Businesses Are United Against the Attack on Drug Innovation
Some breathless Beltway pundits would have you believe corporate America is at war with itself over the Build Back Better Act, President Biden's ungainly multi-trillion-dollar grab bag of a budget bill.
"Big business lobbies bitterly divided over drug pricing reform," blared one recent headline.
It's a juicy narrative -- but baseless. The notion that businesses are divided comes from skillful media relations on the part of two relatively small trade associations -- the ERISA Industry Committee (ERIC) and the Purchaser Business Group on Health (PBGH). Both, it's true, favor price-control legislation included in the broader budget bill.
ERIC is an organization for human resource managers. While its members hail from many large companies, it would be absurd to suggest that the organization's stance reflects those companies' views.
PBGH, meanwhile, is a lobbying group for people whose job it is to … buy drugs. So it's no surprise they'd like the government to dictate lower prices. PBGH also supports government-run health care. Again, not surprising, considering their board includes people who manage government-run programs in California and Washington state.
Even this minimal business support for price controls arises only in the context of their members' overall opposition to Build Back Better legislation as a whole. These companies want nothing to do with the bill's provisions for higher taxes, mandates on employer health plans and increased costs of family and medical leave.
The idea that American business is divided over the bill is pure partisan propaganda. Opposition to the bill in total is unanimous.
But on drug price controls, ERIC and PBGH are more the exception than the rule. From the Small Business and Entrepreneurship Council to the U.S. Chamber of Commerce, businesses large and small are vociferously opposed to Democrats' plan to impose arbitrary price caps on prescription medicines.
It's easy to see why these business groups are joined in solidarity on the issue. These unprecedented price controls would be the foot in the door to government run health care. The so-called Public Option to provide universal health care relies on price controls for doctors and hospitals. Getting drugs under this structure is the first step to establishing a nationwide government health program that would significantly reduce access.
Companies are also rightfully worried about the harmful precedent the legislation sets. If the government can dictate prices to the pharmaceutical industry, what other sectors could it upend on a whim?
Finally, every independent expert estimates the bill will reduce new treatments and cures for diseases like cancer, diabetes and heart disease. This means worse health for employees, more disease progression, and higher long-term costs.
Corporate America as a whole is entirely right to worry about price controls.
Currently, the United States invents about two-thirds of the world's new medicines. Our market structure, while still highly regulated, encourages risk-taking and private investment and incentivizes companies to innovate to meet unmet needs.
American patients are fortunate in that most new medications become available to them almost immediately after FDA approval. In countries with socialized medical systems and drug-price controls, on the other hand, it can take medications years to come to market -- if they reach patients at all.
For example, as of 2019, 89% of all medicines developed between 2011 and 2018 were available in the United States. But only 62% were available in Germany, 50% in Japan, and 48% in France. The difference in access makes the difference between life and death.
The bill uses a price control similar to the one used for our Veterans. Drug availability in the Veterans Affairs system is similarly constrained. That's why nearly eight in 10 veterans have supplemental prescription drug coverage.
And just this past year, the European Union "negotiated" for weeks over the price of Covid vaccines. EU patients eventually paid one dollar less per dose than American patients, but the delays cost billions in economic damages due to prolonged economic lockdowns, not to mention the incalculable cost of unnecessary illness and mortality.
There are better ways to lower costs without harming workers' access to medicines or imperiling innovation. Improving insurance, accelerating drug approval and competition, and eliminating price floors in federal law would free up the market and lower costs for consumers.
Business owners know that when it comes to price controls on drugs, the side effects are worse than the so-called cure. For customers and employees alike, a healthy tomorrow depends on lower costs and access to the best medicines in the world.
Joel White is president of the Council for Affordable Health Coverage, a coalition of organizations seeking to lower the cost of health care for all Americans. Previously, Joel spent 12 years on Capitol Hill as a House staffer, most recently as the Staff Director for the Ways and Means Health Subcommittee.