The international reference pricing idea was most recently floated by the Trump Administration. Pegging what companies can charge in the U.S. To what they charge elsewhere, the theory goes, would lower prices in the U.S. But would it? This video, featuring executives from across the biotech industry, explains why it’s not so simple:
Remember, the U.S. Is the most important market for drug companies. And so if the price had to be the same in the U.S. As it is in Europe, companies would be more likely to raise their European prices instead of lowering their U.S. Ones. And what would happen then? It’s likely we’d see two results:
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Patients in European countries would suffer, because their government payers would balk at paying U.S. Prices. Maybe only the sickest patients would be allowed access. But at U.S. Prices, European revenues and profits would shrink.
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This means that investors would see that overall new drugs are less profitable than before. That would reduce their willingness to invest in new projects unless prices were higher in the U.S.
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If we don’t invent new medicines as a result of investors being less compelled to invest in R&D, we’ve already discussed how that won’t save the U.S. Money since it means we’ll keep suffering the burdens of disease and relying more on doctors and hospitals, which, unlike drugs, don’t go generic.
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Since part of the current sensitivity to drug prices in the U.S. Is due to seeing that other countries pay less, it’s possible that once the U.S. Sees that other countries are getting the same price, the U.S. Might tolerate higher prices than we have now, which could compensate for lost profits ex-U.S. So in this case we would end up still getting new medicines but paying more for them (via our insurance premiums).
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Either way, Americans pay more and patients in other countries get worse access to treatment, simply because of U.S. Pricing policy that defined “fairness” as the U.S. Paying the same as other countries. There are ways to get other countries to pay more, but it’s not using International Reference Pricing.
For more on Trump’s Most Favored Nation policy and international drug pricing, check out this
As you watch this, note that they compare the UK price to the list price, not the net price, in the US. That’s a major reason why they first claim the price is 10x higher in the US but later say it’s 3x higher. They also incorrectly assert that middlemen are paid a percentage of the list price and therefore have no incentive to lower prices. In reality, they’re paid a percentage of rebates, and payors still have incentives to lower net prices---which is why net prices in competitive drug classes decline. Otherwise, this video gets the key point right: MFN won’t lower prices for patients in the US, nor will it reduce what insurance pays.