Health care cost cutting needed but IPI model not the way

As a small business owner, rising healthcare costs are a perennial concern. However, I am deeply alarmed by a proposal by the Centers for Medicare and Medicaid Services (CMS) that attempts to cut costs by putting foreign price controls on US drugs by introducing the International Pricing Index (IPI) into Medicare Part B.

IPI would set the reimbursement rate for vital drugs under Medicare Part B that treat chronic conditions to what 14 other countries pay. While these countries may have lower drug costs, the IPI model comes with consequences that we cannot afford. The model would restrict short-term access to vital treatments, shrink medical innovation incentives and most importantly pose severe risks to vulnerable Medicare beneficiaries under Part B who are diagnosed with conditions such as cancer, multiple sclerosis, rheumatoid arthritis and more.

Part B drugs are complex, life-changing therapies that the United States has invested years and $90 billion annually in their research and development. In fact, U.S. research accounts for more than half of new drugs globally, making us a leader in medical innovation. The U.S Chamber of Commerce found that foreign price control such as IPI suppress 11-16 percent annually in global private research and development, impacting the number of innovative drugs brought into the market.

Studies also show that patients in the 14 developed countries where IPI is used, have less access to vital treatment. Between 2011-2018, patients in the U.S had access to 95% of cancer drugs in the market compared to patients in the UK and Greece who only had access to 74 percent and 8 percent of treatments. Economists have estimated that if the U.S. had adopted European price controls on pharmaceutical drugs between 1986-2004, the U.S would have produced 117 fewer drugs.

No question, cost savings in healthcare are needed. However, these efforts should not come at the expense of medical innovation and patient access. CMS should focus on patient-centric reform that will continue to allow American to lead in medical innovation. The IPI is not the right approach.

Karla Pollack
Principal, ABS Inc.