NCPA - National Center for Policy Analysis

Congress Should Take Steps to Make Drugs More Affordable

January 11, 2017

Senior Fellow Devon Herrick writes for Townhall:

As Republicans squabble about how to repeal & replace Obamacare, lost in the debate is the way most Americans actually access our health care system. In any given year, most people don't ride in the back of an ambulance heading to the ER. Nor do they convalesce in a hospital bed. Most of the medical care Americans receive is not even provided in doctors' offices. The most common way Americans access our health care system is by taking a pill.

Drug therapy is convenient and usually relatively cheap. Most of the drugs Americans take do not even require a prescription -- but a few come with price tags that make your mortgage look cheap. Patients increasingly experience sticker shock at the pharmacy counter because rising health plan deductibles have forced them to pay more of their drug costs out-of-pocket. This isn't necessarily bad; cost-sharing makes it harder for drug makers to jack up prices without anyone noticing.

A significant driver of high drug prices is the excessive regulatory regime at the U.S. Food and Drug Administration (FDA). Few people notice when the FDA drags its feet and drugs take a dozen years to reach the market; yet, the agency suffers a severe public relations backlash when an approved drug causes unforeseen side effects. Thus, the FDA has an incentive to error on the side of caution. A drug that makes it through the FDA approval process is guaranteed years of high monopoly prices due to regulatory barriers that limit competition. To boost competition, a streamlined path to faster drug approval is badly needed. In a market with numerous firms competing to sell drugs, high prices should entice more firms to enter the market. Guidance from Congress would reduce this regulatory bottleneck and refocus the agency's priorities.

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