to lifesaving drugs earlier than anyone else in the world. Before the Affordable Care Act was signed into law, the United States was home to the highest number of cancer drug launches, by a factor of at least four, compared to any country studied in the previous decade, including Germany, Japan, Switzerland, France, Canada, Italy or the United Kingdom, according to the Annals of Oncology in 2007.
What would happen with federal price controls on drugs?
Many politicians, including both Democrats and Republicans, have called for price caps to control drug prices, a notion popular with many voters in the wake of highly visible instances of price gouging.
But we already know from history that price caps don’t provide the desired products at lower prices; instead, caps always restrict the availability of the product, whether that product be gasoline for cars, rent for apartments or anything else.
In other words, even in financial terms alone, the benefits of a new drug are far greater than the savings from price controls.
Wouldn’t Americans benefit from the dominant negotiating power of government-run insurance?
Just as important, if the buyer is as dominant as Medicare, a price negotiation could easily lead to new limits on availability of the good, even though prices would be lowered. In the case of prescription drugs, it is only we, the patients, who suffer if the negotiation leads to the negative outcome of limited drug availability. The government has little to lose here; we patients harbor virtually all the risk of the unintended consequences.
Instead of even more regulation, the Trump administration’s policy should focus on enhancing competition, the single most important way to alleviate high prices for prescription drugs.
Over the past decade, development costs for generics exploded fivefold while time-to-market scaled from 16 months to 42 months, according to the nominated head of the FDA, Gottlieb. While significant improvements have been made by the FDA in paring down this backlog, this should continue to be the focus.
Let’s further streamline the overly long FDA approval process for lower-cost generic drugs and allow re-importation limited to generic drugs, which have neither new intellectual property nor new active substance risks.
Third, on a broader level, markedly expanding health savings accounts would let consumers control the money and incentivize cost consciousness for all health expenses. The administration should also immediately eliminate the Affordable Care Act taxes and overregulation on the pharmaceutical industry that have been passed on to consumers and have generated unprecedented consolidation that harms patients.
If the new administration doesn’t follow these steps and instead repeats Obamacare’s fundamental mistake of top-down regulation, patients will undoubtedly suffer. Such overregulation would distort markets, limit development of drugs, inhibit innovation and create disincentives for risk-taking. In medical terms, this means more people will die, a consequence proven throughout the world by systems relying on such policies.
This article initially stated that delays for drugs and medical devices in the United States now take longer than in Europe. But the data is not yet clear on the delays in drug time, so it has been amended to reflect only the delays in medical devices.