Podcast Summary
US is the only wealthy country without drug price negotiation: The US lacks price negotiation with drug companies, leading to significantly higher drug prices for consumers compared to other wealthy countries
While it's true that Americans pay high prices for brand name drugs due to the costs of research and development, the relationship between drug prices and innovation is not as simple as it seems. The US is the only wealthy country that doesn't negotiate drug prices with pharmaceutical companies, leading to significantly higher costs for consumers. The Congressional Budget Office (CBO) explains that this difference in pricing policies has a significant impact on drug prices in the US. While drug companies argue that they need high prices to recoup their research and development costs before generics flood the market, economists question whether this justification holds up. The lack of price negotiation in the US means that consumers bear the brunt of these costs, and other countries benefit from the innovations without paying the same price. It's a complex issue with no easy answers, but understanding the role of government in drug pricing is a crucial first step in addressing the issue.
Policies to reduce drug prices may impact new drug development: Policies to reduce drug prices could save costs for the government but might limit new drug entries, potentially missing out on life-saving medications. Economists suggest offsetting this with increased funding for research.
While policies aimed at reducing drug prices, such as Medicare's new negotiation powers, can result in significant cost savings for the government, they may also lead to a reduction in the number of new drugs entering the market. This trade-off can be a concern, as it could potentially mean missing out on potential life-saving drugs. However, according to economist Chris Mayes, the cost savings from these policies could be offset by increased funding for research and development at the National Institutes of Health. Fiona Scott Morton, an economist specializing in competition in healthcare, emphasizes the relationship between profit and innovation in the pharmaceutical industry. While high prices can incentivize innovation, they can also limit access to necessary medications. It's a complex issue with no easy answers, but ongoing research and dialogue can help find a balance between affordability and innovation.
FDA approval process and Medicare prevent taxpayers from making informed decisions on drug costs: Policymakers suggest creating entities to evaluate cost-effectiveness of drugs, enabling comparison and potential price suppression
The high prices for certain drugs, particularly old generic ones and expensive cancer treatments, are a concern due to price fixing and lack of competition. The FDA approval process and Medicare's administration currently do not allow for comparison of cost-effectiveness between drugs, preventing taxpayers from making informed decisions and potentially overpaying. If given the power to implement policies, suggestions include creating federal or university entities to evaluate cost-effectiveness, similar to what many other countries do. This would enable comparison of the cost per quality-adjusted life year saved between drugs, potentially suppressing corporations' incentives to set high prices. Additionally, addressing the complexity of modern drug manufacturing, particularly biologics, and the challenges in producing generic versions and gaining federal approval for them, is another area that requires attention.
High barriers to FDA approval of biosimilars hindering competition and driving up drug prices in the US: Europe's faster approval process for biosimilars has led to massively declining prices for biologics, but the FDA's slow and bureaucratic reputation hinders competition and drives up US drug prices. Experts suggest speeding up drug trial approvals as a potential solution.
The high barriers set by the FDA for approving biosimilars, or generic versions of biologic drugs, are hindering competition and leading to higher prices in the US. Europe, which moved faster on this issue, has seen massively declining prices for biologics due to the availability of biosimilars. The FDA's reputation for being slow and bureaucratic contributes to this issue, but there are solutions to lower drug prices while preserving innovation. Experts suggest speeding up drug trial approvals as one potential solution. Despite the complexities of drug pricing, there are ways to improve the system, but political obstacles prevent these improvements from being implemented. The Indicator is a podcast that explores economic trends and solutions, and this episode featured discussions with Chris Adams, Fiona Scott Morshin, and Fyodor Birnbaum on the topic of drug prices and innovation. The episode was produced by Brittany Cronin, engineered by Josh Newell, fact-checked by Sierra Juarez, produced by Viola, and edited by Kate Kincannon. Support for NPR comes from Saatva, where you can find luxury mattresses sold online at half the price of traditional retailers. Visit Saatva.com/npr and save an additional $200.
