Tying U.S. Drug Prices To Foreign Markets Risks Innovation And Lives
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“The higher prices that Americans pay for drugs cover a disproportionate share of the research and … More development efforts from which the entire world benefits,” writes health policy expert Sally C. Pipes. Getty Images Earlier this month, President Donald Trump signed what he called “one of the most consequential Executive Orders in our Country’s history.” The order is essentially an updated version of his administration’s 2020 “Most Favored Nation” policy. It directs pharmaceutical companies to tie the U.S. prices of their drugs to the lower prices that other developed countries pay. It certainly seems unfair that Americans pay more for drugs than foreigners. So the president’s insistence that drug companies offer Americans the best deal they provide worldwide has intuitive appeal. But the economics behind this proposition are much more complicated. The higher prices that Americans pay for drugs cover a disproportionate share of the research and development efforts from which the entire world benefits. Like it or not, we have become the world’s medicine chest. Pegging drug prices here to those in other countries would yield minimal savings for the United States and devastate funding for biomedical research. In the long run, pharmaceutical companies would develop fewer novel lifesaving drugs. And that would consign Americans and foreigners alike to undue suffering. Other countries pay less for pharmaceuticals because their governments forcibly cap prices. If drug companies want to sell their wares within that country’s borders, they have to assent to the foreign government’s price. That strategy has trade-offs. For starters, manufacturers prioritize markets where they can garner higher returns. So they tend to delay launching their drugs in countries with price controls. Across the G20 group of middle- and upper-income nations, just 38% of new medicines launched between 2012 and 2021 were available as of October 2022. In…
