On announcing her drug “affordability” plan last week, Presidential Candidate Hillary Clinton unveiled a series of recycled proposals that would make the problem worse. The plan imposes new price controls that would squeeze medical innovators while also imposing rigid mandates over R&D spending.
Clinton’s plan is clearly appealing to the outrage over Turing Pharmaceuticals — which last week attempted to increase the cost of drug Daraprim 4,000 percent — as proof that the industry does not work in the interests of the American people.
In fact, a five page document outlining the plan released by the Clinton campaign mentions Turing Pharmaceuticals 11 times, and its rogue CEO four times. Earlier this week, the Clinton campaign ran an ad entirely about the company and its CEO.
But this one rogue actor is not the norm – the company and its CEO has been denounced by the rest of the industry, who agree that the 4,000 percent price rise is excessive. In response to this outrageous story, Hillary has clearly responded by releasing an equally outrageous and unserious plan.
Evoking the negative connotations behind Turing, Hillary promises to force companies (like Turing) to “invest more of their revenues or pay rebates to support research rather than keep them as profits.”
Drug companies already reinvest in new innovations en masse, but are bound by prohibitively high R&D costs. On average it costs $2.6 billion to develop a new prescription drug. So for this new mandate to work, companies would need to start receiving far higher revenues.
The Clinton plan would result in the opposite happening. At the same time as Hillary is forcing companies to invest more, the Clinton plan squeezes drug companies by implementing price controls and allowing the importation of drugs from other countries.
While this second proposal may sound pro-free market, it would only squeeze American innovators further. Many countries utilize a price control that in the short term results in lower costs for consumers, but also prevents new research for the next miracle cure. While allowing cheaper drugs would lower costs on the surface, it creates a hidden cost that prevents companies from reinvesting in new medicines.
The plan also contains a number of other proposals designed to punish the pharmaceutical industry, like preventing drug companies from treating advertising as a business expense, and shortening the patent life on medicines – meaning companies have an even narrower window to recoup costs from their innovation.
In all, Clinton’s proposal seems more motivated out of spite toward drug companies and faux outrage than a desire for serious reform. Underscoring this, her campaign website vows to “demand lower drug costs.”
Hillary’s plan sets a dangerous “government knows best” precedent. It would prevent medical innovators from recouping the necessary profits to re-invest in new medicines, would force them to do so anyway. This plan would put innovators between a rock and a hard place, and would almost certainly put the industry in a tail spin toward collapse.