Fraser Forum

Hillary Clinton’s anti-pharmaceutical campaign will hurt Canadian patients

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Last September, Hillary Clinton announced a proposal to impose federal price controls on prescription drugs. Politically, Clinton may be on to something. In an October poll conducted by the Kaiser Family Foundation, drug costs topped the list of concerns about health care among Americans. Answering whether “Making sure that high-cost drugs for chronic conditions, such as HIV, hepatitis, mental illness and cancer, are affordable to those who need them” should be a priority for the federal government, 85 per cent of registered Democrats and 73 per cent of Republicans agreed. Asked whether “government action to lower prescription drug prices” should be a priority, 74 per cent of Democrats and 56 per cent of Republicans agreed.

Fortunately, there are a couple of good initiatives in Congress that would achieve these outcomes. The 21st Century Cures Act, which passed the House of Representatives last July, would speed up approval of new drugs and thereby increasing patients’ choices and competition among drug-markers.. Another bill, sponsored in the Senate by Senator Ted Cruz (R-TX) and Senator Mike Lee (R-UT), would allow drugs and medical devices approved in certain other countries (including Canada) to be allowed in the U.S. as well. (Sometimes the FDA approves drugs faster than other countries’ regulators, and sometimes other countries approve faster. Patients in all countries would benefit from reciprocity, as I argued a decade ago in a Fraser Institute study.)

Unfortunately, such reforms freeing patients and drug-makers from undue government interference are not those proposed by Hillary Clinton, the likely Democratic candidate for the presidency. Instead, she would impose federally dictated prices on new medicines by forcing drug-makers to calculate, using some sort of pseudo¬scientific formula, each new drug’s research and development cost.

This is nonsense.

A drug company’s management sees how things are going in the research portfolio and moves money around based on various scientific and business factors. Lessons learned from an unsuccessful drug experiment may be useful for another compound. A line of inquiry may dead-end and be forgotten for a couple of years until a new scientist decides to have another look. Some research may be applicable to more than one new drug in the R&D portfolio. And if Clinton had any business background she might know that drug-makers often trade drugs that are still in the development process (either by sale or licensing).Drug-makers selling or out-licensing drugs in development do not tell buyers how much they’ve already spent on R&D.

Mrs. Clinton’s proposal is simply a way to impose politically determined prices on an unpopular industry. (It could also motivate them to pay more ransom to their kidnapper: Drug-makers are among the largest donors to the Clinton Foundation.)

Why should Canadians care? Drug-makers, even those based in Canada, develop medicines primarily for the U.S. market. Although developing countries are increasing global market share, IMS Health forecasts the U.S. will still account for 41 per cent of global pharmaceutical sales in 2020. No other country remotely approaches this—the “EU5” (Germany, Great Britain, France, Italy, Spain) together will account for 13 per cent, while Canada and other major developed countries will account for just 3 per cent.

Canadians (and other non-Americans) benefit from research and development aimed primarily at the U.S. market, because the medicines are sold here at lower prices than in the U.S. (These price differences have been a subject of inquiry at the Fraser Institute: See, for example, here and here.)

If Hillary Clinton succeeds in quashing incentives for investors to risk their capital in pharmaceutical R&D, Canadians will suffer the loss of future treatments just as much as Americans will.


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