Grave Mistake to Fix Drug Prices Without Esteem for Their Value

Democrats remain fixated on prescription drug prices.

Last August, they managed to include price controls on drugs dispensed through Medicare in the Inflation Reduction Act. And they're not done meddling.

Earlier this month, Rep. Lloyd Doggett, D-Texas, called on President Biden to unilaterally suspend drug patents in order "to address the crisis of unaffordable medicines."

Socialist Sen. Bernie Sanders, I-Vt., has named drug pricing as one of his top legislative priorities in his new role as chairman of the Senate Health, Education, Labor, and Pensions Committee.

This single-minded focus on prices ignores the enormous value that innovative medicines can provide. Even drugs that deliver seemingly minor improvements in health can be tremendously valuable to individual patients and the broader economy.

Consider the case of Alzheimer's. More than six million Americans have the disease today. By 2050, that number could rise to nearly 13 million. Experts estimate that Alzheimer's and other forms of dementia cost the country $321 billion last year.

Developing effective therapies for the disease has proved difficult.

But in recent years, a few promising treatments have emerged.

In a new paper, Tomas Philipson and Yier Ling of the University of Chicago attempt to quantify just how valuable effective Alzheimer's drugs would be.

According to their analysis, a medical innovation that slows the progression of Alzheimer's from mild to moderate by anywhere from six months to three years would generate between $212 billion and $1.3 trillion in value over the next decade.

And that assumes only half of Alzheimer's patients receive the drug.

It's worth noting that the hypothetical medicine Philipson and Ling consider isn't anything like an Alzheimer's cure.

It's simply a new drug that slows the disease's progression. Yet even this small improvement delivers enormous value to patients, caregivers, and the economy.

Most of that value — nearly 60% — would derive from reduced healthcare spending. In fact, a drug that delays the progression of Alzheimer's would save Medicare up to $340 billion over the next ten years.

Another significant share of the value would come in the form of improved health and a lower burden on the caregivers of Alzheimer's patients.

Those who lament the supposedly high prices of drugs tend to ignore these sorts of benefits, or at least discount them.

A more balanced assessment of both the costs and benefits of the latest medical treatments suggests that, by and large, prescription drugs are an incredibly good deal for most Americans.

Retail prescription drugs accounted for just 9% of overall healthcare spending in 2021.By comparison, hospital care made up 31% of the nation's healthcare bill.

Physician and clinical services accounted for 20%.

Moreover, around 90% of the prescriptions filled in the United States each year are for low-cost generic medications.

And at a time of historic inflation, prescription drug prices have remained remarkably stable. In the last year, the price of everything from bread to gasoline and electricity has increased by more than 10%.

Prescription drug prices have risen by less than 2% over that same period.

It's also telling that, while more than 80% of the nation believes prescription drug costs are unreasonable, nearly 70% say that affording their medicines is easy, according to a recent Kaiser Family Foundation poll.

Do some of the latest medicines carry high price tags?

Of course.

But to judge those prices in isolation, without considering the value they deliver, is a mistake. And it's one that the left has used for decades to defend disastrous policies like price controls and patent infringement.

Reforms like these weaken the incentive to invest in even minor medical advances, slowing progress toward new cures and treatments. And that lost innovation comes with significant costs of its own, as Philipson and Ling show in the case of Alzheimer's.

Sadly, Democrats appear all too willing to inflict those costs on patients in the name of battling an affordability crisis that, for most Americans, doesn't exist.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.