Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions

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    Prescription drug prices and spending are contributing to unsustainable health care costs
    Congress and regulators can pursue a wide range of policy actions that would curb high drug prices

Abstract

Issue: Historic increases in prescription drug prices and spending are contributing to unsustainable health care costs in the United States. There is widespread public support for elected officials to address the problem.
Goal: To document the drivers of high U.S. prescription drug prices and offer a broad range of feasible policy actions.
Methods: Interviews with experts and organizations engaged with prescription drug development and utilization, pricing, regulation, and clinical practice. Review of policy documents, proposals, and position statements from a variety of stakeholders.
Key Findings: Congress and regulators can undertake a wide range of policy actions to begin to rebalance incentives for innovation and price competition, prioritize patient access and affordability, and maximize the availability of information to patients, providers, and payers.

Executive Summary

Historic increases in prescription drug spending and prices are contributing to unsustainable health care costs in the United States. Caught in the middle are patients. Faced with rising out-of-pocket drug costs, some must choose between taking life-saving drugs or paying the rent. Because the pharmaceutical market is complex and diverse, it will be challenging to rein in costs while still encouraging drug innovation. But it is certainly possible. There are many practical policies that could significantly curtail prices while incentivizing robust research and development.

This report documents 10 major problems that play a role in high U.S. prescription drug prices. These problems, along with their specific drivers, are creating barriers to health care access that affect patients, providers, and payers. We also identify a broad range of feasible policy actions that would curb high drug prices. The report is intended not as an exhaustive list of recommendations but as a means of fostering discussion and consensus among policymakers and stakeholders.

Our findings and conclusions are based on interviews with subject matter experts and organizations that are engaged with prescription drug development and utilization, pricing, regulation, and clinical practice (see appendix). We also reviewed policy documents, proposals, and position statements from a variety of stakeholders and performed an extensive literature review.

The 10 major problems are:

  • High launch prices and high annual increases for patented brand-name drugs.
  • Brand-name drugs, with Orphan Drug Act market exclusivities, are introduced with high launch prices and experience high annual price increases.
  • Some manufacturers create, or take advantage of, natural monopolies for drugs that enable them to significantly increase prices.
  • The lack of robust competition among manufacturers of generic drugs results in less price competition and higher prices.
  • The lack of price competition among biologics and biosimilars results in higher prices.
  • Anticompetitive behavior by some manufacturers undermines competition, resulting in higher prices.
  • Some manufacturers use current patent-protection policies for brand-name drugs to extend monopoly pricing.
  • Patients, providers, and payers lack information about the comparative effectiveness of drugs at the point in time when critical health care decisions are made.
  • The pharmaceutical distribution system does not make essential pricing information available to patients, providers, and payers at the point of care—information that patients and their providers need when deciding on the best course of treatment.
  • Federal law imposes limitations on state authority to negotiate prices for Medicaid and implement other price-related measures to reduce high drug prices.

This report also discusses a broad range of feasible policy actions that have been proposed by various stakeholders, experts, and researchers and could be further developed by policymakers to address high drug prices. Some of the actions identified will have a direct impact on pricing, while others may have an indirect impact but could lead to other favorable outcomes.

Our goal is for policymakers and stakeholders to use this resource to help identify the range of factors driving high prescription drug prices and reach consensus on the most significant problems affecting patients’ access to affordable drugs. With a greater understanding of the issue, policymakers and stakeholders will be better positioned find a path to bipartisan solutions.

Read the full report.

Downloads

Publication Details

Publication Date: July 10, 2017
Authors: Henry Waxman, Bill Corr, Kristi Martin, Sophia Duong
Contact: Henry Waxman, Chairman, Waxman Strategies
Editor:
Maggie Van Dyke
Citation:
H. Waxman, B. Corr, K. Martin et al., Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions, The Commonwealth Fund, June 2017.

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