Why Price Fixing and the International Price Index Are Bad News for America
Taking actions that stifle pharmaceutical innovation during a pandemic seems like a bad idea. But that’s exactly what the Administration announced it was considering today. In an announcement of several executive orders meant to lower drug prices, the biopharmaceutical industry was given a month-long reprieve to come up with ways to reduce medicine costs to avoid implementation of an Executive Order linking the price of Medicare prescription drugs to the International Pricing Index (IPI) takes effect.
If enacted, this order will link the price of Medicare prescription drugs in the U.S. to prices set in a few select foreign countries. It is known as the International Pricing Index (IPI) and while you can call it what you want, it does not change what it is: price controls.
Price controls are price controls even if the intentions are well-meant and it is bad news for the American pharmaceutical industry at a time when we need to encourage drug makers to come up with vaccines and treatments for COVID-19.
That is why it is so troubling that the United States would advance policies that will hurt investment and innovation by imposing price controls on the industry. They effectively prevent entrepreneurs from entering the market and when fewer entrepreneurs enter the market to create the infrastructure needed to make great medication, sick people go without.
Policies that discourage or stifle pharmaceutical innovation costs human lives. America develops the world’s most cutting-edge drugs and treatments and is able to do that because of our market-based system. Taking that away will end the same way every other government price fixing measure has — in shortages and a lack of new products.
Fixing the price of medications is not the answer to high drug prices. Instead, the president should strengthen intellectual property protections, look at reforming the seven to 10-year process it takes to get a drug to market, and enhance economic incentives and tax relief to spur innovation.
ALEC and ALEC Action have consistently opposed efforts to import foreign price controls through the IPI because of the detrimental effects this policy would have. The American pharmaceutical industry is working hard to find treatments for COVID-19. Now is not the time to discourage the drug industry’s efforts to create new, life-saving and life-enhancing medications.