Think Obamacare Will Suffocate New Drug Development With Price Controls? Think Again
There were a million arguments against healthcare reform a year ago. One was that if President Obama got his way and expanded health insurance to millions of uninsured people, and the government made a real effort to study the comparative effectiveness of drugs at high and low prices, it was really the first step toward government-imposed price controls on new prescription drugs.
Once you have government price controls, opponents argued, drugmakers will lose the windfall profits the marketplace offers today to companies that take the substantial risk to develop innovative new drugs. The U.S., in turn, would lose its competitive edge as the center of innovative pharmaceutical R&D.
Guess what happened? One year after Obama signed healthcare reform into law, drugmakers are still in the midst of a golden age. Drugmakers still command ever-higher prices for innovative new medicines. And they will almost surely continue to enjoy this kind of pricing power in the U.S. at least until the end of this decade.
The latest bit of evidence arrived last week in a report from the Government Accountability Office (GAO). The report said that brand-name drug prices climbed by an annual average of 8.3 percent from 2006 through the first quarter of 2010, compared with a 3.8 percent annual uptick in the consumer price index for overall medical goods and services. (When generics were factored in, the overall amount of spending on the 100 most commonly used drugs was a much more modest 2.6 percent annual increase, according to the GAO.)
Still, that’s a big rate of price increases for new brand-name drugs. Yet despite the evidence, plenty of people like to argue that we are starting to see a new era of “stealth” price controls that are part of healthcare reform.
When the FDA proposed the revocation of Genentech’s approval of bevacizumab (Avastin) for breast cancer in December, opponents of healthcare reform surmised the agency was actually cracking down on the drug because of its price—which isn’t the FDA’s job. The same point—about nameless, unaccountable bureaucrats exercising some hidden policy on behalf of price controls—was made in August when the FDA delayed Genentech’s application to market a supercharged version of Herceptin which is sure to have a supercharged price. And plenty of observers—me included—sensed that a hidden agenda against high-priced drugs was really driving Medicare’s decision to force Dendreon to publicly explain the safety and effectiveness of its new prostate cancer drug last November.
Whatever the true motivations are—and there are plenty of other reasons why government agencies might have made those decisions—I haven’t seen any compelling evidence that says … Next Page »