Price controls for prescription drugs are at the forefront of policy discussions in the United States. A new study looks at the long-term impact of price controls in Medicare and how short-term savings has adverse effects on the overall health of the population.
Much of the focus on price controls for subscription drugs in the US has been on the potential short-term savings – in terms of lower spending – while evidence suggests price controls reduce drug innovation and consequently negatively affect population health.
A hypothetical scenario was introduced where pricing from the Federal Veterans Health Administration (VA) program is applied to Medicare Part D drugs, and the effects of these prices were simulated on US health and economics outcomes over the lifetimes of individuals aged over 50.
The results show that VA-style pricing policies will save individuals a significant amount, up to $0.1 trillion and $0.3 trillion. However, this government price setting will also reduce innovation; the projected number of new drug introductions will decrease by as much as 25%.
Health benefits decline over a lifetime
As a result, individuals will lose health benefits over their lifetimes, including a decrease in their life expectancies. The paper supports the existing evidence that government policies that achieve drug cost savings through price controls create a loss to society by reducing drug innovation, and consequently population health.
The findings suggest that policymakers concerned about drug prices should explore policies that protect patients from high out-of-pocket costs while preserving the incentive for drug innovation.
Government policies that achieve drug cost savings through price controls create a loss to society by reducing drug innovation, and consequently population health.
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