AZAR IS THE RIGHT MAN TO LEAD EFFORTS TO BRING DOWN DRUG PRICES
Obamacare may be a dead issue for now, but that doesn’t mean the debate about health insurance costs in the United States won’t continue. However, up until recently, there seemed to have been very little discussion of actual healthcare costs.
Health insurance is very expensive, but a big part of the reason for that is how costly drugs and procedures are that the insurance covers.
Thankfully, HHS Secretary Alex Azar understands this and is on the case.
The son of a doctor who went on to become a brilliant lawyer and pharmaceutical executive himself, Azar’s background gives him a unique perspective from which to work when coming up with policy solutions for bringing down the cost of prescription drugs.
So what can we do to lower drug prices and make medicine more affordable?
For starters, the administration’s Competitive Acquisition Program for tougher negotiation as it pertains to Medicare Part B should help greatly. Medicare is a huge part of the market as far as buying prescription drugs is concerned, so anything that can be done to drive those prices down would be a welcome change.
Beyond that, though, the entire patent system needs to be re-worked.
The average drug in this country costs anywhere from a several hundred million to a few billion dollars to develop. Obviously, it is important that drug companies be allowed to patent the drugs they cultivate, because otherwise, there would be minimal financial incentive to spend all of the money it takes to bring those drugs to market.
The patent period lasts for 20 years, but that starts from the time the drug is invented, not the time it being sold. The average drug takes 8 years to come to market, meaning that in most cases, the developer of the drug has 12 years before they can face any competition.
While I understand that a significant period of time should be afforded to these companies so they can recoup their research and development costs, shaving a few years off of that could be very beneficial to consumers. The earlier availability of generic drugs would lower overall drug costs, especially for those who pay for their medicine out of pocket.
Another issue we must confront is the fact that we are subsidizing drug costs for much of the rest of the developed world.
The United States accounts for nearly 50% of R/D funding, yet the same drugs that cost so much in the United States are often close to 50% cheaper in other countries.
How can this be?
Basically, our country does not have tight price controls on these drugs, while others do. The result is that whatever costs drug companies cannot recoup from the countries with strict price controls gets dumped onto us, making our drugs much more expensive.
Many have suggested that a solution to this would be to adopt the same price control measures here, but that would mean the drug companies would have nowhere to recover their costs and it would lead to less innovation and fewer new drugs in the market since opportunities to make money would be far more scarce.
One interesting idea to combat this is to allow for the re-importation of drugs from Canada, where they are generally far cheaper than in the United States.
While this idea failed to pass in the Senate recently, it has created a very interesting alliance between progressive Senators like Vermont’s Bernie Sanders and Massachusetts’ Elizabeth Warren and libertarian-leaning Republicans like Kentucky’s Rand Paul and Arizona’s Jeff Flake.
Some have said this practice should not be allowed because there is potential for fraud and it would mean bypassing the FDA. Those are reasonable arguments and should not be dismissed out of hand.
However, it is worth considering the potential ramifications for Canada.
This practice would likely result in a Canadian drug shortage, which would mean they would be forced to raise prices somewhat and pay something closer to the true market share that they should have been paying for drugs all along.
And whether or not that re-importation bill is how we do it, getting other countries to pay their true market share for drugs so that drug companies don’t lean so heavily on us is a must if we are ever going to get fair pricing in the United States.