In recent months, the debate around health care has shifted, in part, away from the inadequacies of Obamacare and the resulting rising costs for Americans to prescription drug prices. This is in large part because of the actions of former Turing Pharmaceuticals CEO, Martin Shkreli, who attracted both media and Congressional scrutiny when he infamously increased the price of the anti-parasitic drug known as Daraprim by more than 5,000 percent. When questioned about this increase, Shkreli’s nonchalant attitude and seeming disregard for the patients who rely on this medicine spurred public outrage. As a result, policymakers, and indeed several Presidential candidates, were quick to label Shkreli’s behavior as reflective of the entire U.S. pharmaceutical industry. With a poster child like Shkreli, it is easy to see how a call to action to address drug costs is quickly following suit.
While curbing abuses committed by individual actors like Shkreli are certainly warranted, there should be concern about the impact Congress’ misguided proposals could have on the entire biopharmaceutical industry and the American people.
In a rush to call for government intervention in prescription drug pricing, some members of Congress and the media ignore the disastrous consequences intervention would have for the patients who depend on the development of new treatments. For example, over the past few years there has been incredible progress made in disease areas like Hepatitis C, when the first FDA approved cure, Solvaldi, was introduced to the market. Although the initial price per pill was high, it was hardly comparable to the half-a-million dollar price tag for individuals who needed a liver transplant as a result of years of living with Hepatitis C. Solvaldi created a cure for patients that wouldn’t have been possible without critical investment in research. These savings are critical for consumers and taxpayers.
Imposing price controls (commonly called “transparency measures” by policymakers) destroys the incentive for investment in the biopharmaceutical industry because it diminishes the possibility of returns. Without investment, innovative drugs that require expensive and risky research (like Solvaldi) never make it to market and patients suffer the consequences. Overall, government imposed price controls distort the market balance. And, like we saw during the gas crisis of 1970 (remember those long lines?), they can have disastrous results by limiting the supply of products available for consumers. There in no place more critical to avoiding a shortage of goods then in the biopharmaceutical market, which is responsible for creating the drugs that save and improve lives.
Critical prescription drugs should never be out of reach for patients, but diminishing the prospect of investment in potential cures is certainly not an effective means of addressing the problem. Congress must consider solutions that combat long-term healthcare spending without harming patients, and a competitive market place is the best way to ensure this. As an example of the competitive free market working, two other drugs have entered the market to compete with Solvaldi. And, with any competition, comes a reduction in price. Insurers must also be held accountable for rising costs when they fail to cover specialty treatments patients rely on. Without addressing the role of insurers, patients will continue to pay high prices for treatments. And, taxpayers will also be on the hook for increasing costs in all government healthcare programs.
Government intervention in drug pricing will have disastrous effects on drug innovation. The development of new drugs and treatments doesn’t just make a difference in the lives of Americans, but also saves the healthcare system and country millions of dollars down the road. As Congress begins to consider proposals to improve patient accessibility to prescription drugs, they shouldn’t undermine competition by imposing onerous government regulations such as price controls on prescription drugs.