Introduction into the USA of European-style controls on prescription drug prices could generate modest savings in the nation’s health costs but would also stifle the medical innovation that can extend lives, to the detriment of future generations, researchers have warned.

A better policy would be for the US government to reduce or abolish drug co-payments, as this would not only improve public health by boosting the use of medicines but also encourage innovation, conclude two new studies conducted by non-profit research organisation the RAND Corporation, published on-line today in the journal Health Affairs.

The researchers, who created the first economic models to help predict the impact of what might occur if the US were to impose price regulations on prescription drugs, conclude that such a move would represent “a risky policy strategy” that would modestly lower health costs but also have “a longer-term cost of reducing development of new drugs that can reduce suffering and prolong life," said Darius Lakdawalla, director of research at the Bing Center for Health Economics at RAND.

The study findings reveal that, if US price regulations had been imposed in 2005 that cut drugmakers' revenues by 20%, this would reduce lifetime spending on prescription drugs among people aged 55-59 by about $9,000 in 2010, growing to about $14,400 in 2060.

However, they also show that the lower drug company profits would discourage investment in research, slowing the pipeline of new drug treatments and shortening expected life spans. For Americans who were aged 55-59 in 2010, life expectancy would decline by two-tenths of a year, while the life expectancy of people in this age range in 2060 would drop by 0.7 years. The researchers focused on the impacts of such policies on people aged 55-59 because “the elderly and near-elderly” account for a majority of drug spending, and it is around these ages that the health benefits will first appear.

The costs assigned to price regulations - representing the monetary value of shorter life spans caused by a slowdown in pharmaceutical innovation - would reach $51,000 for Americans aged 55-59 in 2060, and this loss of medical innovation would also affect Europeans, who would see shorter life spans similar to those experienced by people in the US, the researchers note.

On the other hand, they also found that lowering drug co-payments for Americans by 20% would increase US life expectancy by about 0.5 years by 2060 - similar to the gains created by major medical breakthroughs such as the development of heart bypass surgery - and increase lifetime costs for prescription medications by $7,900. Such a policy would stimulate smaller life expectancy gains and higher drug spending in Europe, they add.

- The RAND papers published today in Health Affairs are entitled US Pharmaceutical Policy In A Global Marketplace and The Effect Of Regulation On Pharmaceutical Revenues: Experience In 19 Countries. Funding for the project came from Pfizer, the National Institute on Aging and the Bing Center at RAND.