How Not to Reduce Prescription Drug Prices
As soon as the gavel went down to start the 2022 General Assembly session, the Lamont administration was back again with a new prescription drug prices bill.
SB 13 reflects a laudable goal. However, there are many ways to lower healthcare costs, and this bill is not one of them.
In fact, the legislation is counterproductive and displays a glaring misunderstanding of what does and does not drive healthcare costs.
Canadian drug importation is unworkable on at least three counts.
First, the Canadian government is opposed.
Every Canadian administration over the last 10 years, when queried about support for exports to Connecticut, raised objections—concerns about ensuring an adequate supply of medicines for its own citizens, as well as how Canadian pharmacies, laboratories, and drug suppliers and wholesalers would meet the bill’s safety and efficacy guarantees.
Second, Connecticut wholesalers who import drugs from Canada must, among a host of requirements, be able to represent that an imported drug meets all U.S. Food and Drug Administration standards for safety, efficacy. and misbranding and adulteration.
Liability, Cost Concerns
In addition, imported Canadian drugs would have to meet US “track-and-trace” requirements.
These conditions raise liability and cost concerns and discourage participation in the importation program.
That all the players in the Canadian through Connecticut supply chain would be willing and able to guarantee purity, dosage, potency, labeling accuracy, non-adulteration, etc., etc.—or identify tainted drugs passing through Canada from, say, Russia as not “Canadian”—is a bridge too far.
Finally, the bill does not allow importation of the costliest medicines—biological and other infused and injected drugs (many, if not most, of the most effective oncology and autoimmune treatments fall into these categories).
The price cap provisions in SB 13 ignore the long history of government-imposed price controls.
An academic, private sector, or government-sponsored study demonstrating the effectiveness of price controls does not exist.
No matter the product—flour, machinery, medicines—price controls cause shortages, delays in the introduction of new products and incentivize high introduction prices.
Price controls didn’t work when Richard Nixon tried them, didn’t work in Nazi Germany or the Soviet Union, and aren’t working in Venezuela or Zimbabwe.
When tried, all price controls have done is ratchet up the misery of empty store shelves and metastasizing inflation.
The governor’s bill establishes a compliance labyrinth.
Penalties for price cap noncompliance are set at 80% of the difference between the revenue derived from selling a drug outside the bill’s price caps less the revenue that would have been made complying with the law.
The bill gives the Department of Revenue Services robust powers to collect records, hold hearings, and mandate disclosures.
It also bars manufacturers from withdrawing a drug from sale in Connecticut to avoid its price caps and, in any event, requires 180-day prior notice before a manufacturer could cease sale of a drug in the state.
SB 13’s fundamental flaw is how it undermines our greatest competitive advantage: innovation.
To bring a new cure or safe and effective treatment to pharmacy shelves takes $2.7 billion and about a decade.
If biopharma innovators can’t recoup their huge investments, they will pivot to other products where they can.
Do we want our biopharma industry to recalibrate its R&D machinery—that produced COVID-19 vaccines and cutting-edge anti-viral treatments in record time—to produce products unconstrained by price controls, like over-the-counter cough lozenges and cosmeceuticals?
Medicine innovation is, as well, the way out of, not the cause, of healthcare cost inflation.
As high as some medicine prices may seem, the medicines are far less costly than the surgeries, hospitalizations, and long-term care they replace.
Think of the cystic fibrosis patient freed of recurrent respiratory infections and, ultimately, the need for a lung transplant. Or the Hepatitis C patient cured and freed from the need for a liver transplant.
Or the millions freed from debilitating strokes and heart attacks owing to blood pressure and cholesterol lowering meds.
SB 13 will not lower drug prices, but it will reduce access to life-saving medications, stifle life sciences innovation, and add more complexity and cost to the healthcare system.
It may have some political value but is devoid of authentic policy value for reducing healthcare costs.
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