In late 2018, more than 150 economists sent a letter to President Donald Trump and his Department of Health and Human Services warning that an “international pricing index” (IPI) for Medicare drug prices would amount to implementing foreign price controls on the American market. This international pricing index would put a damper on innovation while making it harder for American patients to get the health care they need. President Trump recently released a “Most Favored Nation” executive order that amounts to an international pricing index plan in new packaging.
The National Taxpayers Union organized the 2018 letter, and it is as relevant to the President’s current Executive Order as it was to the Administration’s first attempt to link drug prices here to other countries’ policies. This update of the IPI plan will hurt American access to affordable, effective, and innovative treatments. This is an even bigger threat during the ongoing coronavirus pandemic, when quick and safe access to innovative treatments is more critical than ever.
In general, setting price controls at below-market rates leads to shortages, squeezes the cost bubble toward some other portion of the economy, and imposes a deadweight cost on society. In this case, price controls can lead to a reduction in patient access to certain drugs, less investment in the research and development of new drugs, and cost-shifting that raises the prices of other therapeutics.
The words of caution and concern expressed by economists in 2018 are more true today than ever before. Additional signatories have signed on to the letter since its initial release, but as NTU Executive Vice President Brandon Arnold noted,
“Expert economists have often warned about the perils of price controls. Whether packaged as IPI, MFN, or some other term, price controls imposed by our government that rely on other nations’ regimes will have the same result: worse health and economic outcomes for American patients and taxpayers. As we work to recover from the COVID crisis, these price control regimes can be particularly destructive.”
To speak to the organizers of this letter, please contact Kevin Glass, NTU Vice President of Communications, at 703-299-8670 or at email@example.com.