Price Controls On Prescription Drugs Could Have Adverse Effect On Life Spans, Study Says

Main Category: Pharma Industry / Biotech Industry
Also Included In: Public Health;  Health Insurance / Medical Insurance
Article Date: 17 Dec 2008 - 5:00 PST

email to a friend   printer friendly   view / write opinions   rate article

Placing price controls on prescription drugs in the U.S. would result in modest cost savings but would shorten life spans as the pace of drug innovation slowed, according to a study in Health Affairs, Reuters reports. Some policymakers recently suggested that the U.S. develop a form of prescription drug price regulation as a way to slow rising costs, according to Reuters.

For the study, Darius Lakdawalla of RAND and colleagues used computer models of price regulation in 19 countries to simulate controls in the U.S. Researchers said that introducing price regulations to a mostly unregulated market in the U.S. would lead to less investment in creating lifesaving drugs, which in turn could reduce life expectancy.

Lakdawalla said, "We found policies that regulate the prices of drugs could result in modest savings for consumers, in the best cases on the order of $5,000 to $10,000 per person over a lifetime. But in many other cases, those policies resulted in very substantial losses to consumers in the form of reduced life expectancy and those would be worth tens of thousands of dollars."

According to Lakdawalla, a better approach to moderating prescription drug prices would be to cut drug insurance copayments by 20%, which by 2060 would increase life expectancy in the U.S. by half a year because more people would take needed drugs and drug industry profits would motivate further innovation.

In a commentary accompanying the study, F.M. Scherer of Harvard University questioned some of the researchers' assumptions, including the rate of declining drug company profits leading to less innovation.

An abstract of the price control study can be found online.

The commentary also can be found online.

Related Study
Another study in Health Affairs states that drug prices have reached a "turning point," according to Reuters. The researchers -- including Harvard University economist David Cutler, a health policy adviser for President-elect Barack Obama -- said while drug prices tripled from 1997 through 2007, spending rose by only 1.6% in 2007, the slowest rate since 1974, because many brand-name drugs lost patent protection. They said that prescription drug spending trends have changed in the past five years and that assumptions based on past trends no longer apply (Steenhuysen, Reuters, 12/16).

The second study also can be found online.

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2008 Advisory Board Company and Kaiser Family Foundation. All rights reserved.