Price and Costs

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.

Biosimilars could generate savings of about $116 million in New Jersey annually—including the state’s Medicaid program and patients with commercial insurance, according to a new issue brief by the Center for Medical Economics and Innovation at the Pacific Research Institute. Nationwide, those annual savings could reach $7 billion. PRI is a San Francisco-based free-market think tank. “We broke it down so you can look at it by state total and then breakout how much is for Medicaid which is directly applicable...

“Three hundred forty-five billion dollars in savings versus the cost of eight to 15 fewer drugs over 10 years, I frankly think it’s worth it.” Rep. Darren Soto (D-FL), hearing before the House Energy and Commerce Committee In the above quote, Representative Soto is defending H.R. 3, the drug price control bill Speaker Nancy Pelosi is advocating. While the Congressman believes that the costs of price controls are “worth it”, patients living with diseases that lack an effective treatment may disagree. While there has...

Despite their abysmal track record, government solutions are back in vogue. Ostensibly, government’s scale, leverage, and freedom from profit will unlock potential health care savings that are beyond the reach of the private sector. At their most extreme, reforms such as “Medicare for all” call for a complete government takeover of the health care system. Proponents of single payer reforms claim that only a complete government takeover of the health care sector can eliminate the health care sector’s inefficiencies and ensure 100 percent...

Influenza — the flu — is more than a bad cold. Seasonal outbreaks mean not only misery but increased hospital admissions and deaths. The last flu season, from October 2018 until May 2019, caused up to 42.9 million illnesses, up to 647,000 hospitalizations and up to 61,200 deaths, according to preliminary numbers from the Centers for Disease Control and Prevention. Those figures are slightly higher than the average over the last decade. What can we expect this year? Australia’s flu season, which...

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Biosimilars have the opportunity to bring significant savings to state Medicaid programs and consumers with commercial insurance according to a new study released today by Pacific Research Institute. “Every state would experience significant savings in the state Medicaid programs from expanding the use of biosimilars compared to the more expensive originator biologics,” said Dr. Wayne Winegarden, director of PRI’s Center for Medical Economics and Innovation and author of the new issue brief on biosimilars. “The same benefits will also accrue to...

When it comes to determining value, the U.S. health care system faces unique challenges. Without a better approach, the twin goals of continued innovation and broad-based drug affordability will be difficult, if not impossible, to maintain. Value assessment models are quickly becoming the approach du jour to overcome these challenges. However, value assessment models suffer from several flaws, but perhaps most importantly, as applied, these models assume that there is one number that accurately portrays the value of a medicine to all patients. Such an...

Much of the medical progress in the past half-century has involved expensive, high-tech diagnostic tests and therapies. But it would be a mistake to gainsay the value of inexpensive, low-tech innovations. Consider the problem of falls, which are both a cause and effect of declining health in the elderly. They are the leading cause of injury-related visits to U.S. emergency rooms and of accidental deaths for Americans over 65. Preventing falls or reducing their impact would help millions of people and...

San Diegans and all Californians will pay a high price should a bill introduced by Assemblyman Jim Wood, a Democrat from Santa Rosa, become law. Proponents claim the bill is necessary to rein in anti-competitive practices by the pharmaceutical industry, but in reality, it will delay generic entry and raise the costs of medicines for Californians. The ostensible rationale for Assembly Bill 824 is to stop “pay-for-delay” tactics. “Pay-for-delay” refers to the practice of patented drug manufacturers paying off generic manufacturers for the sole...

Making medicines more affordable for patients promises to be a top policy priority for Congress when it returns from its August recess. Achieving this goal does not require new, elaborate, government programs or regulations. It requires reforms that will empower biosimilars to more effectively compete against originator biologics. To see why a little background is needed. Consider that the growth in spending on drugs that includes all discounts and rebates grew 3.5% annually between 2009 and 2018 according to IQVIA’s annual review of...

The Trump Administration on July 31 announced steps that could lead to the importation of prescription drugs from Canada, where prices are lower. This strategy is favored by President Trump but has long been opposed by many Republicans. Health and Human Services Secretary Alex Azar said that the policy would enable Americans to “get the benefit of the deals that pharma themselves are striking with other countries.” The fate of this initiative is uncertain after the failure of the administration’s last two proposals...

The Trump Administration's Department of Health and Human Services (HHS) has officially proposed legalizing the importation of drugs from Canada (e.g. the Safe Importation Action Plan). Canadians’ reactions provide an important perspective demonstrating why drug importation will harm the U.S. Despite assurances from Prime Minister Justin Trudeau, Canadians are worried that the U.S. proposal will impose severe costs on Canadians. Their concerns are well founded. Typical of their reaction, the Canadian Pharmacists Association (CPhA) has noted that the Canadian medicine supply is not equipped...

A smarter way to curb drug prices through imports By Henry I. Miller, M.S., M.D. and John J. Cohrssen The Trump administration last week announced steps that could lead to the importation of prescription drugs from Canada, where prices are lower. It is a goal supported by President Trump, but long opposed by many Republicans . . . Instead of pushing for piecemeal steps that will continually run into political opposition and legal challenges, the administration should take a broader approach — by establishing...

From the time we were toddlers, it has always been tempting to bang the square peg into the round hole. After all, there is always that one square peg that seems like it should just about fit into that round hole, and it would feel so satisfying if it did. Alas, square pegs don’t fit into round holes. The analogy is apropos for Congress’ current approach to drug prices. In the latest iteration, the Senate Health, Education, Labor and Pensions (HELP)...

Report: Growing biosimilar market could save billions in health spending by Paige Minemyer Growing the biosimilar market could lead to significant healthcare cost savings, according to a new report, with the opportunity for billions in cost reductions. An analysis (PDF) from the Pacific Research Institute, a free market think tank, shows today the limited biosimilar market share saved about $253.8 million per year in spending. If biosimilars gained a 25% market share, those savings would increase to $2.5 billion, they said. If the market share increased further,...

Cures for Cancer Could Grow on Trees By Kathleen L. Hefferon and Henry I. Miller Politicians talk a lot about farming but seldom about “pharming,” even though the latter can also have a big impact on Americans’ pocketbooks—and their health. The punny name refers to genetically modifying plants such as corn, rice, tobacco and alfalfa to produce high concentrations of pharmaceutical ingredients. Many common medicines already come from plants, including morphine, the fiber supplement Metamucil and the cancer drug Taxol. Yet heavy-handed...

Biosimilars Struggle to Gain Market Share in the U.S., Analysis Shows By Alex Keown Over the past several years, the U.S. Food and Drug Administration has approved a number of biosimilar medications, therapies that have similar properties to a branded drug, but are different in composition, which differentiates them from generic drugs. The approval of biosimilar treatments has been supported at the highest levels as a means to increase competition in the market and help regulate some of the high costs of prescription...