In his 2016-2017 budget, Gov. Andrew Cuomo (D-N.Y.) recently proposed not only significantly intrusive disclosure requirements for the pharmaceutical and biotech industries but price controls on the drugs they sell to consumers. This proposal is the latest in a misdirected anti-free market campaign to get to the bottom of rising health care and prescription drug costs in the United States. It also stands to destroy the market for innovation in the prescription drug market.
Gov. Cuomo’s drug plan would task the state’s health commissioner with developing a list of prescription drugs for which “there is a significant public interest in ensuring rational pricing by drug manufacturers.” These manufacturers would be required to disclose the cost of developing, manufacturing, producing, and distributing the drug. Research and development costs would also fall under the list of mandatory disclosure items.
This unprecedented level of mandatory disclosure about the cost of developing, manufacturing, producing, and distributing prescription drugs will have significant impact on innovation for the companies producing life-saving drugs in New York.
The goals of these mandates have nothing to do with transparency and everything to do with government price-controls. Letting governments decide how much companies can charge for their products or harassing them with nanny-state disclosure requirements is a guaranteed prescription for the end of pharmaceutical innovation in the United States.
Research is expensive. Bringing a potentially life-saving prescription drug to market is expensive. After hundreds of millions of dollars and a decade of time spent developing a drug, the Food and Drug Administration (FDA) approves only 12 percent of potential medicines that enter clinical trials. Price-control caps on the after-trial cost of these drugs will serve one purpose, ending the free-market incentive to actually bring drugs to market for consumers and patients in need.
As the National Bureau of Economic Research has acknowledged,
“Numerous economic studies indicate that price controls, by cutting the return that pharmaceutical companies receive on the sale of their drugs, also would reduce the number of new drugs being brought to the market. So, a short-run benefit for consumers could lead to a long-run negative impact on social welfare.”
The New York legislature should reject Gov. Cuomo’s misguided crusade against prescription drug and biotech companies and focus it’s effort on driving down health care costs which have increased as a direct result of government intervention in the health care market. That begins with reform to the state’s Medicaid program and a pairing back of Obamacare’s mandates on health insurance providers and plans.