By WAYNE
WINEGARDEN |
PUBLISHED: November
16, 2018 at 3:13 pm | UPDATED: November 16, 2018 at 3:15 pm
Health and Human Services Secretary
Alex Azar just released a sweeping proposal that would drastically change how
Medicare pays for advanced cancer therapies and other potent medicines. The
plan relies on foreign price controls to reduce drug spending by $17 billion
over five years.
Although drug spending may decline,
as the Congressional Budget Office has noted, the plan could result in
increased healthcare spending elsewhere, as patients will inevitably lose
access to medicines. So while the savings is questionable, the negative health
impact on patients is certain. Sec. Azar ought to find a better way.
The proposed changes would affect
Medicare Part B, which covers drugs administered in doctor’s offices, clinics,
and hospitals. These medicines include injectable treatments for cancer,
multiple sclerosis, rheumatoid arthritis, osteoporosis, and other serious
diseases.
Doctors buy these medicines
themselves and then bill Medicare for reimbursement after treating patients.
The federal government pays doctors the average U.S. price of the drug, plus a
markup to cover administrative costs.
Administration officials correctly
note these drugs cost more in the United States than in other countries, which
impose strict price controls on medications. These countries contribute
relatively little to global research and development efforts, but they reap the
rewards of R&D conducted in the United States.
To end this “global
freeloading,” the administration wants to create an “International
Pricing Index.” Medicare would no longer set reimbursements based on the
average U.S. sales price. Instead, it would tie reimbursements to the prices
paid in 16 other countries, including the Czech Republic, Finland, Greece — a practice
known as “reference pricing.”
These countries enjoy lower drug
costs, thanks to their price controls. But this comes at a cost: Reduced access
to medicines.
Take the United Kingdom, where a
government agency makes unilateral decisions about which medications are worth
the money. Earlier this fall, the government refused to cover a
multiple-sclerosis medication that had been shown to keep patients out of a
wheelchair for up to seven additional years.
British patients simply can’t
obtain many of the newest medications that Americans take for granted.
Americans could access roughly 90 percent of all the medicines released
worldwide between 2011 and 2017. British patients could only access two-thirds
of those drugs.
In short, the administration’s
proposal would lower domestic prices — but only by restricting patients’ access
to state-of-the-art medicines.
Imposing price controls would also
have a chilling effect on research and development. Pharmaceutical investors
won’t pour billions into risky research projects if there’s little chance to
earn a return. Breakthrough cures for Alzheimer’s and cancer may go
undiscovered, dooming millions of future patients to suffering and premature
death. Since the United States is the global leader in developing innovative
medicines, the drop off in research investment will also harm the 800,000
Americans employed by drug companies.
President Trump has repeatedly
promised to protect American workers and consumers from foreign freeloaders.
His trade negotiators have bashed other countries’ reference pricing schemes,
which “undermine incentives for innovation in the health care sector” and do
not “appropriately recognize the value of innovative medicines.” And his
administration has successfully strengthened intellectual property protections
in the revised free trade deal with South Korea and the new United
States-Mexico-Canada Agreement. These stronger IP protections will help create
more accurate, market-based prices for U.S. drugs in these markets.
Given the anti-price-control actions
taken by the rest of the administration, it’s shocking that Sec. Azar is
embracing such a wrongheaded policy. The proposal might save the government
some money, but it would result in layoffs and make it far harder for patients
to get the medicines they need. President Trump would be wise to scrap it and
instead force our trading partners to raise their standards.
Wayne Winegarden is the senior
fellow in business and economics at the Pacific Research Institute and the
Principal of Capitol Economic Advisors.
https://www.sbsun.com/2018/11/16/new-medicare-price-controls-dont-put-america-first/
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