World Health Organization is mistaken on drug price controls
The World Health Organization thinks that drug companies are ripping off cancer patients.
For every dollar these firms invest in drug development, they supposedly reap excessively high profits. The global health body urges governments to consider “strengthening pricing [control] policies at the national and regional levels.”
Instead of promoting price controls that deter research, the WHO should bolster innovation and boost access to lifesaving drugs.
Consider what it takes to bring drug from the initial research phase to a doctor’s office.
The WHO claims it costs $794 million to bring a drug to market — and that companies recoup this investment within three years.
But this estimate is wildly off; it ignores the high rate of research failures.
Just one in 1,000 promising compounds that enters pre-clinical trials makes it to human testing. Only one in 10 of those potential medicines receives FDA approval. Just one in 20 potential oncology medicines advances from Phase I clinical trials to approval.
Every drug that makes it to market has to pay for itself and all the company’s failures. As a result, the true cost of developing a single medicine is estimated at $2.6 billion.
Price controls would steer investment dollars away from such risky endeavors. Without any chance of recouping their upfront costs, drug development would dry up, along with future cures.
The United States is the world leader in drug development because we recognize the value of innovative medicines. In 2016, biopharmaceutical companies poured $90 billion into research and development. More than half of all drugs in development globally spring forth from U.S. laboratories.
Americans are healthier for it. U.S. cancer death rates have dropped 26 percent over the past three decades. New medicines are responsible for more than 70 percent of recent cancer survival gains.
Over time, these medicines easily pay for themselves. Between 1988 and 2000, improvements in cancer survival generated just under $2 trillion in “social value,” according to one study.
Cancer drugs are frustratingly expensive. But the key to making these drugs affordable without stifling research and development is to encourage competition.
When Sovaldi, a “direct-acting antiviral” that promised to cure hepatitis C, hit the market in 2014, the medicine was criticized for its $84,000 price tag. Today, several similar treatments are on the market — some cost about 70 percent less.
Innovative payment arrangements could make paying for these medicines a bit easier.
As one example, several companies are pursuing “outcomes-based contracts” that peg prices to the effectiveness of their drugs. “Healthcare loans” are another model. These arrangements allow patients to pay off the cost of drugs over time, like a mortgage.
Drug development is expensive. But in the long run, by improving and extending life, advanced treatments are worth it.
Kenneth E. Thorpe is a professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease.