By Kirsten Axelsen
The Trump administration recently announced a plan to begin setting pricing targets for medicines in a “most favored nation” policy – which aims to tie U.S. drug prices to the lowest possible price among other high-income countries. Of course, paying less for drugs seems like a good idea. But in any market, including medicines, paying less often means getting less.
The reality is that other countries get lower prices because, unlike the United States, they are willing to deny drug access to their populations.
Central to many foreign systems are “health technology assessment” (HTA) programs – evaluations to decide whether a new treatment adds enough “value” to a patient’s life to justify coverage.
These assessments can delay and deny access to life-changing medicines. Patients in countries like England, Germany and Canada often wait months or years for the same therapies available in the United States. Some treatments never make it to those patients. Moreover, drug development, including clinical trials, has shifted away from many of these price-controlled countries, depriving them of an important economic benefit.
Countries where the government dictates drug prices through HTA programs frequently rely on discriminatory metrics. Treatments that do not restore “perfect health” are often deemed not cost-effective – even if they prevent decline, improve quality of life or reduce long-term care. A therapy that stabilizes a progressive condition in someone with limited mobility may be rejected simply because their starting point is too low to generate enough “gain” for care to be cost-effective.
Second, these countries often employ outdated and rigid cost-effectiveness thresholds. These thresholds are typically anchored to economic indicators. That is a flawed approach, not least because medical innovation does not follow the same growth curve as the broader economy. A breakthrough Alzheimer’s treatment may increase near-term spending but deliver immense long-term benefits for both the economy and individual well-being.
South Korea, for instance, still bases its threshold on its 2007 GDP per capita. As a result, safe, effective therapies are routinely denied reimbursement. The United Kingdom set its threshold in 2004, and reimburses just 36 percent of all new medicines launched between 2017and 2023. In many countries, the benchmarks are not even public, leaving patients and providers to guess what counts as “worth it.”
Finally, many HTA systems rely on rigid evidence standards. Some require randomized controlled trials (RCTs) that directly compare new drugs to existing treatments; but existing treatments often do not exist, particularly for breakthrough medicines. In Germany, only 6 percent of medicines without head-to-head trial data received an additional benefit rating, putting them at risk of being denied reimbursement.
The United States has no reason to adopt foreign pricing models. Our system fosters robust competition that drives prices down without price controls. About 90 percent of prescriptions filled in the United States are generics, which are often cheaper than foreign medicines. Brand-to-brand competition often cuts list prices by 50 percent, and generic entry can drive prices down by up to 80 percent.
Affordability is possible without sacrificing access or the economy. The United States should lead the push for fair global cost-sharing, ensuring that other countries contribute more to sustaining the innovation ecosystem they rely on. That approach is far better than one that reduces people to formulas and thresholds.
Kirsten Axelsen is an independent consultant and policy advisor to biopharmaceutical companies for DLA Piper and Charles River Associates and is also a non-resident fellow with the American Enterprise Institute. This piece originally appeared in the DC Journal.
The opinions expressed in this commentary are those of the writer and not necessarily those of the AFRO.