When it comes to prescription drug pricing, it isn’t as simple as getting drugs from cheaper places, at least not if you don’t want to stifle innovation.
“The economics of this issue are kind of interesting and a little bit counterintuitive,” said Phil Kerpen with American Commitment. “You’ve got a situation in the drug-pricing internationally right now where foreign countries, including rich countries, are paying much less for drugs than we pay in the United States. Europe, Japan, Canada, they’re paying significantly lower prices than we are. A lot of people have always said this is extremely unfair.”
How do you fix that? Foreign countries understand that raising the prices of drugs isn’t a good move politically, and people as disparate as Donald Trump and Bernie Sanders are both looking for ways to make it cheaper, with one of the main ones being reimportation, most often Canada is the country under consideration.
“The average cost of bringing a new drug to market is about $2.5 billion, which is staggering,” said Kerpen. “The only way you make the economics of that work in the system we have now is, you’ve got to be able to charge very high prices for the decade or so you have patent protection.”
Allowing Americans to buy drugs from Canada circumvents those prices, but it also will make it so drug companies will be disincentivized to provide those drugs in the first place.
“What we’re looking at right now, with Nancy Pelosi’s H.R. 3 bill, her drug pricing bill that she’s introduced, is they want a total nationalization, a total government takeover of drug pricing,” said Kerpen. “They’re not even sort of trying to do it by the back door of importing at Canadian prices. The Pelosi bill just says, for the 250 most popular drugs in the country, the government will set the price in a so-called negotiation.”
Even though Kerpen acknowledges that drug prices are too high, which he pegs to overregulation, but he sees price controls as heading down a slope toward requiring government to take over research and development of drugs once private companies are no longer able to profit from it.