We Won’t End AIDS Through Price Controls
Like so many other diseases, COVID-19 has a disproportionate impact on communities of color. The CDC reports, for example, that African Americans are 2.8 times as likely to be hospitalized with COVID as whites and twice as likely to die. These disparities, however, are minor in comparison with HIV/AIDS. African Americans in 2019 were more than eight times as likely as whites to contract the disease; Hispanics, nearly five times.
In his State of the Union Address in 2019, President Trump pledged to “eliminate the HIV epidemic in the United States within 10 years,” and Joe Biden declared he will “re-commit to ending the HIV/AIDS epidemic by 2025.” The plan of both presidents focuses on 48 counties, mainly in the South, with large African American populations.
The plan’s key components are diagnosing the disease, treating it with antiretrovirals, and preventing it with PrEP (pre-exposure prophylactic) drugs. But the goals are in serious jeopardy for two reasons. The first is COVID itself, which closed clinics or made them inaccessible. As a result, 670,000 fewer HIV screening tests were completed in a six-month period in 2020 compared to a year earlier.
The second reason is a section of the massive Build Back Better Act (BBBA), passed by the House on Nov. 19 and awaiting action in the Senate. It gives Washington the power to set prices for certain innovative medicines in Medicare’s Part B and D programs. It also effectively prohibits price increases beyond inflation for both Medicare and commercial insurance plans.
The BBBA does not designate specific drugs, but it is likely that sophisticated HIV/AIDS pharmaceuticals, which have already saved millions of lives around the world, are among them.
The success of these HIV/AIDS drugs is a function of intense and expensive research and development, with more than 3,000 clinical trials conducted for potential HIV/AIDS treatments over the past 30 years, leading to 57 medicines approved by the FDA.
On Nov. 29, Tomas Philipson, the former acting chair of the Council of Economic Advisers and his University of Chicago colleague Troy Durie produced a report on the expected impact of the BBBA provision on “antiviral innovation and patient health.” They concluded that, through 2039, spending on R&D for antiviral drugs as a whole would fall by $165 billion, and “for HIV, the largest antiviral class, we find 4 to 9 fewer new drug approvals during that period with 2.5 to 5.1 million lost life years for HIV patients.” They also found that the “rapid response in antivirals” that we saw in response to COVID-19 would be “greatly reduced.”
In a separate study on Dec. 1, Charles River Associates found that price controls will lead to a decline of 22% in R&D investment for HIV/AIDS by 2035 and 374 fewer clinical trials.
Advocates of BBBA’s price controls disingenuously use the word “negotiation.” In fact, negotiation is a discussion between two parties trying to reach an agreement. Negotiation is what actually does occur today between pharmaceutical manufacturers and pharmacy benefit managers (PBMs), which represent health insurers. PBMs are tough bargainers. For example, one of the largest, Express Scripts, held average price increases in 2020 to 0.9%.
In the BBBA legislation, the federal government doesn’t do this kind of negotiating. It simply dictates the prices of medicines to manufacturers based on what the bill, in an Orwellian phrase, calls the “maximum fair price.” That price is between 40% and 75% of the average manufacturer price for commercial plans -- an enormous reduction that slashes the revenues and earnings that go into R&D.
It’s basic Economics 101: price controls change behavior. Investors decide where to put their dollars for the best returns and, if returns to innovative drugs are suddenly limited by federal fiat, those dollars will go elsewhere – either to more conventional medicines or not to medicines all. The losers are people living with diseases like HIV/AIDS or likely to contract such illnesses in the future.
Researchers are on the brink of developing more effective treatments and PrEP medicines. Seven clinical trials are even investigating potential cures for the disease. The BBBA section on price controls will put an end to many of these attempts. The Senate should eliminate that section from the bill.
The Senate could also respect the judgment of Congress in the Medicare Modernization Act of 2003, when it designated six “categories and classes of clinical concern” for special protection. One of those was antiretrovirals, the class that includes HIV/AIDS treatments. Or, as a last resort, the Senate could specifically honor the promises of two presidents and prohibit price controls on HIV/AIDS drugs only. We won’t conquer this epidemic any other way.
James K. Glassman, a former Under Secretary of State for Public Diplomacy and Public Affairs, is an advisor to healthcare companies and for many years has participated in the effort to end HIV/AIDS globally.
