Reference Pricing Isn’t Worth the Risk to Innovation and Patient Health
A Health Affairs Blog co-authored by NPC's Michael Ciarametaro explores the tradeoffs and risks associated with international reference pricing and suggests alternative policy approaches that would reduce drug costs, while still maintaining incentives for innovation.
As policymakers in Washington, D.C., debate ways to stem rising health care spending, international reference pricing is one of many ideas being considered that could have damaging effects on the future of biopharmaceutical innovation and patient health.
International reference pricing policies would link the price that Medicare pays for certain drugs to prices paid in other countries, with these negotiated prices also extending to private health plans. A new Health Affairs Blog co-authored by National Pharmaceutical Council (NPC) Vice President of Research Michael Ciarametaro explores the tradeoffs and risks associated with international reference pricing and suggests alternative policy approaches that would reduce drug costs, while still maintaining incentives for innovation.
The blog’s authors – NPC’s Ciarametaro, Craig Garthwaite of Northwestern University, Craig Mitton of the University of British Columbia, Susan Peschin of the Alliance for Aging Research, and Joel White of the Council for Affordable Health Coverage – discussed the potential impacts of price controls during a webinar earlier this year.
The adoption of international reference pricing in the U.S. would do more harm than good, the authors write, by putting biopharmaceutical innovation and future patient health outcomes at risk. According to the nonpartisan Congressional Budget Office (CBO), implementation of international reference pricing would lead to fewer new therapies coming to market as global revenues for new drugs would decline, making R&D investment less attractive.
This means that patients and society risk forgoing new treatments that could have yielded substantial benefits – and it is impossible to know how many new medicines would never come to market, what kinds of medicines would go undiscovered, and which conditions would go without treatments or cures.
The authors added that implementation of price controls for specific patient populations, like people on Medicare, could adversely affect those patients by introducing skewed incentives for biopharmaceutical innovation. If companies view treatments for that population as less profitable, they may focus their research on conditions that have a greater impact on other patient populations.
Fortunately, better policy options exist that could help control health spending costs and promote high-value health care without disincentivizing innovation.
The authors propose:
- Reforming health benefit designs to better address affordability concerns for patients and the overall health system.
- Addressing anti-competitive behavior in the current market and encouraging price competition to drive down health care costs while incentivizing innovation.
- Focusing on value-based care and practices across the health care continuum to help reallocate finite resources to those that generate the most value and benefit for patients.
Learn more about the potential impacts of international reference pricing and the alternative policy options that could reduce health spending without harming innovation in the Health Affairs Blog.