Global Price Control Elimination May Not Affect U.S. Rx Costs, Economist Tells ITA Panel
This article was originally published in The Pink Sheet Daily
Executive Summary
Payoff from elimination of price controls would be enhanced innovation, not lower costs in U.S., panelists tell Commerce Department hearing. International Rx pricing study is due Sept. 8.
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The payoff from the elimination of price controls in foreign countries would take the form of more innovation - not necessarily lower prices for U.S. consumers, American Enterprise Institute economist Kevin Hassett said during an Aug. 3 International Trade Administration meeting on global price controls. "There is no empirical evidence," he said, but "I would guess that prices in the U.S. wouldn't change very much to the extent that firms have identified different models in the market …to deal with price discrimination." However, Hassett stressed in his presentation to the ITA panel, price controls have a negative impact on overall investment in R&D. "Research is diminished and the discovery of new treatments is slowed, harming the U.S. economy and consumers." The hearing was convened as part of a study being conducted by the Commerce Department agency on global price controls on the pharmaceutical industry. The ITA is looking specifically at the impact of price controls in nine member countries of the Organization for Economic Cooperation and Development (1 (Also see "International Drug Pricing Comments Sought For Commerce Department Study" - Pink Sheet, 1 Jun, 2004.)). The Pharmaceutical Research & Manufacturers of America stressed that foreign price controls suppress innovation and R&D. A recent study by the Boston Consulting Group "concludes that in the absence of these distortive government policies, an additional 110 to 140 branded drugs would have been launched over the past decade had it not been for OECD country price controls," PhRMA VP-International Affairs Geralyn Ritter said. Donald Light, PhD, Columbia University, agreed that "higher prices abroad would not benefit American consumers and businesses, but they might reverse the trend to invest more R&D in the" U.S. The Commerce Department expects to use the results of the study to help press its argument with foreign governments to drop price controls in the context of trade agreements (2 (Also see "International Rx Price Study To Be Used In Negotiations With Developed Countries" - Pink Sheet, 27 Apr, 2004.)). The Medicare law directs the Commerce Department to work with the International Trade Commission, HHS and the U.S. Trade Representative to determine whether international pharmaceutical pricing practices represent "nontariff barriers with respect to trade in pharmaceuticals." The panel writing the pricing study, which is due Sept. 8, is being led by ITA Office of Trade Policy Analysis-Trade Development Project Manager Adam O'Malley. The panel also includes ITA staff Terry Labat and Kristie Mikus. AEI economist Jack Calfee has been hired as a special employee to assist with writing the report. - Tericke Blanchard |