Drug price controls may shorten lives -report

CHICAGO Tue Dec 16, 2008 12:01am EST

CHICAGO Dec 16 (Reuters) - Imposing European-style price controls on prescription drugs in the United States would result in modest cost savings that would be more than offset by shortened life spans as the pace of drug innovation slows, U.S. researchers said on Tuesday.

They said lowering insurance co-payments would be a better way of attacking the problem of rising prescription drug prices in the United States, which pays more per capita for pharmaceuticals than any other nation.

"We found policies that regulate the prices of drugs could result in modest savings for consumers, in the best cases on the order of $5,000 to $10,000 per person over a lifetime," said Darius Lakdawalla of the nonprofit Rand Corporation, who worked on two studies appearing in a special report on drug pricing in the journal Health Affairs.

"But in many other cases, those policies resulted in very substantial losses to consumers in the form of reduced life expectancy and those would be worth tens of thousands of dollars," Lakdawalla said in a telephone interview.

Some policymakers have suggested the United States adopt some form of price regulation as a way to curb rising prescription drug costs. Most European countries regulate drug costs, which is one reason European nations spend less than two-thirds as much per person on drugs each year than the United States.

Lakdawalla and colleagues used computer models of price regulation in 19 countries to simulate the impact of price controls that cut drug company revenues by 20 percent.

They said introducing price regulations into a largely unregulated market like the United States would result in less investment in developing life-saving drugs, which in the long run would reduce the life expectancy of Americans.

"We found longevity declines on the order of about a half of year for people at the age of 55 when you look out to people who are alive in 2050 and 2060," he said.

Lakdawalla said a better approach would be to cut drug insurance co-payments by 20 percent, which would increase life expectancy in the United States by a half year by 2060 as more people take needed drugs and higher drug profits stimulate innovation.

"In the best cases it would lead to a benefit on the order of $20,000 to $30,000 per person," Lakdawalla said.

All five papers in the section were funded by a grant from the pharmaceutical company Pfizer Inc (PFE.N). Lakdawalla also got funding from the National Institute on Aging.

F.M. Scherer of Harvard questioned some of the assumptions made by Lakdawalla in a commentary in the journal, including the assumptions about the rate at which lost drug company profits would translate into less innovation.

A team of researchers that included Harvard economist David Cutler, a health policy adviser for President-elect Barack Obama, suggested in the same journal that drug prices had reached a "turning point."

They noted that while drug prices tripled from 1997 through 2007, spending in 2007 grew just 1.6 percent, the slowest rate since 1974, as many brand-name drugs lose patent protection.

Cutler and colleagues noted that prescription drug spending trends have changed dramatically in the past five years, and assumptions based on older trends no longer apply. (Editing by Bill Trott)