How to Decrease the Cost of Drugs?

While drug affordability is no doubt the top concern of the public, the congressional majority in the U.S. House of Representatives is divided on how to proceed with this public health matter.

Last year in may, 43 states and Puerto Rico sued drug companies for inflating prices by up to 1000 percent from 2013 to 2015. It is no secret that drug companies possess monopolistic market power. The market has few competitors, leaving drug companies free to set prices as high as they wish, with little regards to the actual therapeutic benefits the drugs provide. Drug companies can gouge patients and taxpayers for a simple reason: they legally can.

I find that the lack of legislation and strict regulation upon pharmaceutical companies when determining drug prices is one of the key problems in this issue.
An institute that assesses the values of pharmaceutical drugs should be established within the National Institutes of Health (NIH). The institute would asses the product, accounting for factors such as the drug’s therapeutic benefit, its uniqueness in the market and the disease burden targeted by the drug along with many other factors. Pharmaceutical companies would be required to submit documents outlining the drug’s risks and benefits, clinical evidence and produce records. The institute would then further consider clinical studies, economic analyses, and public comment.

Drug companies would be required to submit to the institute a dossier of clinical evidence that speaks to the drug’s benefits and risks. The institute would also consider clinical studies, economic analyses, input from a council of citizens, and public comments. If clinical evidence is lacking, the institute could contract with academic research centers for independent studies—a function with which the NIH has ample experience.

On the basis of this assessment, drug companies would negotiate prices with the secretary of the U.S. Department of Health and Human Services (HHS). But if they could not come to an agreement, the institute would determine the new drug’s justified price.
For all old drugs, the baseline assumption would be that the justified price is the average price charged in peer countries that evaluate a drug’s value. Because there are important demographic and health differences between the United States and other countries, HHS or the council of citizens could refer a drug to the institute for review, resulting in a departure from the baseline. Annual price increases for old drugs would be justified only if they were less than a measure of inflation.

In all cases, the windfall profits tax—which would apply if a drug’s list price exceeded its justified price—would serve as a deterrent. There would be no reason for a drug company to price above the justified price because any profit from doing so would be recovered. But in the event that the tax was triggered, revenues would be rebated to consumers.

Nearly 1 in 3 Americans reports that they have not taken medicine as directed due to the cost. Congress must act on legislation that meets the scale of the problem; it is time to treat skyrocketing prescription drug prices as a national emergency.

Categories: Clinical