In late April, Democratic representative Frank Pallone (D-NJ06) re-introduced the Lower Drug Costs Now Act (LDCNA) to the House of Representatives. If passed, the bill would lower prices for medications by placing price controls on prescription drugs sold in the United States. Americans spent an average of $1,200 for prescriptions in 2020, which the bill’s proponents correctly point out is higher than any other country in the world.
While the effort to lower prescription prices should be commended, passing the LDCNA would inflict significant harm to both patients and the development of pharmaceuticals. The bill requires the Department of Health and Human Services to negotiate the overall prices of prescription drugs. In doing this, the bill ties U.S. prices for prescriptions to costs for the same medications in nations with socialized healthcare such as Australia, Canada, the United Kingdom. Specifically, the bill mandates, “the negotiated maximum price may not exceed 120% of the average price” in these nations.
Artificially low prices on medications have been shown to cause drug shortages. Nations the LDCNA cites for price comparisons such as Canada and the United Kingdom frequently encounter a shortage of prescription medication that ultimately denies them access to important, often lifesaving, treatments.
A recent report conducted by Britain’s Institute for Cancer Research concluded that patients in the United Kingdom have been denied access to lifesaving medications due to price disagreements between pharmaceutical companies and the U.K. government. Life-extending breast cancer medications Palbociclib and Ribociclib, for example, only became available to U.K. patients in 2020 even though these drugs had been available to American patients for two years prior. If U.K. breast cancer patients had access to drugs like Palbociclib sooner, their lives could have been extended by at least seven months.
Canada, another country that imposes stringent price caps, regularly experiences shortages of medications. In 2019, Canadians suffered a massive shortage of around 2,000 drugs due to disagreements over prices. This shortage forced around 20% of Canadians to obtain medications through informal sources such as friends and family or prescription black markets. Prescriptions sold on the black market could be fake, expired, or filled with dangerous chemicals that can worsen the condition of and eventually kill patients.
Even for patients trying to obtain prescriptions through legal means, these shortages can have serious clinical consequences. Drug shortages in European and Canadian hospitals can result in delayed treatment, rationing of medications, or patients being denied treatment altogether. At their most serious, an inability to access medication increases the risk of medication failures and unnecessary patient mortalities.
Price controls on drugs will also lower investments in the research and development of new medications. The Manhattan Institute concluded in 2015 that price controls cutting the prices of medications in half would “slash the number of products under development by 30 percent-60 percent.” Researchers at Precision Health Economics found a similar result, arguing in 2018 that removing price controls in non-U.S. OECD countries would produce a 12% increase in investment into research and development and lead to around 13 new treatments per year.
Europe provides a clear example of how price controls will destroy research and development. The Biotechnology Innovation Organization discovered that before the implementation of price controls, European-based firms invested 24% more than the United States in R&D. By 2015, however, these countries lagged the United States by 40%.
Imposing price controls in the United States would lead to the same kind of investment drop that has been seen in Europe. Less investment into research and development would result in fewer new, life-saving treatments being developed for patients. Lowering drug prices should not come at the expense of denying patients access to future treatments.
If passed by Congress, the LDCNA would cause significant harm to American patients by restricting access to current and future medications as well as imposing higher costs on drug manufacturers that would disincentivize investments in research and development. While the aims of LDNCA are admirable, the bill in its present form could inflict far more harm onto patients by denying access to future medications. If lawmakers hope to reduce drug costs for American consumers, they should instead be looking to introduce more competition in the market for generic medications.