Addressing the trade-off between lower drug prices and incentives for pharmaceutical innovation

By Rena Conti

TPRI faculty co-lead and Questrom faculty Rena Conti will testify at the upcoming U.S. House of Representatives hearing of the Committee on Oversight and Reform, entitled “Unsustainable Drug Prices: Findings from the Committee’s Drug Pricing Investigation and the Need for Structural Reforms.” on Friday, December 10, 2021, at 10 a.m.

Professor Conti will discuss recently published papers germane to the current public debate on lowering prescription drug prices. In these papers, she and coauthors Richard Frank (Brookings Institute and NBER) and Jon Gruber (MIT and NBER) argue there is significant evidence to suggest the current policies supporting access to new drugs are not sufficient to ensure all Americans are able to afford the medicines they need to stay well and productive. The proposed reforms which include extending negotiation authority to the Secretary of Health and Human Services, limiting drug price inflation, restraining anticompetitive practices pursued by pharmaceutical companies, and redesigning insurance coverage to promote access to safe and effective drugs are sensible and evidence based. Furthermore, it is possible for policymakers to advance both affordability of new drugs now and incentives for continuing innovation for the future. While these objectives are commonly discussed as stark tradeoffs in the popular press, Conti, Frank and Gruber argue the trade-off between prices and innovation need not be this stark and, in fact, is likely avoidable. There are ready policy options that will allow the U.S. to meet the goals of both controlling prescription drug costs and promoting investments in innovative new therapies that can make us healthier. In fact, the U.S. has successfully pursued policies in the past that improved incentives for innovation and affordability, from basic science investments to programs for financing innovative start-ups. In her testimony and the new papers, Conti details the significant win-win potential in legislation promoting innovation into selected clinical areas that are currently underfunded by the pharmaceutical industry. These investments would build on the considerable strengths of the currently proposed drug pricing reforms.

Professor Conti’s recent work on this topic may be found at The New England Journal of Medicine and the Brookings Institution.