The Lower Drug Costs Now Act and Pharmaceutical Innovation

Hitch, J., Firth, I., Hampson, G., Jofre-Bonet, M., Garau, M., Garrison, L. and Cookson, G.

 

Consulting Report
September 2021

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The US spends significantly more on healthcare per person than other wealthy countries. H.R. 3 is a recent policy proposal aimed at reducing national spending on prescription drugs, one component of overall healthcare spending. Drug manufacturers would be required to negotiate prices with the US government, and prices would be capped at a level based on the prices of the drug in a set of foreign countries. Evaluation of a policy with such large potential impact on pharmaceutical revenues must consider potential negative effects on incentives to innovate. However, the relationship between prices (and revenues) and new drug approvals is uncertain, and there are significant limitations with the existing policy analysis.

This short executive summary report summarises the methods and main insights from a study into the likely impacts of H.R. 3 on outcomes related to (bio)pharmaceutical innovation. The study consisted of two workstreams: 1) a set of interviews with key decision-makers in the pharmaceutical, biotechnology and healthcare investment industries, and 2) an expert elicitation exercise with academic and industry-oriented economists. After summarising the methods separately, the document concludes with the main insights across the two workstreams