Michael Lodge, The Business Advisor

The Misguided Notion of Government-Set Prices for Prescription Drugs

Apr 24, 2022

Prescribing price-fixes: A centerpiece of last year's Build Back Better Act was drug pricing legislation, which could be included in the next version of the bill, now rebranded as an inflation-control, climate, and deficit-reduction bill.

  • President Biden has touted the drug pricing provisions, which would allow the government to set prices for a certain number of drugs under Medicare Part D among other changes, as a way to address current inflation.

Drugs aren't driving inflation: While headline inflation is at an alarming rate, prescription drugs are experiencing some of the lowest levels of inflation across various goods and services, according to Bureau of Labor Statistics data.

Give us the European experience? Up until the 1990s, biopharmaceutical R&D was consistently higher in Europe than in United States. Then drug pricing policies caused R&D to flee.

Keeping up with competitors: Government-set pricing of prescription drugs would give rise to new problems of its own, including discouraging research and development (R&D) and innovation that benefit U.S. consumers.

  • A number of competitors have implemented strategies to attract life-sciences innovation, including China, Singapore, Japan, and Sweden. See more.

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