Editor’s Note: The following is a testimony delivered by Darius N. Lakdawalla to the U.S. Senate Committee on Health, Education, Labor and Pensions on Feb. 8, 2024. More information about the hearing can be found here.
Key Points:
- The challenge for public policy is to sustain the pace of medical innovation while ensuring that valuable new technologies remain affordable and accessible.
- The U.S. is by far the largest market for pharmaceuticals in the world and the engine of global pharmaceutical innovation. Other countries, in effect, free ride off the innovation stimulated by the American market.
- Despite stable or falling net prices paid to prescription drug manufacturers over the past decade, novel medicines lie increasingly beyond the financial reach of American patients.
- Blunt price controls are not the solution to the worsening affordability of prescription drugs or to global free-riding: Schaeffer Center research suggests that introducing European-style pricing policies would reduce Americans’ life expectancy.
- Instead, aligning drug prices with the actual value provided to patients stimulates innovation that benefits patients and discourages innovation that does not.
- Legislation to increase drug price transparency, coupled with better information about value, can help payers and consumers spend their money wisely.
- Affordable and generous insurance for prescription drugs ensures that drugs remain within the financial reach of American families.
Full testimony is available here.