ACI Releases Paper on the Effects of Adopting Foreign Price Controls on Drugs

Washington, D.C. — Today, The American Consumer Institute Center for Citizen Research (ACI), a non-profit consumer education and research organization, released a white paper, “How International Reference Pricing for Prescription Drugs Would Hurt American Consumers.”

Recently, some lawmakers and other federal officials have promoted international reference pricing as a way to reduce drug costs for Americans. “Proposals to peg U.S. drug prices to an international benchmark may seem sensible on the surface, but our research reveals that these price controls carry heavy costs,” said Steve Pociask, President of ACI and co-author of the paper.

“Importing the misguided policies of foreign countries will create drug shortages that limit patient access to lifesaving medications, decrease market investment and jobs, undermine intellectual property rights, and endanger the nation’s position as a world leader in producing innovative drugs,” said Joseph Fuhr, Professor Emeritus of Economics Widener University, who also contributed to the research. According to a recent survey by ACI, nearly all Americans (94 percent) believe U.S. leadership in inventing life-saving medicines is important.

The paper finds that artificially suppressing drug prices would substantially reduce incentives for drug manufacturers to undertake the costly and high-risk process of creating novel medicines. In Europe, where drug pricing by government fiat is the norm, pharmaceutical companies spend significantly less than their U.S. counterparts on research and development, and they generate a much smaller share of global drug innovation. As a result, patients abroad have fewer treatment options.

The availability of cutting-edge medicines is far more limited in countries with price controls in their pharmaceutical markets, the paper notes. Of all new medicines launched worldwide between 2011 and 2018, the U.S. has access to nearly 90 percent, compared to only 47 percent on average among countries with price controls. Even when new drugs are ultimately made available in foreign countries, patients must typically wait more than a year longer than in the U.S.

The paper also raises concerns that adopting foreign price controls could undermine efforts to combat the coercive practices that some countries use to obtain heavily discounted drugs from U.S. manufacturers. These intellectual property abuses have resulted in fewer American jobs and less innovation.

To bring about lower drug costs without stifling market forces, the paper urges policymakers to promote transparency and competition in the pharmacy benefit manager (PBM) market, which has the potential to deliver billions of dollars in drug savings to consumers while preserving America’s strong record of pharmaceutical innovation and access.

The full report is available online.

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The American Consumer Institute Center for Citizen Research is a 501(c)(3) nonprofit educational and research institute. For more information, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal.

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