INTERNATIONAL REFERENCE PRICING

THE HARM

We need to do something to address the high cost of drugs and the utilization management techniques used by insurance companies to limit access, but international reference pricing isn’t the answer.  International reference pricing systems create significant questions about drug accessibility, which could make it harder for patients to get the treatments they need.  Patients in the countries that we would reference do not have the same access to the same treatments that we do in the U.S.; if we copy their prices we risk losing the access that we currently have to the latest treatments and cures.  Of the new cancer drugs introduced between 2011 and 2018, for example, the U.S. had immediate access to 95 percent, while the U.K. could only access 74 percent.

Reference pricing or indexed pricing is also unlikely lower out of pocket costs for seniors.  An Avalare study found that fewer than 1% of affected patients in Medicare would see a reduction in out of pocket costs from implementation of an international reference pricing system.  To make matters worse, an international reference pricing system would be based off discriminatory pricing systems abroad that assign a financial value to the life of patients.  They place less value on the sick, older, and disabled patients by creating arbitrary cutoffs that do not take into account structural health disparities.  As a result, they often dismiss people of color and the elderly as “too expensive” to be worth paying for care.  This is especially concerning given that index pricing will disproportionately hurt investment in the areas where seniors have the most need for new treatments – Alzheimer’s, cancer, and various autoimmune and rare diseases.  

THE BAD

While some policymakers believe an international reference pricing proposal leads to reduced expenses and a higher quality of care for patients,it is doing the contrary by putting the lives of the most vulnerable and sickest Medicare patients at risk. This model would:

Slow the pace of innovation and chill investments in new cures and treatments that patients and seniors need. As the world leader in innovation and healthcare – particularly when it comes to new treatments and cures – most new treatments and cures are approved here first.  The U.S Biopharmaceutical industry employs close to 1.7 million Americans and account for 57% of all new drugs developed globally; however, this will change with the current proposal. According to a study from the University of Connecticut, U.S. scientists would have developed 117 fewer life-saving drugs between 1986 and 2004 had something similar to an international pricing index been in effect at the time. 

The U.S. invests the most of any country in drug research and development, spending 2.84% of its GDP on research and development in 2018. A 2016 report by the  US Department of Commercefound that international reference pricing and other foreign price setting policies lead to 11-16 percent less private R&D investments worldwide. International reference pricing would be especially detrimental to investment in the areas where seniors need new treatments the most – cancer, Alzheimer’s, and rare and autoimmune diseases. 

Severely hinder patient access to life-saving treatments and create drug shortages. The other countries that our drug prices would be tied to under a reference pricing system base their drugs prices on restrictive pricing control and access to treatment. For example, of the 74 new cancer drugs launched between 2011 and 2018, 95% are available in the U.S., while only74% are available in the United Kingdom, 49% in Japan, and 8% in Greece. Because we have the ability to invest more in cancer treatments, the U.S. has a much stronger brain cancer survival rate than other developed nations.  The first-year survival rate for brain cancer is 36.5% in the U.S., but it is only 26.3% in the U.K. and 27.2% in France. An artificial price control set at below-market rates also creates important questions about drug accessibility, which could make it harder for patients to get the treatments they need.

Implement a pricing model in the U.S. that is incompatible with our healthcare system. The countries most often included for reference in international reference pricing models have very different healthcare systems than we do in the U.S., and these policies don’t seem to take that into account. Studies show that the implementation of a reference pricing or indexed pricing model will more likely impact the pricing of other countries and access to treatments for the US and other countries.