CEA recommends pricing reforms at home and abroad

The Council of Economic Advisers issued a white paper proposing ways that the U.S. government can reduce drug prices while also fostering innovation. The paper included recommendations to reform policies that hinder price competition at home and implement policies to limit "free-riding" abroad.

The group said ex-U.S. drug developers and governments rely on U.S. patients and tax payers to finance R&D. It said that because most ex-U.S. governments -- as their markets primary buyers -- “force” drug manufacturers to comply with pricing rules to gain market access, they are able to set drug prices below that of the U.S., which erodes returns to innovators. The group estimated that among Organization for Economic Co-operation and Development (OECD) countries, Americans pay more than 70% of patented biopharmaceutical profits, despite the fact that the U.S. accounts for 34% of OECD GDP at Purchasing Power Parity. ...