New report proposes 8 fixes for high drug costs
- A newly published report from the National Academies of Sciences, Engineering and Medicine calls for improved access to affordable medicines in the U.S. as "an imperative for public health, social equity, and economic development".
- Overall medical expenditures now make up 18% of the U.S. gross domestic product, according to the Academies, although drug costs only represent a slice of that overall spending.
- The report includes eight recommendations and 27 actions to improve the affordability of prescription drugs without deterring industry from developing new drugs.
"High and increasing costs of prescription drugs coupled with the broader trends in overall medical expenditures, which now equals 18 percent of the nation’s gross domestic product, are unsustainable to society as a whole," said Norman Augustine, former chair of the National Academy of Engineering and chair of the report committee, in a Nov. 30 statement.
The team putting together the report focused on a number of key issues that it described as "market failures" —such as the lack of competition based on the patent protection process, the imbalance between the negotiating power of suppliers and purchasers, and convolutions in the supply chain.
In response to the challenges these market failures pose, the committee made eight principal recommendations:
- Allow the Department of Health and Human Services to directly negotiate prices with drug manufacturers, and authorize the agency and private payers to expand flexibility in formulary design
- Further discourage so-called "pay for delay" agreements between branded companies and generics makers. Authorize the Food and Drug Administration to seek reciprocal generic drug approval agreements with other countries.
- Require disclosure of information from insurance plans about average net prices paid for prescription drugs
- Disallow companies to deduct direct-to-consumer advertising for prescription drugs as a business expense on taxes to the federal government
- Establish limits on the total annual out-of-pocket costs paid by enrollees in Medicare Part D plans that cover prescription drugs.
- Increase oversight of the 340B program.
- Revise the Orphan Drug Act to ensure financial incentives for rare disease drug development are not diverted to widely sold drugs.
- Increase incentives for medical providers to select treatments that are cost-effective.
Many of these are familiar proposals, and some touch on topics currently hotly contested within the medical industry (such as regarding the 340B program). While scrutiny of rising drug costs has continued, there has so far been little momentum for executive action on pricing from the Trump administration.
Drugmakers have continued to push back on any potential major challenges, which currently are bubbling up from the state level rather than top down from the federal government.
For industry, the key question is whether cutting drug prices and tightening patent rules will have an impact on return on investment, and therefore the amount that can be reinvested in innovation. These concerns are reflected in the inclusion of dissenting viewpoints, from Henri Termeer, previously the CEO of Genzyme (now deceased) and from Michael Rosenblatt of Flagship Pioneering, into the report.
- National Academies of Sciences, Engineering and Medicine Press release
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