Patients are raving about a series of newer, more effective medicines.
There's just one catch.
These drugs are really expensive. Xeljanz, a new rheumatoid arthritis drug, costs $25,000 a year. Sovaldi, a breakthrough hepatitis C cure, costs $84,000.
To contain rising healthcare spending, some policymakers want the government to impose price controls on medicines. They believe price caps will help patients by making medications more affordable.
In reality, price controls will bring drug development to a standstill, depriving patients of future medications that could improve or even save their lives. To ensure patients have access to groundbreaking medical advances, lawmakers must avoid short-sighted price controls.
The average medicine requires an investment of $2.6 billion and over a decade of research. Just 12 percent of medicines that enter experimental human testing receive FDA approval. That means revenue from successful drugs must also cover costs of those that never make it to market.
If price caps prevent companies from recovering steep costs associated with drug development, firms will stop investing in risky research projects that lead to breakthrough treatments and cures.
According to a National Bureau of Economic Research study, price controls that cut drug prices by 40 or 50 percent would decrease early stage development projects by up to 60 percent.
That'd be devastating for patients with chronic diseases like Alzheimer's. By 2050, Alzheimer's will afflict 14 million Americans, and annual treatment costs will reach $1.1 trillion. A new treatment that delays the disease by just five years annually would save the healthcare system $367 billion.
Such a treatment likely will come from private-sector drug companies, which fund almost 80 percent of experimental Alzheimer's drug testing. With a 99 percent failure rate, Alzheimer's drug trials are a risky investment. Drug companies won't pour billions into highly uncertain research if they know price caps will make it impossible to recoup costs.
The lack of price controls has already yielded better treatments for 50 million Americans who live with autoimmune diseases, which cause the body's immune system to attack healthy cells.
In 2011, drug companies introduced Benlysta, the first treatment targeted specifically at lupus in over a half-century. In 2012, the FDA approved Xeljanz, designed for rheumatoid arthritis patients who hadn't responded to earlier medications.
These life changing treatment advances wouldn't have been possible under a price control regime.
Policymakers can make drugs more affordable for patients without jeopardizing research. Prohibiting insurance companies from charging high co-pays and co-insurance would lower patients' out-of-pocket expenses. Stronger trade agreements would prevent other companies from freeloading off American research spending.
Affordability is a real concern for today's patients. But price controls aren't the answer.
Virginia Ladd is the president of the American Autoimmune Related Diseases Association.
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