Drug Prices And Medical Innovation: A Response To Yu, Helms, and Bach

In a recent Health Affairs Blog post, Nancy Yu, Zachary Helms, and Peter Bach note that prices for top-selling drugs are higher in the United States than in other countries. They conclude that “premium pricing [in the United States] exceeds what is needed to fund global R&D.” They further suggest that “lowering the magnitude of the US premium” would have saved $40 billion for US prescription drug purchasers in 2015. Essentially, the authors imply that the US price premium could be significantly reduced without affecting research and development investments or having other adverse effects. This is a strikingly bold and unfounded conclusion. There is no sound economic rationale to suggest that price ratios across countries or revenue premiums in the United States should match current research and development spending. Hence, the fact that price differences and research and development spending levels fail this arbitrary test does not offer a basis for sound policy making. The issue of drug prices is always controversial, but in today’s politically charged environment, it seems particularly important to carefully evaluate this post’s methods and conclusions—and to do so through the lens of the economic principles that drive companies to search for new medicines and set prices for them. Thought leaders and policy makers would be well advised to approach this issue with a clear-eyed view of facts and underlying principles that govern economic behavior. The Au...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Costs and Spending Drugs and Medical Innovation Featured Big Pharma drug innovation drug pricing Research and Development Source Type: blogs