The fundamental dilemma in prescription drug policy is often understood to be the tradeoff between establishing incentives for innovation that produces new cures through high product prices and the fact that high prices can and do strain the ability of consumers and taxpayers to afford the high prices to support that innovation. This is also the tradeoff posed by the Congressional Budget Office’s (CBO) recent cost estimate of one of the leading proposals to control drug pricing, H.R.3. That bill proposes new negotiation authority be extended to the Secretary of Health and Human Services to establish drug prices and imposes limits on drug price inflation. The implementation of these policies is estimated to save the public sector almost half a trillion dollars a decade – yet at the same time declining pharmaceutical industry revenues are estimated to result in 30 fewer drugs over multiple decades. Thus, the dilemma facing policymakers is perceived to be that controlling drug prices now necessarily means fewer new drugs tomorrow.
Addressing the trade-off between lower drug prices and incentives for pharmaceutical innovation (Rena Conti, Richard G. Frank, and Jonathan Gruber, Brookings)
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