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Getting to Lower Prescription Drug Prices: The Key Drivers of Costs and What Policymakers Can Do to Address Them

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Abstract

  • Issue: Unsustainably high prescription drug prices are a concern for patients, employers, states, and the federal government. There is widespread public support for addressing the problem, and enacting policies to lower drug prices has been a top concern for Congress and the administration over the past three years. Despite this attention, structural changes have not been enacted to rein in drug prices.
  • Goal: To document the drivers of high U.S. prescription drug prices and offer a broad range of feasible federal policy actions.
  • Methods: Interviews with experts and organizations engaged on policies related to prescription drug pricing. Review of policy documents, white papers, journal articles, proposals, and position statements.
  • Key Findings: Action in five areas is key to increasing access to and affordability of medications for Americans: 1) allow the federal government to become a more responsible purchaser; 2) stop patent abuses and anticompetitive practices that block price competition; 3) build a sustainable biosimilar market to create price competition; 4) fix incentives in the drug supply chain and make the supply chain more transparent; and 5) ensure public accountability in the government-funded drug development process. Congress and regulators have a wide range of tools at their disposal to address high drug prices and spending.

Introduction

Our 2017 report, Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions,1 described the activities and behaviors of pharmaceutical manufacturers and other parts of the prescription drug supply chain that led to unaffordable prescription drug prices. Three years later, we find that pharmaceutical manufacturers’ behavior is unchanged and that drug prices remain unsustainable.

During the past four years, the Trump administration has announced a number of proposals to address high drug prices but has implemented only small measures within its authority. Congress has held many hearings and enacted some modest pieces of legislation. To date, each chamber has also advanced separate major drug pricing bills: the House passed H.R. 3, the Lower Drug Costs Now Act, and, although it was never brought to the floor for a vote by the full Senate, the Senate Finance Committee approved S. 2543, the Prescription Drug Pricing Reduction Act (see the Appendices) — but Congress has not enacted the structural changes necessary to rein in drug prices.2 The result has been persistent public pressure on elected leaders to lower prescription drug prices, as those prices have continued to rise annually and new drugs have been introduced at unprecedented high prices. In an April 2020 poll, 65 percent of Americans agreed that the Trump administration had made “not very much” progress or “none” on controlling rising drug costs.3

As we detail in this paper, pharmaceutical manufacturers continue to extend monopoly protection of brand and biologic prices, delay or prevent competition, and continue unsustainable price growth. This is caused by patent gaming and manipulation of exclusivity periods and enabled by outdated drug coverage design that manufacturers use to their advantage to incentivize use of more expensive products and crowd out generic or biosimilar products. Overall, the pharmaceutical market no longer maintains the right balance of incentives to drive the invention of new products while maintaining effective generic and biosimilar price competition.

While further action is needed to substantially reduce high introductory prices and limit annual increases of prescription drugs, this will not address the drivers of high prices. We recommend a policy focus on the following five areas:

  1. Helping government to become a more responsible purchaser.
  2. Stopping patent abuses and anticompetitive practices that block price competition.
  3. Building a sustainable biosimilar market to create price competition.
  4. Fixing incentives in the drug supply chain and making the supply chain more transparent.
  5. Ensuring public accountability in the government-funded drug development process.

Below we discuss, in no particular order, some potential actions in each of these areas that Congress and the administration could consider taking.

 

Read the full report.


Notes

1. Henry A. Waxman et al., Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions (Commonwealth Fund, July 10, 2017).

2. Elijah E. Cummings Lower Drug Costs Now Act, H.R. 3, 116th Congress (2020); Prescription Drug Pricing Reduction Act of 2019, S. 2543, 116th Congress (2019).

3. Dan Witters, “In U.S., 66% Report Increase in Cost of Prescription Drugs,” Gallup, April 28, 2020.

Publication Details

Publication Date: October 1, 2020
Contact: Henry Waxman, Chairman, Waxman Strategies
Citation:

Henry A. Waxman et al., Getting to Lower Prescription Drug Prices: The Key Drivers of Costs and What Policymakers Can Do to Address Them (Commonwealth Fund, Oct. 2020). https://doi.org/10.26099/dys3-en63

Experts

Chairman, Waxman Strategies
Senior Advisor, Waxman Strategies
Jeremy Sharp
Vice President, Waxman Strategies
Ruth McDonald
Vice President, Waxman Strategies
KAHAARI KENYATTA
Associate, Waxman Strategies