Debate Desk
Should the Government Set the Prices of Prescription Drugs?
Price controls lower what patients pay today and reduce the new medicines that arrive tomorrow; targeted reforms to middlemen and patents work better.
The claim
Americans pay more for the same drugs than people in other rich countries, and many cannot afford their prescriptions. Supporters say that letting Medicare negotiate or set prices would save money and force drugmakers to be fair.
The answer in three points
- Developing a new medicine takes about a decade and costs a great deal, and most candidates fail. The few that succeed must cover the cost of the failures. If prices are capped below that level, fewer companies will make the bet, and fewer cures will arrive.
- Prices abroad are lower in part because other governments set them and America pays the difference. The United States funds much of the world's drug innovation. The better answer is for other wealthy countries to pay a fairer share, and for trade policy to press them.
- Much of what patients pay is shaped by middlemen and rules rather than by the maker's list price. Pharmacy benefit managers, rebates and insurance design add costs that patients never see. Transparency, competition from generics and biosimilars, and faster approvals lower prices without cutting new research.
Patients want lower prices today and new cures tomorrow, and the best policy delivers both.
The numbers
- The Inflation Reduction Act of 2022 gave Medicare authority to negotiate prices for a limited set of drugs, with negotiated prices taking effect starting in 2026, according to the Centers for Medicare and Medicaid Services.
- The Food and Drug Administration reports that generic drugs make up about 90 percent of prescriptions dispensed in the United States.
- The Food and Drug Administration's Center for Drug Evaluation and Research approved more than 50 novel drugs in some recent years, according to its annual reports.
What they will say next
"Medicare can negotiate and save billions." It can save money on the drugs it targets. The long-run effect on research is the matter of debate, and economists have estimated fewer new drugs in the following decades.
"Drug companies make large profits." Some do, and many small firms lose money. Profits are the reward that attracts capital to risky research. The goal should be fair competition and fewer barriers to entry.
"Other countries pay less and still have medicines." They benefit from drugs developed with American revenue, and some wait longer for new ones. A system where everyone sets prices low would produce fewer.
"People are rationing pills." That is a real hardship, and targeted help for low-income patients, caps on out-of-pocket costs and clearer pricing deal with it directly.
Competition, transparency and speed to market are the tools that lower prices and keep discovery going.
"Insulin and other drugs cost less abroad." Many do, and reforms such as caps on out-of-pocket costs, faster generics and attention to middlemen can lower them here. The issue is how to reduce prices without cutting off the supply of new treatments.