By Sandip Shah
Baby boomers are aging rapidly. Around 10,000 Americans celebrate their 65th birthday every day.
Unfortunately for these seniors, the government health care to which they’re entitled may put their lives at risk. That’s thanks to a new proposal from the Department of Health and Human Services that would impose price controls on certain medicines covered through Medicare.
HHS’ plan could save Uncle Sam a few dollars in the short run. But its long-term side effects would be far costlier for both the government’s budget and patients’ health.
The proposal impacts treatments covered through Medicare Part B. These are highly potent medications administered in doctors’ offices, including oral cancer drugs, infusions, vaccinations, and IVs.
Currently, doctors purchase Part B drugs ahead of time and store them on site. Once physicians administer a treatment to patients, Medicare reimburses them the average sales price of that particular drug.
Under Sec. Azar’s proposal, Medicare would instead reimburse doctors a flat fee for the drugs they administer. This reimbursement would correspond to the average price of that drug in 14 benchmark countries.
The majority of these countries rely on artificial price controls to keep drug spending in check. By copying this model, HHS hopes to cut Medicare spending by as much as 30 percent.
Implementing price controls would harm American patients in a couple of ways.
First, artificially capping the cost of medicines will devastate access to quality healthcare providers. Consider what happened when the government tried cutting Medicare reimbursements in 2013. Eight in 10 oncologists said payment cuts impacted their practices. And half had to turn cancer patients away because of it.
Second, HHS’ plan would stall the medical advancement that benefits patients today — and paves the way for breakthrough cures for the patients of tomorrow.
Drug development isn’t easy. It takes $2.6 billion and over a decade to develop a single drug. Scientists and investors need ample financial incentives to put money towards future medicines.
Price controls make development even harder than it currently is. Innovators won’t risk billions on pharmaceutical research if they don’t think they’ll recoup their upfront costs. And when pharmaceutical investments start drying up, so will new cures.
In addition to undermining seniors’ health, the proposal would cost more money in the long run.
Hospitalizations due to mismanaged conditions cost Medicare more than $5 billion a year. If HHS is really concerned with lowering costs and improving patient health, it should invest in more preventative medical innovation.
HHS should look for better ways to keep seniors healthy in their homes. Not only would the new proposal sacrifice seniors’ care, it would cost more in the long run.
Sandip Shah is the founder and president of Market Access Solutions, a global market access consultancy, where he develops strategies to optimize patient access to life-changing therapies.
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