Hillary Clinton's recommended drug cap could actually prevent innovation instead of helping.
+ Regulatory
Kerry Goff | Feb 19, 2016

Clinton's recommended drug cap could be bad news for innovation

Democratic candidate Hillary Clinton announced in late September that she would demand a stop to excessive profiteering and marketing costs by encouraging innovation and new treatments from drug companies — including a stop to direct-to-consumer drug company advertising subsidies — and reinvesting funds in research.

Although this promise looks good on the surface, many experts have raised concerns over the logistics.

Scott Gottlieb, a physician and resident fellow at the American Enterprise Institute (AEI), recently wrote an op-ed in the Washington Journal explaining why Clinton’s promises are harmful.

“Hillary Clinton demonizes drug-company profits and pushes for federal control over how drugs are priced,” Gottlieb told Patient Daily. “But many of the pharmaceutical industry’s supporters in Washington and on Wall Street argue that new restrictions impede investment and innovation, and it is unlikely to get through a Republican Congress.”

Gottlieb explained that the Independent Payment Advisory Board (IPAB) is not allowed, by law, to make considerable changes to the structure of Medicare, so its focus will more than likely turn to price controls and ways to give Medicare more control over uses of technology.

“Regarding drug prices, the IPAB and CMMI (Center for Medicare and Medicaid Innovation) are likely to engage in so-called reference pricing that is the backbone of European-style price controls,” Gottlieb said. “Under this construct, the agencies will allow the Medicare program to lump together drugs and other treatments that the agencies’ bureaucrats feel are similar enough that they can be used in place of one another — even if a newer but also more expensive treatment might offer benefits over older alternatives.”

He also explained the dangers of the government getting too involved with price caps, including harm to availability, innovation and funding for certain life-saving medicines.

“The effect on the availability of new treatments could be cataclysmic,” Gottlieb said. “Drug discovery is a high-risk, high-cost endeavor. Mounting regulation already has stretched the average time to develop a drug to 128 months between synthesizing a pill and winning its approval. Only about 10 percent of the drugs that go through Phase I clinical trials reach the market. Average out-of-pocket spending is $1.4 billion to develop a new medicine, with an additional $470 million in direct, post-market research costs after a drug is approved.”

With this kind of timeline and cost, Gottlieb argues that these road blocks would eliminate better, newer medications that could be more effective for patients.

“Think of a new cancer drug that obviates a far less tolerable form of chemotherapy,” Gottlieb said. “Only Medicare says the new drug should be priced the same as old, generic chemo because the FDA says that the two remedies have a similar treatment effect.”

Gottlieb believes that government rules like price controls prevent drug developers from experimenting with new ways to price their products, such as charging different prices based on what the medicine is being used for.

“These are far better alternatives to price controls, but, ironically, the government’s price interventions prevent these approaches,” he said.

Organizations in this story

More News