Darius Lakdawalla is the Quintiles professor of pharmaceutical development and regulatory innovation in the School of Pharmacy at the University of Southern California.

Turing Pharmaceuticals finds itself in the spotlight after acquiring a 62-year-old drug and promptly raising its price by more than 4,000 percent.

The resulting controversy has reopened a long-simmering debate. Why does our government not control prescription drug prices? Because nobody ultimately wins from drug price controls.

Our research shows that when prices fall, innovation falls even more. Patients would see their lives cut short by delayed or absent drugs.

Turing Pharmaceuticals pursued a windfall gain from a drug they did not bring to market, but the episode is more the exception than the rule. Effective new drugs bring greater rewards to patients than to the firms that sell them. For instance, breakthroughs in the treatment of H.I.V. generated financial rewards for their inventors, but also decades of healthy life to patients who once saw their H.I.V. as a death sentence. Indeed, academic research finds more than four-fifths of the value created by new drugs flows to patients in the form of health benefits, and less than one-fifth flows to manufacturers. Rather than price controls, we need value-based payment policies that reward companies that bring real value to patients and penalize firms who do not.

Drug price controls would stifle the introduction of valuable new drugs, because innovators will spend less pursuing new drugs if they expect to earn fewer rewards from discovering them. Our research finds that, if the U.S. government were to begin negotiating drug prices the way other governments do, drug prices would fall by about 20 percent, but innovation would fall by even more. Patients would see their lives cut short by delayed or absent drug launches. On balance, America would lose more in the form of premature mortality from price controls than it would gain in lower spending.

On the other side of the ledger, drug price controls would not save that much money. According to federal government data, prescription drug spending makes up roughly one-tenth of America’s total bill for health care. Lopping 20 percent off drug prices by negotiating prices would thus shave all of 2 percent off our total health care bill. What’s more, we will enjoy only a one-time cost reduction, because drug spending has been growing no faster than overall health care spending over the past 10 years.

Bluntly pushing down all drug prices will save us little and cost us dearly. America needs a more refined solution that preserves rewards for the hard work of innovators but snatches them away from speculators.



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