OPINION:
Next year, America celebrates 250 years of independence from Britain. By almost any measure, the divorce has been hugely successful for Americans. The U.S. enjoys greater economic prosperity, a stronger economy and wider global dominance than the empire from which it broke away.
Although Britain now imports American entertainment, technology and politics, the United States is toying with importing one of Britain’s most disastrous policy blunders of modern times: government control over drug prices. It really must reject government-controlled health care and the so-called most-favored-nation price controls.
For all the U.S. health care system’s faults, the country remains a global leader in medical innovation. More than half the world’s pharmaceutical research and development is generated by U.S.-based companies, with Europe making up less than a third. Americans, as a result, have far more access to new medical breakthroughs than much of the rest of the world.
So while U.S. policymakers explore ways to tackle rising health care costs, trying to mimic the cost controls of Britain’s socialized, government-run National Health Service would be a mistake. Unless you want to see the same months- or yearslong waits for treatment, denial of care and medicines to many and a damaging large-scale exodus of biomedical investors.
NHS agencies exert total control over the prices and availability of medicines for NHS patients (i.e., just about everyone). They have the ultimate say in what the NHS pays for drugs and even whether patients should have access to them at all. They can decline to fund new drugs, and they cap total drug costs, saving the NHS billions of dollars in rebates from drug companies but forcing it to ration care for patients.
The result? Pharmaceutical research and investment in Britain is in free fall. Drug companies are pausing planned developments or pulling out entirely. The British economy, British researchers and British taxpayers are paying the price.
Among the casualties:
• AstraZeneca scrapped a $610 million investment in Liverpool earlier this year and has paused a $271 million expansion of its Cambridge R&D site.
• Merck is pulling the plug on a $1.31 billion London research hub and is closing existing labs across Britain.
• Sanofi has frozen any “substantial” R&D investments across Britain until it sees “tangible improvements in the current commercial environment.” Dream on.
• Bristol Myers Squibb is signaling that it will walk away if the NHS undervalues its latest schizophrenia treatment, and AbbVie is signaling the same with its latest treatment for ovarian cancer.
This research retreat has not happened overnight. As Lilly Chief Executive Officer Dave Ricks said recently on CNBC, “The U.K. has been on a long, slow glide path from a leader in biopharmaceuticals to really a laggard, and that’s happened over the last 20 years through a number of policy mistakes.”
Quite. So why would the U.S. want to adopt the same innovation-strangling policy mistakes?
When it comes to biotech innovation, America is indeed exceptional. Even so, it is on course to fall behind China. American (and Western) health care’s competitiveness, security and access to breakthrough medications and treatments would all be in jeopardy should China make itself the new leader in drug research and manufacturing.
A University of Chicago study found that, if U.S. policymakers implement price controls such as most-favored-nation, it could lead to a $663 billion reduction in drug research and development over time. That’s not just hundreds of drugs that would never make it to market, or even to the laboratory. Jobs and investment around the country would be lost. In just 10 years, nearly 1 million industry-supported jobs could be lost. For smaller biotechnology firms in particular, the results would be catastrophic, with a nearly 90% reduction in the number of new medicines developed.
The lesson from across the Atlantic is clear: When governments dictate prices, innovation dies. America’s biopharmaceutical strength is no accident; it is the product of policies that reward risk, competition and discovery. If lawmakers copy Britain’s model of centralized control, they will find themselves copying its failures, too: lost investment, lost cures and worse treatment.
After 250 years of independence, does America really want its scientific leadership smothered by bureaucrats or surrendered to Beijing?
• Eamonn Butler is director of the Adam Smith Institute in London.
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