Indiana Patients and Employers Lose if the Government Sets Prices


Advocates of allowing government appointees to set certain drug prices are ignoring some potentially serious unintended consequences that could harm Indiana seniors and our state’s robust life sciences industry. As the president of a multi-generational manufacturing company within Indiana’s life sciences sector, I’ve seen firsthand the significant impact pharmaceutical research and development can have on both patients and our state’s economy.

While Congress has not released its final proposal on what’s known as government arbitration, we do know leaders are considering allowing government appointees to have the final say on the costs of drugs for millions of Americans enrolled in Medicare. This change would discard the market-based approach to drug pricing that has helped make America the world leader in the development of cutting-edge treatments for serious illnesses. It is paramount that Indiana representatives oppose a poorly thought out plan.

In European countries where government arbitration has been implemented, investments in drug research and development have stagnated and patients are routinely denied effective treatments that are freely available in the U.S. In fact, an analysis of 16 countries with arbitration policies found that their patients waited an average of 17 months longer than U.S. patients for access to innovative cancer drugs. That could be part of the reason why the five-year cancer survival rate is 42 percent higher for men and 15 percent higher for women in the U.S. than in Europe.

In addition to the health risks and access issues arbitration could pose for beneficiaries, it would also threaten the state and nation’s economy. By discouraging investment and innovation, binding government arbitration could diminish the $1.3 trillion in economic output generated by the U.S. biopharmaceutical industry. Our state’s $64.5 billion biopharmaceutical industry could be hit the hardest.

The life sciences sector plays a pivotal role in Indiana. We rank in the top five states for total number of life sciences businesses (1,751 companies), concentration of companies, and largest number of industry jobs. Biopharmaceutical jobs are especially prevalent, as Indiana has the second highest concentration of them in the nation. Of the approximately 56,000 Hoosiers who make their living in life sciences, about 24,000 are employed by biopharmaceutical companies, creating a spinoff effect that supports 165,000 total jobs throughout the economy.

Drug prices, set by unelected, government bureaucrats solely focused on reducing Medicare government spending will only discourage investment in the industry, reduce employment opportunities for Indiana workers, and hinder research and development of new treatments. 

Reducing investment in medical innovation will decrease future access to these new treatments and harm the approximately 1.2 million Hoosiers who depend on Medicare for vital treatments and medications. For their sake, and for the sake of Indiana life sciences companies and their employees, we should all make it clear to our elected officials in Washington that we do not want to see government arbitration become a part of Medicare.

Kevin Schaefer is the president of Schaefer Technologies in Indianapolis.

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