3 alternatives to drug price controls – and how to maintain health, science and technology innovation

As the new president and a new Congress prepare to advance a new agenda, we can anticipate more attention on health care costs.

Too often, the debate focuses on drug access and price controls. But if you want cutting-edge health care, don't make it a cost-controlled commodity.

But recently Dr. Scott Gottlieb suggested 3 specific alternate avenues of pursuit. His view, published as an op-ed piece in the Wall Street Journal, is the controls are based on the premise the medical care is a commodity to be purchased at the lowest price, with little allowance for innovation. This would push new drug development over a tipping point.

Dr. Gottlieb says the most economically pernicious effect of price and access controls isn't the impact on revenue from existing drugs -- but how they distort future investment decisions. They will lower expectations that untreated diseases can continue to be re-priced, even with very effective new drugs. I work with health-care investors and companies first hand. They can reallocate capital in the face of protracted political uncertainty. They can also forego traditional discovery altogether, in favor of less socially useful but lucrative areas like lifestyle meds or prescription cosmetics. He notes that the last time policy makers waged a concerted effort to control the price of and the access to the most innovative, but expensive new drugs as part of broader health-care reform in the mid 1990s, the percent of venture capital going into biotech fell by almost half in a single year. A lot of that money shifted into Internet companies.
Of course, re-pricing diseases doesn't help people struggling to get basic health care, or those burdened by high co-pays.

So Dr. Gottlieb proposes 3 policy options to address these troubling issues – without preying on medical innovation and its health contributions.

1. Specialty drugs typically appear on the "fourth tier" of health plans, and have expensive co-pays. Drug companies need to explore alternative pricing mechanisms, including approaches that tie their reimbursement to evidence that an individual patient is benefiting.
2. Health insurers need to provide new policy holders with clear, up-front disclosures on co-pays and not stick patients with unbearable bills only after sickness strikes.
3. The FDA can also help lower overall drug spending by adopting reasonable regulatory pathways for diagnostic tests that would enable doctors to target drugs more efficiently to patients most likely to benefit.

Dr. Gottlieb also recently debated “Pharmaceutical Communication to Consumers” at the Oxford Union Society. You can read his remarks at http://www.aei.org/publications/filter.all,pubID.28737/pub_detail.asp