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（英）

The

Hidden

Toll

of

Drug

Price

Controls:Fewer

New

Treatments

and

HigherMedical

Costs

for

the

WorldTRELYSALONG

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JULY2023Whennationsimplementpharmaceuticalpricecontrols,theyreducepharmaceuticalrevenues,whichthenreducesinvestmentsinfurtherR&D,limitingfuturegenerations’accessto

newnoveltreatmentsneededtofightdiseasessuchascancer,Alzheimer’s,heartdisease,

anddiabetes.KEY

TAKEAWAYS.Manycountriesarewillingtosacrificeeconomicwelfarebypayinghigherenergypricestosavetheplanetfromclimatechange.

Yet,whenitcomestocuringdiseases,theyfreerideontheinvestmentsofothers.....AfteradjustingforGDPpercapita,30

of32OECDcountriesforwhichdatawereavailablein2018hadlowerprescriptiondrugpricesthantheUnitedStates.Pharmaceuticalpricecontrolsin32OECDcountries,notincludingtheUnitedStates,reducedmanufacturersalesrevenuebyin201877percent,or$254billion.PharmaceuticalsalesrevenuecorrelatesstronglywithinvestmentsinR&D.Analyzingthatlinkfor478pharmaceuticalcompaniesin2021,thecorrelationcoefficientwas0.92.Liftingpharmaceuticalpriceregulationsin32OECDcountriesin2018wouldhaveincreasedpharmaceuticalsalesrevenuegloballyby$254.1billion,resultingin$56.4billionofadditionalR&Dexpendituresand25newdrugsannually...Ifjustfiverichnations—Japan,Germany,FranceUK,andItaly—paidtheirfairshare,humanitywouldbenefitfrom12newdrugseveryyear.Evenifthesecountriesreducedpricecontrolssuch

thatpricesroseto75percentofU.S.levels,pharmaceuticalcompaniescouldhaveincreasedR&Dexpendituresbyanadditional$23.9billion,resultinginatleast11newdrugsannually.CONTENTSKeyTakeaways1Introduction2PharmaceuticalPriceControls3PriceRegulations’ImpactonRevenue6ImpactofReducedrevenuesOnR&D8ImpactofAdditionalR&DInvestmentonNewDrugs10ImpactofNewDrugsonLifeExpectancyandSavings12CaseStudy:Europe’sPharmaceuticalRevenueandNewDrugs14PolicyRecommendations

20Conclusion

22Endnotes22INTRODUCTIONGovernment-imposedpriceregulationsonthepharmaceuticalsector

arethehealthequivalentofnotsigningtheParisAgreement.Whenitcomestoclimatechange,196partiessignedtheClimateAccords,agreeingtocontributetheirfairshare,includingaccepting

higherenergyprices,tofightingclimatechange.1

FrenchPresidentMacronwasemblematicwhenhestated,“Wewillnotsacrificeourcommitmentstotheclimate

…soallcountriesmustcontinuetoupholdalltheircommitments,”whichincludespendingmoremoney.2Yet,whenitcomestofinancialsolidarityforthehealthofpeoplearoundtheworld,FranceishappytopayalmosthalfasmuchfordrugsastheUnitedStatespays.Indeed,whenitcomestocontributingtothedevelopmentofnewdrugstotreatdiseases,manywealthycountriesimposeseverepricecontrols,freeridingoffafewnationssuchastheUnitedStates,andtherebyshirktheirresponsibilitytocontributetothehealthoffuturegenerations.

Accordingtomultiplestudies,whereas“USpolicydiscussionsofdrugpricingissuescommonlyincludetheirlikelyeffectsontheincentivesforinnovation,thatislesscommonindiscussionsofpricinginothercountries.Indeed,thereappeartobefewerconcernsexpressedby[restofworld]authoritiesaboutthefuturesupplyofinnovativepharmaceuticals.”3

IncontrasttotheirbeinggoodSamaritansonclimate,whenitcomestodruginnovation,countriesimposingpricecontrolsareselfishfreeriders.Whenwealthycountriesimposepriceregulationsondrugs,theyfailtobalancethewelfareofcurrentandfutureconsumers.Pricecontrolsreducecurrent

governments’andconsumers’healthexpenditures.Assuch,manywealthycountriesareunwillingtoabandonthembecausedoingsomeanstheirconsumer/taxpayerwelfarewouldfall.4

Inotherwords,thesecountrieschoosetoactintheirowninterestwhilesimultaneouslyforgettingtoconsiderthe

healthoffuturecitizens,boththoseintheirowncountryandglobally.Accordingtoonestudy,drugpricecontrolsreduce“R&D,theflowofnewproducts,firmvalue,andconsumerwelfare”fortheworld.5

Thismeanstoday’spricecontrolswillreducethenumberofnewdrugsavailabletofuturegenerationsinallINFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE2countries,includingtocurediseasessuchasheartdisease,cancer,stroke,andAlzheimer’s.Conversely,liftingpriceregulationsbenefitsallcountriesbecauseitwouldboostbiopharmaceuticalrevenue,leadingtoanincreaseinR&Dandthedevelopmentofnewdrugs.6Thehealthoffuturegenerationsisjustasimportantasthewell-beingoftheclimateinthefuture.Assuch,itisdeeplytroublingthatsomanygovernmentsofwealthynationsarewillingtodotheirpartforclimatechangebutnotforthedevelopmentofnewdrugsthatwilldeterminethehealthoffuturegenerations.ThisreportexaminesthepharmaceuticalpriceregulationsofOECDcountriesandtheirimpactonrevenueandthedevelopmentofnewdrugs.PHARMACEUTICAL

PRICE

CONTROLSAmajorityofOECDcountriesimplementsomeformofpharmaceuticalpricecontrolonmanufacturersonthebasisthatsuchmeasureswillreducedrugpricesforcitizens.DespiteFrankeletal.’sfindingsthat“noveldrugcandidatesgeneratemoreknowledgespilloversthanincrementalones,”many

countrieschoosenottofosterecosystemsthatsupportinvestmentinthemost-innovativedrugs.7UsingtheRANDCorporation’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,thisRANDCorporationstudyisoneofmanystudiesexaminingtheimpactofdrugpricecontrolsthathasfoundthatothercountriesareconsistentlypayinglessforinnovativemedicinescomparedwith

theUnitedStates.14Ofthe32OECDcountrieswithavailabledata,allhadlowerprescriptiondrugpricesthantheUnitedStates,whichhistoricallyhasnotimposedpricecontrolsonitspharmaceuticalsector.15EvenafteradjustingforGDPpercapita,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.INFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE3Table

1:

Assessment

of

OECD

countries’

GDP

per

capita-adjusted

prescription

drug

price

levels

using

RANDCorporation

study

(numbers

over

100

indicate

2018

prices

lower

than

the

United

States’)19Price

Index:Main

ResultsPrice

Index:Main

ResultsCountryCountryLuxembourgTurkey503.1346.8329.3270.6249.9237.4222.4200.3198.3195.6191.2188.5188.0187.3186.6185.3183.7LithuaniaCanadaFinlandCzech

RepublicSloveniaItaly182.7176.9175.9167.1163.3158.3155.7154.4152.8150.0140.9140.8131.7100.075.0NorwayIrelandAustraliaSwedenNetherlandsKoreaGreecePortugalSpainBelgiumSwitzerlandNew

ZealandAustriaJapanPolandLatviaUnited

KingdomGermanySlovakiaEstoniaHungaryUnited

StatesChileMexico54.9FrancePharmaceuticalpricecontrolsforce

drugpricesbelowtheirmarketvalue.Forexample,Brekke,Grasdal,andHolmasfoundthatNorway’sreferencepricingpolicyreducedpricesfor

brand-nameandgenericdrugs.20

Historically,theUnitedStatesandthefewcountrieswithoutstringentpricecontrolshaveprovidedastrongbaselinefordrugpricesinanenvironmentwithoutextensivepricecontrolmeasures.Asaresult,fiveacademicstudiesfindthatdrugpricesincomparisoncountrieswithpricecontrolmeasureswereatleast30percentlowerthanintheUnitedStates,suggestingthattheaveragedrugpricewas30percentbelowthosedrugs’freemarketvalue.21AccordingtoamorerecentRANDCorporationstudy,pharmaceuticalpricecontrolscontinuetoreduceprescriptiondrugpricesbyanaverageof156percentin32OECDcountriescomparedwiththeUnitedStates.22INFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE4Pharmaceuticalpricecontrolstendtolowerbrand-nameoriginatordrugpriceswhileraisingthepriceofgenericandbrand-namenonoriginatordrugs.EvenafteradjustingforGDPpercapita,all32OECDcountrieswithavailabledatahadlowerbrand-nameoriginatordrugpricesthantheUnitedStates,wheretherehavehistoricallybeennodrugpricecontrols—althoughtheBidenadministrationhasbegunaprocessofimplementingthemforMedicarePartDdrugsthroughprovisionsintheInflationReductionAct.23

(Seefigure1andfigure2.)Inotherwords,theaverageOECDcountrylikelyimposessomeformofforcedpricereductiononbrand-nameoriginatordrugs.In2018,theaveragepriceofbrand-nameoriginatordrugsforthese32countrieswas177.9percentlowerthantheUnitedStates’.24

Incontrast,26of32OECDcountrieshadhigherunbrandedgenericsandbrand-namenon-originatordrugpricesthantheUnitedStates.25

In2018,theaveragepriceofgenericsandbrand-namenon-originatordrugswas26.7percenthigherintheseothernationsthanintheUnitedStates.26

Inotherwords,pharmaceuticalpricecontrolsdisincentivize

manufacturersfromdevelopingnewmedicines

whileincentivizingtheproductionofgenerics(which,ofcourse,unwittinglyendangerstheavailabilityofmoregenericmedicinesinthefuture,asfewernewinnovativemedicinesarecreatedand

thus,inturn,can’tbecomefuturegenerics.)Figure

1:

Brand-name

originator

drug

prices

relative

to

U.S.

prices27LuxembourgTurkeyNorwayEstoniaIrelandKoreaNetherlandsAustraliaGreeceSwitzerlandJapanLatviaCzechRepublicItalyChilePortugalSpainPolandHungaryMexico0%10%20%30%40%50%60%70%80%90%INFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE5Figure

2:

Unbranded

generics

and

brand-name

nonoriginator

drug

prices

relative

to

U.S.

prices28LuxembourgNorwayTurkeyNetherlandsIrelandAustraliaPolandPortugalCzechRepublicItalySpainHungaryJapanEstoniaSwitzerlandGreeceLatviaKoreaChileMexico0%100%200%300%400%500%600%700%PRICE

REGULATIONS’

IMPACT

ON

REVENUEBydefinition,priceregulationsreduceglobalpharmaceuticalrevenues.Accordingtoa2004UnitedStatesDepartmentofCommercereport,drugpriceregulationsin11OECDcountriesreducedpharmaceuticalrevenuesby25to38percent.29

Amorerecentstudyof19OECDcountriesfindsthatfiveoutofsixbroadcategoriesofpharmaceuticalpricecontrolsreducedrevenues.30

Directpricecontrols,whereregulatorsdirectlysetdrugpricesthroughpricenegotiationsorothermeans,

hadthemostsignificantnegativeimpactonpharmaceuticalrevenues,reducingthemby18.3percent.31

Althoughnotassubstantial,economicevaluationandbudgetregulationsreducedacountry’spharmaceuticalrevenueby6.1percent.32

(Seefigure3.)Inotherwords,pricecontrolmeasuresreducepharmaceuticalrevenuesand,subsequently,therevenuethatdrivesR&D.INFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE6Figure

3:

Price

regulations’

impacts

on

revenue331GenericIncentive2orMoreGenericIncentivesEconomicEvaluationsExpenditureCapsProfitControlsDirectPriceControls-20%-15%-10%-5%0%Price

control

measures

reduce

pharmaceutical

revenues

and,

subsequently,

the

revenue

thatdrives

R&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

(Seefigure4.)Figure

4:

Pharmaceutical

manufacturer

sales

revenue

for

varying

levels

of

price

controls

for

32

OECD

countries38RevenueWithCurrentPriceLevelsRevenueWith75%ofU.S.PriceLevelsRevenueWith100%ofU.S.PriceLevels$0$200B$400B$600BINFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE7Countriesthatspendmoreonprescriptiondrugsandimposeextensiveforcedpricereductionontheirpharmaceuticalsectorreducedmanufacturers’revenuethemost.Thetop10

countriesthatnegativelyimpactpharmaceutical

manufacturers’revenuethemostreducerevenue

by$206.9billion.39

Atthetopofthelist,Japan’spricecontrolsreducedmanufacturers’revenueby$36.6billionandGermany’sreducedrevenueby$34.8billion.40

(Seefigure5.)Inotherwords,asaresultofcountries’independentandself-interestedbehavior,theexistenceofnewdrugsfallsshortoftheidealworldwidelevel.41Figure

5:

Manufacturer

revenue

losses

for

the

top

10

countries

with

the

most

extreme

price

reductions42SpainAustraliaKoreaCanadaTurkeyItalyUnitedKingdomFranceGermanyJapan$0$5B$10B$15B$20B$25B$30B$35B$40BIMPACT

OF

REDUCED

REVENUES

ON

R&DReducingpharmaceuticalcompanies’revenues

disincentivizesthemfrominvestinginR&D.Accordingtomultipleacademicstudies,pricesandprofitsarestronglylinkedtopharmaceuticalmanufacturers’investmentsinR&D.43

AbbottandVernonfoundthatpriceregulationsonthesector“significantlydiminishtheincentivetoundertakeearlystageR&Dinvestment.”44

TheyestimatedthatcuttingpricesintheUnitedStates,acountrywithfewpriceregulations,by40–50percentwouldleadtobetween30and60percentfewerR&Dprojects.45

AnotherstudyfindsthatR&Dinvestmentsincreasewithrealdrugpricesandestimatesanelasticityof0.6.46

Inotherwords,anincreaseof10percentinthegrowthof

realdrugpricesisassociatedwithanincreaseof6percentinthegrowthofR&Dintensity.47

Moreover,theCongressionalBudgetOffice(CBO)hasfoundthatpharmaceuticalcompaniesneedto“earna61.8percentrateofreturnonsuccessfulnewdrugs…toseea4.8percentafter-taxrateofreturnontheirinvestment”becausethedrugdevelopmentfailurerateissohigh.48Pharmaceuticalfirmsviewcurrentdrugpriceregulationsaslikelytocontinue,reducingtheirpotentialprofitswhiledisincentivizingtheirinvestmentinR&D.49

AccordingtoLakdawalla,sinceINFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE8cashflow“appearstobeoneofthemostempiricallyimportantdeterminantsofprivateR&Dspendingbyprivatepharmaceuticalfirms…[even]shorttermdeviationsinprofitability…predictR&Dexpenditures.”50

Asaresult,theOECD’s“PharmaceuticalPricingPoliciesinaGlobalMarket”reportfindsthat“thereisahighdegreeofcorrelationbetweensalesrevenuesandR&Dexpenditure,”whileHendersonandCockburnnotedthat“R&DexpendituresaredirectlyproportionaltotheamountofsalesrevenuesavailabletoundertakeR&Dinvestments.”51Pharmaceuticalsalesrevenuecontinuestobeassociatedwith

investmentsinR&D.AcorrelationbetweennetsalesandR&Dexpendituresfor478pharmaceuticalcompaniesin2021resultedinastrongcoefficientof0.92.52

(Seefigure6.)Inotherwords,pharmaceuticalcompanieswithhighernetsalestendtoinvestmoreinR&D,meaningrevenueisacriticalfactorinhowmuchapharmaceuticalcompanyinvests

inR&D.Figure

6:

Net

sales

and

R&D

expenditures

for

large

pharmaceutical

companies53$90B$80B$70B$60B$50B$40B$30B$20B$10B$0$0$2B$4B$6B$8B$10B$12B$14BR&DExpendituresRevenuelostfrompriceregulationsreducesthecashflowavailableforR&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

(Seefigure7.)INFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE9Figure

7:

Additional

R&D

expenditures

from

varying

levels

of

price

controls

for

32

OECD

countries5775%ofU.S.PriceLevels100%ofU.S.PriceLevels$0$10B$20B$30B$40B$50B$60BDefendersofpricecontrolsknowthat

theyareontheweakestgroundwhenitcomestotheargumentthatcontrolshurtR&Dand,inturn,drugdevelopment.Assuch,manymakespuriousclaimsthatthisrelationshipis,infact,nottrue.Forexample,areportbyCongresswomanKatiePorter(D-CA)assertsthatthepharmaceuticalsectorcouldstillbeprofitableevenifitlost$1trillioninsales,implyingthatpricecontrolssimplyreduceprofits.58

However,thestudycitedinthePorterreportusesreturnoninvestedcapitalasitsmeasureofprofitability,which“poorlyreflectstheprofitabilityofR&D-intensiveindustrysinceR&Disnotcapitalizedbutexpensed.”59Otherserroneouslyassertthatpricecontrolsjustlimitextraneousexpenditures.Yet,Frechet.al.foundthattherevenuesfromhigherprices“representaninvestmentinpharmaceuticalinnovationthatdeliverslargeworldwidesocialreturns…[and]areconsideredas‘quasi-rents’ratherthanmonopolyprofitsinthattheyincentivizeandguideessentialsunkcosts.”60IMPACT

OF

ADDITIONAL

R&D

INVESTMENT

ON

NEW

DRUGSPriceregulationsreducetheamountofR&Dfirmswouldperformintheirabsence.AccordingtoFilson,iftheUnitedStatesadoptedpharmaceuticalpriceregulations,firmswouldconductlessresearchand,ultimately,reducetheflowofnewdrugs.61

Infact,heestimatedthatpricecontrolsintheUnitedStateswouldreduce“theflowofnewdrugs…byalmost40percentinthelongrun.”62

AnotherstudyfindsthatapharmaceuticalpricecontrolregimeintheUnitedStateswouldhavereduced“overone-thirdofallactualnewdrug[or330to365newdrugs]launchesbroughttotheglobalmarket”from1980to2001.63

Ontheotherhand,otherstudiesfoundthatgovernmentpoliciesthatpromotedrugprofitabilityincreased“newclinicaltrials,newmolecularentities,ornewdrugs.”64Lowerrevenuefromthepriceregulationsplaysaroleinreducingthenumberofnewdrugsdeveloped.CivonandMalonyfoundthatcurrentdrugpricesareanimportantdeterminantofR&Dspending,andGiaccotto,Santerre,andVernonfoundthatpriceschargedforcurrentdrugsareanimportantdeterminantofthenumberofprospectivenewdrugsintheR&Dpipeline.65Moreover,AcemogluandLinnnotedthat“a1percentincreaseinthepotentialmarketsizeforadrugcategoryleadstoa4to6percentincreasein

thenumberofnewdrugsinthatcategory.”66Similarly,astudybyPrecisionEconomicsfindsthataconservative8percentincreaseinmarketsizefromliftingpricecontrolswouldleadtoa“9percentincreaseintheworld’sinnovationleadingto8newdrugsperyearby2030.”67

Moreover,theCBOfoundthatabillthatgivestheINFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE10secretaryofHealthandHumanServicesthepowertonegotiatedrugprices“wouldreducedrugcompanies’expectationsaboutfuturerevenues,”leadingto8fewerdrugsfrom2020to2029and“about30fewerdrugsinthesubsequent10years.”68

Inotherwords,priceregulationsandlowerrevenuesreducetheincentiveforpharmaceuticalcompaniestodevelopnewdrugs,hurtingfuturegenerations’accesstonoveltreatmentswhile

alsoreducingthecurrentgeneration’slongevity.69Conversely,liftingpriceregulationswouldincreasethenumberofnewdrugsdeveloped.Accordingto“Deloitte’s13thAnnualPharmaceuticalInnovationReport,”estimatessuggestthattheaveragecostofdevelopinganewdrugwas

$2.3billionin2022.70

Ourestimatesindicatethatliftingpharmaceuticalpriceregulationsin32OECDcountriesin2018wouldhaveresultedinanincreaseof$254.1billioninglobalpharmaceuticalsalesrevenue

and$56.4billioninadditionalR&Dexpenditures.71

Asaresult,theadditionalR&Dexpenditurefromliftingpricecontrolssothatpricesare100percentofU.S.pricelevelsforasingleyearcouldresultinanadditional25newdrugs.72

Evenliftingpricecontrolssothatpricesare75percentofU.S.pricelevelscouldresultinanadditional10newdrugs.73

Moreover,sincetheCenterforDrugEvaluationandResearchidentifiedthat32percentofnoveldrugsapprovedwerefirst-in-classdrugs,weestimatethateightnewfirst-in-classdrugswerelosttopricecontrolsinthese32OECDcountries.74

IftheCenterforDrugEvaluationandResearch’s2019estimatesforfirst-in-classdrugswereused,weestimatethat

11newfirst-in-classdrugswouldhavebeenlosttopricecontrols.75

(Seefigure8.)Inotherwords,pharmaceuticalpricecontrolsreducethenumberofnewdrugsdevelopedeachyear;hence,evenliftingsomepricecontrolscouldincreasethenumberofnewdrugsdeveloped.Figure

8:

Additional

new

drugs

produced

when

prices

are

raised

to

75

percent

or

100

percent

of

U.S.

levels76302520AllOthersFirst-in-Class15105075%ofU.S.PriceLevels100%ofU.S.PriceLevelsINFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE11Ofthe25newdrugslosttopricecontrols,20camefromthesetop10countries.77

IfJapanpaiditsfairshareinsteadoffree-ridingontheUnitedStates,anestimated3.5additionalnewdrugswouldbedevelopedeveryyearglobally.78

Germany’sandFrance’spricecontrolsledtotheloss3.4and2.5newdrugs,respectively.79

Evensmallercountries,suchasSpainandAustralia,playaroleinhinderingnewdrugdevelopment,withtheirpricecontrolsreducingnewdrugsatapaceof1.3and1.2peryear,respectively.80

(Seefigure9.)Figure

9:

Number

of

drugs

lost

in

the

top

10

countries

with

the

most

extreme

price

reductions81SpainAustraliaKoreaCanadaTurkeyItalyUnitedKingdomFranceGermanyJapan-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.50IMPACT

OF

NEW

DRUGS

ON

LIFE

EXPECTANCY

AND

SAVINGSNewdrugsreducemortalityandincreaselifeexpectancy.Cutleretal.foundthatpharmaceuticalsaccountedfor35percentofthe3.3-yearincreaseinlifeexpectancyAmericansexperienced

from1990to2015(from75.4to78.7yearsofage).82

AccordingtoLichtenberg,thesourceofa6.9-year

increaseinlifeexpectancybetween1960and1997forAmericanswaspartiallyattributedtothediscoveryofnewpharmaceuticals.83

HefoundthattheapprovalofonenewdrugintheUnitedStatesresultedina0.093-year,orjustoveramonth,increaseinlifeexpectancy,

totalinga“life-yearsgainedperyearfromapermanentunitincreaseinnewdrugapprovals…[to]about372thousand.”84

AnotherstudybyBuxbaumfindsthat“pharmaceuticalsweresecondonlytoPublicHealthMeasuresinimportance,andcontributed35percentoftheoverallgain.”85However,newpharmaceuticalsarenotjustbeneficialtoAmericans’lifeexpectancy.AstudybyLichtenbergof27countriesfindsthatthelaunch

ofanewdrugintheprior11yearsisestimatedtoincreaselifeexpectancyby3percentforthoseyoungerthan85yearsold,andanewdruglaunchedmorethan12yearspriorincreaseslifeexpectancyby5.5percent.86

Whiletherearecertainlywell-knownmethodologicalchallengeswithcalculatingquality-adjustedlifeINFORMATIONTECHNOLOGY&INNOVATIONFOUNDATION

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JULY2023PAGE12years,there’snodoubttheestimatesarequitesignificant.Forinstance,TopelandMurphyestimatedthat“theaveragevalueofalifeyearisapproximately$150,000.”87

Asaresult,theincreaseinlifeexpectancycouldbevaluedatbillionsforacountry.Moreover,newdrugsreducehealthexpenditures.AccordingtoLichtenberg,thecostofmedicalcaretoincreaselifeexpectancybyayearis$11,000intheUnitedState