by Peter J. Pitts
Scientists searching for cures to cancer, diabetes, Alzheimer’s, and other deadly illnesses may soon lose their funding, due to a misguided proposal from Secretary of Health and Human Services Alex Azar.
The proposal would gradually reduce Medicare’s reimbursement rate for advanced drugs administered in hospitals and doctor’s offices by 30 percent. Sec. Azar claims these price controls “will save $17 billion in Medicare drug spending over the next five years.”
Price controls would save the government money, at least initially. But the cuts to research funding would make it much harder for scientists to discover the cures of tomorrow.
Drug research is ludicrously expensive and fraught with pitfalls. Most research projects fail in the lab. And roughly nine in ten experimental drugs that emerge from the lab and enter human trials fail to gain FDA approval. This high failure rate explains why it takes almost $3 billion to develop just one drug.
Unlike most European nations, which impose strict price controls on medicines, the United States has a relatively free market for drugs. The ability to earn a sizeable return on successful drugs explains why a majority of world’s new drugs are invented in America. America’s researchers are currently developing more than 3,000 new medicines.
Price controls would halt this medical progress. They’d make it nearly impossible for research companies to earn a return on their initial investments. As a result, the investors who currently fund drug research would redirect their capital to other business opportunities that offer better returns.
Consider how price controls have wrecked drug development in Europe. In the 1970s, more than 55 percent of all new drugs were developed in Europe. Just 31 percent were developed in America.
Now, those statistics have reversed, largely due to Europe’s ever-stricter price controls, which have made America ever-more attractive for drug researchers. From 2001 to 2010, the United States generated more than half of all new medicines developed globally; Europe accounted for just one-third.
Medical breakthroughs could save patients, and the government, billions of dollars by preventing or curing chronic disease. Approximately 1,500 innovative treatments targeting Alzheimer’s, cancer, diabetes, heart disease, and stroke are currently in development. If researchers produced one successful treatment that delayed the onset of Alzheimer’s by five years, the government could save over $200 billion annually by 2050.
American patients have some of the best health outcomes in the world precisely because we’ve avoided the pitfalls of socialist price controls.
Peter J. Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest and a Visiting Professor at the University of Paris Descartes Medical School.