By TCCRI Staff. Sep. 23, 2019
Speaker Nancy Pelosi recently unveiled her plan to regulate prescription drug costs in both the Medicare program and private market. Not surprisingly, the Speaker turned to big government to guide the principles of her proposal, the major tenets of which include: use of an international pricing index (IPI) based on other countries’ drug costs, authorizing the federal government to directly negotiate the prices of up to 250 drugs, and penalizing pharmaceutical manufacturers that refuse to participate in so called “negotiations.”
This plan smacks of socialized medicine price controls.
The United States produces the most scientifically advanced, innovative medications in the world, thanks in large part to free market principles that provide companies the incentive to compete and create life-saving drugs. Implementing government price controls would eschew the current market-based competition-driven approach in favor of practices that are predominately found in socialized health care systems, and do not take into account the U.S.’s high drug research and development costs (the average drug takes 11-14 years to develop with average costs of $1 billion to $2.6 billion),[1] the risk involved with such work (only 1 out of every 12.5 potential drugs ever reaches the market)[2] or the impact of such pricing controls on economic activity.[3] These efforts play a vital role in economic activity on both the national and international stages.[4] Therefore, any changes to the current pricing models must take into account incentive structures that fuel the research and development efforts that deliver essential new cures and therapies.
In seeking opportunities to bring down prescription drug costs, lawmakers should also examine ways to bring greater transparency to all facets of the drug supply chain; how best to engage consumers in comparison shopping for best value medications; and opportunities to streamline or eliminate any unnecessary or superfluous regulatory hurdles to bringing a drug to the mass market. The U.S. is a leader in pharmaceutical research and development but this continued progress in drug innovation cannot exist without sound policies that promote free-market enterprise.
We’ve seen the catastrophe that followed an attempted government takeover of the health insurance marketplace and are still working to undo the damage caused by the Affordable Care Act’s myriad government mandates. We cannot let those mistakes be replicated when access to critical medications are at stake.
[1] The Hill, “US drug prices higher than in the rest of the world, here’s why,” by Anupam B. Jena, MD, January 19, 2018, available at
[2] Ibid.
[3] International Trade Administration, “2016 Top Market Report: Pharmaceuticals,” available at https://www.trade.gov/topmarkets/pdf/Pharmaceuticals_Executive_Summary.pdf.
[4] Ibid.