Price and Costs

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On this page, you’ll find the Center’s research on the complex world of pharmaceutical pricing. Our focus will be breaking down current pharmaceutical pricing structures and processes and potential reforms to improve efficiency and innovation; evaluating the impact of regulatory-created inefficiencies such as Pharmacy Benefit Managers (PBMs) and the 340B program; and analyzing how policy proposals such as price controls and drug importation would undermine competition.

March 24, 2025 Blog, Innovation, Price and Costs

An analysis by the American First Policy Institute released today correctly notes that the drug price controls most OECD countries impose on innovative medicines jeopardize future innovations. Yet, while correctly diagnosing their high cost, the authors still recommend that price controls should be imposed on U.S. patients. Adopting such a policy will worsen health outcomes while potentially raising overall healthcare spending even more. The cost of capital for developing a new drug is $2.9 billion, including post approval research and development costs. Meanwhile, the...

February 27, 2025 Briefs, Price and Costs, Studies

SACRAMENTO – Nevada taxpayers could face millions in new bureaucratic costs and patients will likely see less access to life-saving drugs if state government mandates so-called “Maximum Fair Price” price controls on prescription drugs, finds a new brief released today by the Center for Medical Economics and Innovation at the nonpartisan, California-based, free-market think tank, the Pacific Research Institute. “Some Nevada lawmakers want to enact government price controls on prescription drugs in the name of lowering costs for patients,” said Dr....

February 5, 2025 Briefs, Innovation, Price and Costs, Studies

READ THE PDF A California appellate court invented out of whole cloth a new and troubling theory of tort liability. Specifically, the court held that drug companies have a duty to develop and bring to market drugs that are supposedly safer and more effective than another, FDA-approved drug the company sells already. The claim rested on factual premises contradicted by all publicly available information, the acceptance of which could seriously disrupt the FDA approval process. This disruption gives rise to an...

January 29, 2025 Issues, Price and Costs

On Jan. 17, just days before leaving office, the Biden administration announced the next 15 prescription drugs dispensed through Medicare Part D that will be subject to price controls on Jan. 1, 2027, under the terms of the Inflation Reduction Act. Among them is the blockbuster semaglutide, a prescription medication sold by Novo Nordisk under the brand names Ozempic, Wegovy, and Rybelsus for the treatment of Type 2 diabetes and obesity. The IRA required the federal government to publish the list...

January 29, 2025 Issues, Price and Costs

On this Wednesday and Thursday, two powerful Senate committees will hold confirmation hearings for Robert F. Kennedy Jr., President Trump's nominee to lead the Department of Health and Human Services. RFK Jr. is no stranger to controversy. But his most radical policy position may be one that relatively few people are talking about. Politico recently reported that RFK Jr. has "expressed openness" to seizing drug companies' patents and relicensing them to generic manufacturers—a move that would effectively implement roundabout price controls on...

January 27, 2025 Issues, Price and Costs

Just three days before President Biden left office, his appointees tried to tie incoming Trump staffers' hands on a health policy decision that affects millions of Americans and tens of billions in federal spending. On January 17, the Centers for Medicare & Medicaid Services announced a new list of 15 drugs under Medicare Part D that will be subjected to price controls under the Inflation Reduction Act on January 1, 2027. The list was announced this month despite the IRA not...

January 24, 2025 Issues, Price and Costs

California State Senator Scott Wiener, D-San Francisco, recently introduced a bill aimed at reining in pharmacy benefit managers (PBMs), the middlemen largely responsible for the dysfunction plaguing our nation’s prescription drug market. Wiener’s effort should attract the support of lawmakers on both the left and right. By cracking down on the activities of PBMs, they can deliver real savings for patients at the pharmacy counter. Read the op-ed here....

January 17, 2025 Blog, Briefs, Issues, Price and Costs

PRI’s scholars responded to today’s action by the Centers for Medicare & Medicaid (CMS) announcing 15 additional drugs under Medicare Part D that will be subject to government price setting effective January 1, 2027.  The action was authorized by the Inflation Reduction Act signed by President Biden in August 2022. According to Sally C. Pipes, PRI President, CEO, and Thomas W. Smith Fellow in Health Care Policy and author of the soon-to-be published book The World’s Medicine Chest: How America Achieved...

January 7, 2025 Briefs, Innovation, Price and Costs, Studies

READ THE PDF Executive Summary Reforms that will strengthen the biosimilar market and expand savings opportunities include: Reforming (ideally repealing) the Inflation Reduction Act’s price control measures. Improving the incentives underlying the current buy-and-bill system to better align the financial incentives of providers, payers, and patients. Promoting greater transparency to the opaque drug rebating system including addressing the rebate wall problem through comprehensive reform or prohibiting the anti-competitive rebating practices that are generally outlawed in other markets. Given biosimilars’ demonstrated ability to...

January 6, 2025 Price and Costs

The Centers for Medicare & Medicaid Services has proposed a rule expanding Medicare and Medicaid patients’ access to anti-obesity drugs such as GLP-1s. Congress is also considering such a move. Expanding coverage to these patient groups makes sense. Read the op-ed here....

December 2, 2024 Briefs, Innovation, Price and Costs, Studies

READ THE PDF Executive Summary The Inflation Reduction Act’s price controls discourage biosimilar development. Payment system inefficiencies, such as the buy-and-bill payment system and rebate walls, disincentivize the use of lower cost biosimilars. Despite the savings biosimilars have already enabled, there are barriers to further progress. First, the price controls from the Inflation Reduction Act (IRA) disincentivize biosimilar development. Second, the convoluted pricing system discourages greater use of lower cost alternatives. How the payment system disincentivizes their use varies depending on whether...

October 28, 2024 Briefs, Innovation, Price and Costs, Studies

READ THE PDF Executive Summary Since 2019, biosimilars have obtained a majority share of most markets where they compete. The combination of lower prices (both biosimilar and originator) and rising market share could have generated up to $35 billion in savings in 2024 dollars compared to an all-originator baseline based on PRI’s latest analysis. These savings demonstrate that, just like with small molecule medicines, biosimilars strike a beneficial balance between incentivizing innovation and promoting affordability. Lower-cost Biosimilars Are Gaining Market Share The share...

October 9, 2024 Innovation, Multimedia, Policy Proposals, Price and Costs

Low-cost biosimilars generated $19 billion in savings value in today’s dollars in 2023. But obstacles in the current drug pricing system meant that billions of dollars in potential savings were left unrealized. Join the Pacific Research Institute’s Center for Medical Economics and Innovation and panel of experts for a brief, informative webinar discussing how potential reforms can improve competition, generate more savings, and better serve patients and taxpayers. https://www.youtube.com/watch?v=-m7lNXr_dAw...

September 24, 2024 Price and Costs

Last week, a House subcommittee held a hearing on pharmacy benefit managers and their impact on the prices patients pay for prescription drugs.The hearing speaks to voters' concerns. Republicans and Democrats alike have identified the cost of prescription drugs as their No. 2 health care concern, according to polling this month from KFF.And PBMs deserve congressional scrutiny. These middlemen have used their enormous influence in the drug market to make prescription medications unaffordable for a sizable share of patients. Read the...

September 18, 2024 Innovation, Price and Costs

In a patently politicized press release, Senator Bernie Sanders (I-VT) who is  Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, claims that the U.S. price of Ozempic is too high. As evidence, he cites generic companies that claim they can sell Ozempic for less than $100 a month, an inherently flawed JAMA study that claims that these same diabetes drugs can be profitably produced for less than $5 a month, and inaccurate price comparisons with other countries. Debunking...

September 16, 2024 Price and Costs

It's easier to have a car or refrigerator shipped to your home these days than a prescription. To get even the most common prescription drug still requires a visit to the doctor, a trip to the pharmacy, and a convoluted series of negotiations between insurers, middlemen, and pharmaceutical companies. Fortunately, that's starting to change. In recent months, drug companies Pfizer and Eli Lilly have begun rolling out direct-to-consumer programs that let patients purchase basic prescriptions remotely. Read the full article at Forbes...

September 9, 2024 Policy Proposals, Price and Costs

The Inflation Reduction Act (IRA) effectively imposed price controls on a portion of the pharmaceutical market. Worse, by design, the reach of these price controls will expand every year. The intended consequence of the policy is to reduce overall spending on drugs, but all regulations have unintended consequences, too. While these consequences may be unintended, they need not be unexpected. In the case of the IRA, these unintended impacts now threaten to undermine the entire purpose of the policy. Read the full...

August 27, 2024 Price and Costs

Medicare this month announced the end of its first round of "negotiations" over the prices of 10 prescription drugs covered under the Part D benefit as authorized by the Inflation Reduction Act. The results the Biden administration has delivered are a lot less dramatic than they're letting on. According to the White House, the program will save the federal government an estimated $6 billion in 2026, the first year the new prices will be in effect, while reducing costs for seniors...

August 26, 2024 Price and Costs

Dozens of state and local governments are suing drug companies and pharmacy benefit managers, alleging that they're unfairly hiking the price of insulin. The plaintiffs say they're fighting for patients. They're less forthcoming about the fact that they've profited handsomely from the system they're now decrying. For years, these cities and states have insisted on a cut—if not all—of the rebates that these pharmacy benefit managers extract from drug makers when negotiating over whether and how to cover specific drugs.  ...

August 15, 2024 Blog, Innovation, Policy Proposals, Price and Costs

The federal government has announced the long-awaited results from the 2022 Inflation Reduction Act’s (IRA) drug price negotiations.[1] The Biden Administration has been crowing that they have achieved “a historic moment that will help lower prescription drug prices for millions of people across America.” Nothing could be further from the truth. The Biden Administration has sold out patients and the hope for future cures to achieve results that pale in comparison to the benefits enabled by efficient market competition. According to...