ITIF-药品价格控制的隐性代价：全球新疗法减少医疗成本上升 The Hidden Toll of Drug Price Controls Fewer New Treatments and Higher Medical Costs for the World 2023

TheHiddenTollofDrugPriceControls:FewerNewTreatmentsandHigherMedicalCostsfortheWorld

TRELYSALONG|JULY2023

Whennationsimplementpharmaceuticalpricecontrols,theyreducepharmaceuticalrevenues,whichthenreducesinvestmentsinfurtherR&D,limitingfuturegenerations’accesstonewnoveltreatmentsneededtofightdiseasessuchascancer,Alzheimer’s,heartdisease,anddiabetes.

KEYTAKEAWAYS

1Manycountriesarewillingtosacrificeeconomicwelfarebypayinghigherenergypricestosavetheplanetfromclimatechange.Yet,whenitcomestocuringdiseases,theyfreerideontheinvestmentsofothers.

1AfteradjustingforGDPpercapita,30of32OECDcountriesforwhichdatawereavailablein2018hadlowerprescriptiondrugpricesthantheUnitedStates.

1Pharmaceuticalpricecontrolsin32OECDcountries,notincludingtheUnitedStates,reducedmanufacturersalesrevenuebyin201877percent,or$254billion.

1PharmaceuticalsalesrevenuecorrelatesstronglywithinvestmentsinR&D.Analyzingthatlinkfor478pharmaceuticalcompaniesin2021,thecorrelationcoefficientwas0.92.

1Liftingpharmaceuticalpriceregulationsin32OECDcountriesin2018wouldhaveincreasedpharmaceuticalsalesrevenuegloballyby$254.1billion,resultingin$56.4billionofadditionalR&Dexpendituresand25newdrugsannually.

1Ifjustfiverichnations—Japan,Germany,FranceUK,andItaly—paidtheirfairshare,humanitywouldbenefitfrom12newdrugseveryyear.

1Evenifthesecountriesreducedpricecontrolssuchthatpricesroseto75percentofU.S.levels,pharmaceuticalcompaniescouldhaveincreasedR&Dexpendituresbyanadditional$23.9billion,resultinginatleast11newdrugsannually.

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CONTENTS

KeyTakeaways 1

Introduction 2

PharmaceuticalPriceControls 3

PriceRegulations’ImpactonRevenue 6

ImpactofReducedrevenuesOnR&D 8

ImpactofAdditionalR&DInvestmentonNewDrugs 10

ImpactofNewDrugsonLifeExpectancyandSavings 12

CaseStudy:Europe’sPharmaceuticalRevenueandNewDrugs 14

PolicyRecommendations 20

Conclusion 22

Endnotes 22

INTRODUCTION

Government-imposedpriceregulationsonthepharmaceuticalsectorarethehealthequivalentofnotsigningtheParisAgreement.Whenitcomestoclimatechange,196partiessignedtheClimateAccords,agreeingtocontributetheirfairshare,includingacceptinghigherenergyprices,tofightingclimatechange.

1

FrenchPresidentMacronwasemblematicwhenhestated,“Wewillnotsacrificeourcommitmentstotheclimate…soallcountriesmustcontinuetoupholdalltheircommitments,”whichincludespendingmoremoney.

2

Yet,whenitcomestofinancialsolidarityforthehealthofpeoplearoundtheworld,FranceishappytopayalmosthalfasmuchfordrugsastheUnitedStatespays.Indeed,whenitcomestocontributingtothedevelopmentofnewdrugstotreatdiseases,manywealthycountriesimposeseverepricecontrols,freeridingoffafewnationssuchastheUnitedStates,andtherebyshirktheirresponsibilitytocontributetothehealthoffuturegenerations.Accordingtomultiplestudies,whereas“USpolicydiscussionsofdrugpricingissuescommonlyincludetheirlikelyeffectsontheincentivesforinnovation,thatislesscommonindiscussionsofpricinginothercountries.Indeed,thereappeartobefewerconcernsexpressedby[restofworld]authoritiesaboutthefuturesupplyofinnovativepharmaceuticals.”

3

IncontrasttotheirbeinggoodSamaritansonclimate,whenitcomestodruginnovation,countriesimposingpricecontrolsareselfishfreeriders.

Whenwealthycountriesimposepriceregulationsondrugs,theyfailtobalancethewelfareofcurrentandfutureconsumers.Pricecontrolsreducecurrentgovernments’andconsumers’healthexpenditures.Assuch,manywealthycountriesareunwillingtoabandonthembecausedoingsomeanstheirconsumer/taxpayerwelfarewouldfall.

4

Inotherwords,thesecountrieschoosetoact intheirowninterestwhilesimultaneouslyforgettingtoconsiderthehealthoffuturecitizens,boththoseintheirowncountryandglobally.Accordingtoonestudy,drugpricecontrolsreduce“R&D,theflowofnewproducts,firmvalue,andconsumerwelfare”fortheworld.

5

Thismeans today’spricecontrolswillreducethenumberofnewdrugsavailabletofuturegenerationsinall

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countries,includingtocurediseasessuchasheartdisease,cancer,stroke,andAlzheimer’s.Conversely,liftingpriceregulationsbenefitsallcountriesbecauseitwouldboostbiopharmaceuticalrevenue,leadingtoanincreaseinR&Dandthedevelopmentofnewdrugs.

6

Thehealthoffuturegenerationsisjustasimportantasthewell-beingoftheclimateinthefuture.Assuch,itisdeeplytroublingthatsomanygovernmentsofwealthynationsarewillingtodotheirpartforclimatechangebutnotforthedevelopmentofnewdrugsthatwilldeterminethehealthoffuturegenerations.

ThisreportexaminesthepharmaceuticalpriceregulationsofOECDcountriesandtheirimpactonrevenueandthedevelopmentofnewdrugs.

PHARMACEUTICALPRICECONTROLS

AmajorityofOECDcountriesimplementsomeformofpharmaceuticalpricecontrolonmanufacturersonthebasisthatsuchmeasureswillreducedrugpricesforcitizens.DespiteFrankeletal.’sfindingsthat“noveldrugcandidatesgeneratemoreknowledgespilloversthanincrementalones,”manycountrieschoosenottofosterecosystemsthatsupportinvestmentinthemost-innovativedrugs.

7

UsingtheRANDCorporation’sInternationalPrescriptionDrugPriceComparison,theInformationTechnologyandInnovationFoundation(ITIF)examinedprescriptiondrugpricedifferencesbetweentheUnitedStatesand32OECDcountries,usingdatafromTableC.1.“CalculatedU.S.VersusOther-CountryPriceIndices”fromthereport.

8

Morespecifically,ITIFusedthe“MainResults”fromtheindicesinourestimatesofmanufacturerrevenuelosses,R&Dexpenditurelosses,andadditionaldrugslosttopricecontrols.

9

The“MainResults”figuresareprescriptiondrugpricecomparisonsbetweentheUnitedStatesandanothercountry,aftercontrollingforthevolumeandmixofdrugsexamined.

10

Moreover,thesepriceindicescannotbecomparedamongoneanotherbecauseofthe“differentnumberofpresentationsanalyzedforeachpairwisecomparisonoftheUnitedStateswithanothercountry.”

11

ItshouldbenotedthatthesepriceindicesarenotadjustedforpercapitaGDPpurchasingpowerparity(PPP).

12

Asaresult,ourestimatesadjustforthisdifference.TheunderlyingdatausedfortheTableC.1was2018quarterlymanufacturersalesforspecificdrugsextractedfromIQVIA.

13

Asaresult,thedataandfiguresinthisstudyprecededtheUnitedStates’introductionofpricecontrolsthroughthe2023InflationReductionAct.Lastly,thisRANDCorporationstudyisoneofmanystudiesexaminingtheimpactofdrugpricecontrolsthathasfoundthatothercountriesareconsistentlypayinglessforinnovativemedicinescomparedwiththeUnitedStates.

14

Ofthe32OECDcountrieswithavailabledata,allhadlowerprescriptiondrugpricesthantheUnitedStates,whichhistoricallyhasnotimposedpricecontrolsonitspharmaceuticalsector.

15

EvenafteradjustingforGDPpercapita,30countriesstillhadlowerprescriptiondrugpricesthantheUnitedStatesin2018.

16

(Seetable1.)Luxembourg(403.1percentlowerthantheUnitedStates),Turkey(246.8percentlower),andNorway(229.3percentlower)hadthelowestprescriptiondrugprices.

17

Incontrast,Chile(25percenthigherthantheUnitedStates)andMexico(45.1percenthigher)hadthehighestprescriptiondrugpricesin2018onaGDPpercapita-adjustedbasis(mainlybecausebothnationshaverelativelylowerincomes).

18

Inotherwords,manyOECDcountriesimplementsomeformofdrugpricecontrols,leadingtolowerdrugpricescomparedwithanenvironmentwithoutpricecontrols.

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Table1:AssessmentofOECDcountries’GDPpercapita-adjustedprescriptiondrugpricelevelsusingRANDCorporationstudy(numbersover100indicate2018priceslowerthantheUnitedStates’)

19

Country

PriceIndex:MainResults

Country

PriceIndex:

MainResults

Luxembourg

503.1

Lithuania

182.7

Turkey

346.8

Canada

176.9

Norway

329.3

Finland

175.9

Ireland

270.6

CzechRepublic

167.1

Australia

249.9

Slovenia

163.3

Sweden

237.4

Italy

158.3

Netherlands

222.4

Greece

155.7

Korea

200.3

Portugal

154.4

Belgium

198.3

Spain

152.8

Switzerland

195.6

Japan

150.0

NewZealand

191.2

Poland

140.9

Austria

188.5

Latvia

140.8

UnitedKingdom

188.0

Hungary

131.7

Germany

187.3

UnitedStates

100.0

Slovakia

186.6

Chile

75.0

Estonia

185.3

Mexico

54.9

France

183.7

Pharmaceuticalpricecontrolsforcedrugpricesbelowtheirmarketvalue.Forexample,Brekke,Grasdal,andHolmasfoundthatNorway’sreferencepricingpolicyreducedpricesforbrand-nameandgenericdrugs.

20

Historically,theUnitedStatesandthefewcountrieswithoutstringentpricecontrolshaveprovidedastrongbaselinefordrugpricesinanenvironmentwithoutextensivepricecontrolmeasures.Asaresult,fiveacademicstudiesfindthatdrugpricesincomparisoncountrieswithpricecontrolmeasureswereatleast30percentlowerthanintheUnitedStates,suggestingthattheaveragedrugpricewas30percentbelowthosedrugs’freemarketvalue.

21

AccordingtoamorerecentRANDCorporationstudy,pharmaceuticalpricecontrolscontinuetoreduceprescriptiondrugpricesbyanaverageof156percentin32OECDcountriescomparedwiththeUnitedStates.

22

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Pharmaceuticalpricecontrolstendtolowerbrand-nameoriginatordrugpriceswhileraisingthepriceofgenericandbrand-namenonoriginatordrugs.EvenafteradjustingforGDPpercapita,all32OECDcountrieswithavailabledatahadlowerbrand-nameoriginatordrugpricesthantheUnitedStates,wheretherehavehistoricallybeennodrugpricecontrols—althoughtheBidenadministrationhasbegunaprocessofimplementingthemforMedicarePartDdrugsthroughprovisionsintheInflationReductionAct.

23

(See

figure1

and

figure2.

)Inotherwords,theaverageOECDcountrylikelyimposessomeformofforcedpricereductiononbrand-nameoriginatordrugs.In2018,theaveragepriceofbrand-nameoriginatordrugsforthese32countrieswas177.9percentlowerthantheUnitedStates’.

24

Incontrast,26of32OECDcountrieshadhigherunbrandedgenericsandbrand-namenon-originatordrugpricesthantheUnitedStates.

25

In2018,theaveragepriceofgenericsandbrand-namenon-originatordrugswas26.7percenthigherintheseothernationsthanintheUnitedStates.

26

Inotherwords,pharmaceuticalpricecontrolsdisincentivizemanufacturersfromdevelopingnewmedicineswhileincentivizingtheproductionofgenerics(which,ofcourse,unwittinglyendangerstheavailabilityofmoregenericmedicinesinthefuture,asfewernewinnovativemedicinesarecreatedandthus,inturn,can’tbecomefuturegenerics.)

Figure1:Brand-nameoriginatordrugpricesrelativetoU.S.prices

27

Luxembourg Turkey Norway Estonia Ireland KoreaNetherlands Australia GreeceSwitzerland JapanLatvia

CzechRepublic Italy ChilePortugal SpainPolandHungaryMexico

0%10%20%30%40%50%60%70%80%90%

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Figure2:Unbrandedgenericsandbrand-namenonoriginatordrugpricesrelativetoU.S.prices

28

Luxembourg

Norway

Turkey

Netherlands

Ireland

Australia

Poland

Portugal

CzechRepublic

Italy

Spain

Hungary

Japan

Estonia

Switzerland

Greece

Latvia

Korea

Chile

Mexico

0%100%200%300%400%500%600%700%

PRICEREGULATIONS’IMPACTONREVENUE

Bydefinition,priceregulationsreduceglobalpharmaceuticalrevenues.Accordingtoa2004UnitedStatesDepartmentofCommercereport,drugpriceregulationsin11OECDcountriesreducedpharmaceuticalrevenuesby25to38percent.

29

Amorerecentstudyof19OECDcountriesfindsthatfiveoutofsixbroadcategoriesofpharmaceuticalpricecontrolsreducedrevenues.

30

Directpricecontrols,whereregulatorsdirectlysetdrugpricesthroughpricenegotiationsorothermeans,hadthemostsignificantnegativeimpactonpharmaceuticalrevenues,reducingthemby18.3percent.

31

Althoughnotassubstantial,economicevaluationandbudgetregulationsreducedacountry’spharmaceuticalrevenueby6.1percent.

32

(See

figure

3.

)Inotherwords,pricecontrolmeasuresreducepharmaceuticalrevenuesand,subsequently,therevenuethatdrivesR&D.

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1GenericIncentive

2orMoreGenericIncentives

EconomicEvaluations

ExpenditureCaps

ProfitControls

DirectPriceControls

RevenueWithCurrentPriceLevels

RevenueWith75%ofU.S.PriceLevels

RevenueWith100%ofU.S.PriceLevels

Figure3:Priceregulations’impactsonrevenue

33

-20%

-15%

-5%

0%

-10%

Pricecontrolmeasuresreducepharmaceuticalrevenuesand,subsequently,therevenuethatdrivesR&D.

In2018,pharmaceuticalpricecontrolsin32OECDcountries(notincludingtheUnitedStates)reducedmanufacturersalesrevenueby77percent,or$254billion.

34

Thesecountrieshadacombinedpharmaceuticalmanufacturersalesrevenueof$331.3millionatcurrentpricecontrollevels.

35

IftheseOECDcountriesreducedpricecontrolsandraisedtheirpricesto75percentofU.S.levels,revenuewouldincreaseby$108billion.

36

Withoutpricecontrols—ifcountriesraisedtheirpricesto100percentofU.S.levels—thesalesrevenuewouldbe$585.4billion.

37

(See

figure4.

)

Figure4:Pharmaceuticalmanufacturersalesrevenueforvaryinglevelsofpricecontrolsfor32OECDcountries

38

$0$200B$400B$600B

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Countriesthatspendmoreonprescriptiondrugsandimposeextensiveforcedpricereductionontheirpharmaceuticalsectorreducedmanufacturers’revenuethemost.Thetop10countriesthatnegativelyimpactpharmaceuticalmanufacturers’revenuethemostreducerevenueby$206.9billion.

39

Atthetopofthelist,Japan’spricecontrolsreducedmanufacturers’revenueby$36.6billionandGermany’sreducedrevenueby$34.8billion.

40

(See

figure5.

)Inotherwords,asaresultofcountries’independentandself-interestedbehavior,theexistenceofnewdrugsfallsshortoftheidealworldwidelevel.

41

Figure5:Manufacturerrevenuelossesforthetop10countrieswiththemostextremepricereductions

42

SpainAustralia KoreaCanadaTurkey

Italy

UnitedKingdom FranceGermanyJapan

$0$5B$10B$15B$20B$25B$30B$35B$40B

IMPACTOFREDUCEDREVENUESONR&D

Reducingpharmaceuticalcompanies’revenuesdisincentivizesthemfrominvestinginR&D.Accordingtomultipleacademicstudies,pricesandprofitsarestronglylinkedtopharmaceuticalmanufacturers’investmentsinR&D.

43

AbbottandVernonfoundthatpriceregulationsonthesector“significantlydiminishtheincentivetoundertakeearlystageR&Dinvestment.”

44

TheyestimatedthatcuttingpricesintheUnitedStates,acountrywithfewpriceregulations,by40–50percentwouldleadtobetween30and60percentfewerR&Dprojects.

45

AnotherstudyfindsthatR&Dinvestmentsincreasewithrealdrugpricesandestimatesanelasticityof0.6.

46

Inotherwords,anincreaseof10percentinthegrowthofrealdrugpricesisassociatedwithanincreaseof6percentinthegrowthofR&Dintensity.

47

Moreover,theCongressionalBudgetOffice(CBO)hasfoundthatpharmaceuticalcompaniesneedto“earna61.8percentrateofreturnonsuccessfulnewdrugs…toseea4.8percentafter-taxrateofreturnontheirinvestment”becausethedrugdevelopmentfailurerateissohigh.

48

Pharmaceuticalfirmsviewcurrentdrugpriceregulationsaslikelytocontinue,reducingtheirpotentialprofitswhiledisincentivizingtheirinvestmentinR&D.

49

AccordingtoLakdawalla,since

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NetSales

cashflow“appearstobeoneofthemostempiricallyimportantdeterminantsofprivateR&Dspendingbyprivatepharmaceuticalfirms…[even]shorttermdeviationsinprofitability…predictR&Dexpenditures.”

50

Asaresult,theOECD’s“PharmaceuticalPricingPoliciesinaGlobalMarket”reportfindsthat“thereisahighdegreeofcorrelationbetweensalesrevenuesandR&Dexpenditure,”whileHendersonandCockburnnotedthat“R&DexpendituresaredirectlyproportionaltotheamountofsalesrevenuesavailabletoundertakeR&Dinvestments.”

51

PharmaceuticalsalesrevenuecontinuestobeassociatedwithinvestmentsinR&D.AcorrelationbetweennetsalesandR&Dexpendituresfor478pharmaceuticalcompaniesin2021resultedinastrongcoefficientof0.92.

52

(See

figure6.

)Inotherwords,pharmaceuticalcompanieswithhighernetsalestendtoinvestmoreinR&D,meaningrevenueisacriticalfactorinhowmuchapharmaceuticalcompanyinvestsinR&D.

Figure6:NetsalesandR&Dexpendituresforlargepharmaceuticalcompanies

53

$90B$80B$70B$60B

$50B$40B$30B$20B$10B$0

$0$2B$4B$6B$8B$10B$12B$14B

R&DExpenditures

RevenuelostfrompriceregulationsreducesthecashflowavailableforR&Dexpenditures.AccordingtothePharmaceuticalResearchandManufacturersofAmerica(PhRMA),thetoppharmaceuticalcompaniesintheUnitedStatesinvested22.2percentoftheirdomesticsalesondomesticR&Din2018.

54

Inotherwords,thissuggeststhatpharmaceuticalcompaniesgenerallyinvest22.2percentinR&Dinanenvironmentwithoutpricecontrols.Asaresult,pharmaceuticalcompanieslost$56.4billion,or22.2percentofthe$254.1billioninrevenuelosses,inadditionalR&Dexpenditurestopriceregulationsin32OECDcountries.

55

Moreover,evenifthesecountriesreducedpricecontrolssothatpricesroseto75percentofU.S.levels,pharmaceuticalcompaniescouldhaveincreasedR&Dexpendituresbyanadditional$23.9billion.

56

(See

figure7.

)

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Figure7:AdditionalR&Dexpendituresfromvaryinglevelsofpricecontrolsfor32OECDcountries

57

75%ofU.S.PriceLevels

100%ofU.S.PriceLevels

$0$10B$20B$30B$40B$50B$60B

DefendersofpricecontrolsknowthattheyareontheweakestgroundwhenitcomestotheargumentthatcontrolshurtR&Dand,inturn,drugdevelopment.Assuch,manymakespuriousclaimsthatthisrelationshipis,infact,nottrue.Forexample,areportbyCongresswomanKatiePorter(D-CA)assertsthatthepharmaceuticalsectorcouldstillbeprofitableevenifitlost$1trillioninsales,implyingthatpricecontrolssimplyreduceprofits.

58

However,thestudycitedinthePorterreportusesreturnoninvestedcapitalasitsmeasureofprofitability,which“poorlyreflectstheprofitabilityofR&D-intensiveindustrysinceR&Disnotcapitalizedbutexpensed.”

59

Otherserroneouslyassertthatpricecontrolsjustlimitextraneousexpenditures.Yet,Frechet.al.foundthattherevenuesfromhigherprices“representaninvestmentinpharmaceuticalinnovationthatdeliverslargeworldwidesocialreturns…[and]areconsideredas‘quasi-rents’ratherthanmonopolyprofitsinthattheyincentivizeandguideessentialsunkcosts.”

60

IMPACTOFADDITIONALR&DINVESTMENTONNEWDRUGS

PriceregulationsreducetheamountofR&Dfirmswouldperformintheirabsence.AccordingtoFilson,iftheUnitedStatesadoptedpharmaceuticalpriceregulations,firmswouldconductlessresearchand,ultimately,reducetheflowofnewdrugs.

61

Infact,heestimatedthatpricecontrolsintheUnitedStateswouldreduce“theflowofnewdrugs…byalmost40percentinthelongrun.”

62

AnotherstudyfindsthatapharmaceuticalpricecontrolregimeintheUnitedStateswouldhavereduced“overone-thirdofallactualnewdrug[or330to365newdrugs]launchesbroughttotheglobalmarket”from1980to2001.

63

Ontheotherhand,otherstudiesfoundthatgovernmentpoliciesthatpromotedrugprofitabilityincreased“newclinicaltrials,newmolecularentities,ornewdrugs.”

64

Lowerrevenuefromthepriceregulationsplaysaroleinreducingthenumberofnewdrugsdeveloped.CivonandMalonyfoundthatcurrentdrugpricesareanimportantdeterminantofR&Dspending,andGiaccotto,Santerre,andVernonfoundthatpriceschargedforcurrentdrugsareanimportantdeterminantofthenumberofprospectivenewdrugsintheR&Dpipeline.

65

Moreover,AcemogluandLinnnotedthat“a1percentincreaseinthepotentialmarketsizeforadrugcategoryleadstoa4to6percentincreaseinthenumberofnewdrugsinthatcategory.”

66

Similarly,astudybyPrecisionEconomicsfindsthataconservative8percentincreaseinmarketsizefromliftingpricecontrolswouldleadtoa“9percentincreaseintheworld’sinnovationleadingto8newdrugsperyearby2030.”

67

Moreover,theCBOfoundthatabillthatgivesthe

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secretaryofHealthandHumanServicesthepowertonegotiatedrugprices“wouldreducedrugcompanies’expectationsaboutfuturerevenues,”leadingto8fewerdrugsfrom2020to2029and“about30fewerdrugsinthesubsequent10years.”

68

Inotherwords,priceregulationsandlowerrevenuesreducetheincentiveforpharmaceuticalcompaniestodevelopnewdrugs,hurtingfuturegenerations’accesstonoveltreatmentswhilealsoreducingthecurrentgeneration’slongevity.

69

Conversely,liftingpriceregulationswouldincreasethenumberofnewdrugsdeveloped.Accordingto“Deloitte’s13thAnnualPharmaceuticalInnovationReport,”estimatessuggestthattheaveragecostofdevelopinganewdrugwas$2.3billionin2022.

70

Ourestimatesindicatethatliftingpharmaceuticalpriceregulationsin32OECDcountriesin2018wouldhaveresultedinanincreaseof$254.1billioninglobalpharmaceuticalsalesrevenueand$56.4billioninadditionalR&Dexpenditures.

71

Asaresult,theadditionalR&Dexpenditurefromliftingpricecontrolssothatpricesare100percentofU.S.pricelevelsforasingleyea