REALCLEARHEALTH
Washington has a new idea for lowering prescription drug costs: Let other countries decide what American medicines should cost. It's an appealing political proposition, particularly when Americans are understandably frustrated by high drug prices. Unfortunately, what sounds like common sense on the campaign trail can turn into very bad medicine once it becomes government policy.
The Centers for Medicare & Medicaid Services has finalized its GLOBE model, which would tie the prices of certain Medicare Part B medicines to prices in 19 other developed countries. Manufacturers whose prices exceed those benchmarks would be required to pay rebates. The argument is straightforward: Americans pay more for medicines than patients elsewhere, so why shouldn't we take advantage of the lower prices other governments have negotiated? The trouble is that those prices come with baggage, and plenty of it.
Many of the countries included in the GLOBE benchmark rely on government price controls, restrictive reimbursement policies, and lengthy negotiations before new medicines become available to patients. European governments have long struggled to reconcile pharmaceutical spending limits with timely access to innovative treatments. Their decisions reflect their own political priorities and budgetary constraints. Why should Americans assume those same priorities make sense for our healthcare system?
Nobody disputes that prescription drug affordability is a serious problem. Patients shouldn't have to choose between their medications and other necessities, and Medicare has every reason to spend taxpayer dollars wisely. But affordability isn't simply a contest to see which government can negotiate the lowest price. A medicine that costs less but isn't available to the patient who needs it isn't much of a bargain.
The projected savings from GLOBE are hardly overwhelming. One analysis cited by the Center for Medicine in the Public Interest estimates that the model would reduce Medicare Part B premiums by an average of approximately four cents per beneficiary per month. Another analysis suggests similarly modest out-of-pocket savings, partly because many Medicare beneficiaries already have supplemental coverage. Four cents a month is a rather thin justification for a policy that could have substantial consequences for pharmaceutical investment.
Drug development is an expensive business with lousy odds. Most experimental medicines fail, sometimes after years of research and enormous financial commitments. The relatively few that succeed help finance the many that don't. Change the financial calculation enough, and some promising research programs simply won't attract the investment they need.
This is particularly troubling in areas such as ALS, Alzheimer's disease, rare genetic disorders, and certain cancers, where the science is difficult, and the risks are considerable. These are precisely the fields where we should be encouraging investment, not giving investors additional reasons to walk away. Washington can't spend one day celebrating medical breakthroughs and the next making the economics of developing them less attractive.
Foreign drug prices are not some universally accepted measure of pharmaceutical value. They're frequently the product of government negotiations designed to satisfy national healthcare budgets, often backed by the threat of restricted reimbursement. These are political prices, not necessarily accurate assessments of what a medicine is worth to patients. There's no compelling reason to make them the foundation of American pharmaceutical policy.
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