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.

February 18, 2019 Price and Costs

*Featured in Kaiser Health News Morning Briefing* Today, Type 1 diabetes patients pay twice as much for insulin as they did in 2012. This is outrageous — but drug companies aren’t to blame. The problem is a dysfunctional supply chain that benefits everyone except patients. In today’s system, insurers hire third-party firms, known as pharmacy benefit managers, to manage drug plans. These PBMs negotiate with drugmakers and have the power to decide which drugs are covered by each plan. Each year, manufacturers dole out $150...

February 12, 2019 Price and Costs

In response to the problem of rising list prices for drugs, elected officials continue to propose counterproductive reforms. Whether it is importing drugs from Canada or indexing U.S. drug prices to the prices charged in other countries, these policies will make the current bad situation worse because they fail to understand the disincentives that are the root cause of the problem. Until now. A proposal by Health and Human Services Secretary Alex Azar, if implemented, would meaningfully improve the pharmaceutical market. The...

February 11, 2019 Price and Costs

Health and Human Services Secretary Alex Azar just released a sweeping proposal that would drastically change how Medicare pays for advanced cancer therapies and other potent medicines. The plan relies on foreign price controls to reduce drug spending by $17 billion over five years. Although drug spending may decline, the plan could increase health care spending elsewhere, as patients inevitably lose access to medicines. So while the savings is questionable, the negative health impact on patients is certain. Sec. Azar ought...

February 7, 2019 Price and Costs

Congress is poised to consider a bill that would allow Americans to import prescription drugs from Canada. The bill’s authors, Sens. Chuck Grassley (R-Iowa) and Amy Klobuchar (D-Minn.), label their effort as a bipartisan push to “help Americans who struggle to pay exorbitant prices for medication.” It’s noble of lawmakers to tackle prescription drug costs. Eight in ten Americans are concerned about the price of medicines, according to a Kaiser Family Foundation survey. But the Grassley-Klobuchar bill isn’t the right solution. While it...

February 7, 2019 Price and Costs

By Henry I. Miller, M.S., M.D. and Jeff Stier Trump administration officials keep searching for solutions to rising prescription drug prices, which are increasing faster than inflation. "Drug makers and companies are not living up to their commitments on pricing. Not being fair to the consumer, or to our Country!" President Trump tweeted on Jan. 5. Most of the administration's suggested remedies have been threats or the imposition of various types of price controls. On Thursday, Jan. 31, Department of Health and...

February 4, 2019 Price and Costs

In mid-January, three Democrats — Vermont Sen. Bernie Sanders, Maryland Rep. Elijah Cummings, and California Rep. Ro Khanna — introduced legislation that aims to reduce prescription drug prices. Their plan would essentially peg U.S. drug prices to those in five foreign countries where prices are typically lower because their governments forcibly control them. It would also open our borders to imported drugs from Canada and other countries. Their proposal is painfully shortsighted. It would slow pharmaceutical innovation and expose patients to dangerous counterfeits in...

January 24, 2019 Price and Costs

President Donald Trump and Sen. Bernie Sanders don’t agree on much. But they both believe in price controls. Both men recently introduced separate proposals to impose price controls on prescription drugs. Though both men are likely well-intentioned, their plans are deeply misguided. Both proposals would discourage drug research and reduce access to medicines. The Trump administration’s proposed rule, released this fall by Health and Human Services Secretary Alex Azar, would change the way Medicare pays for most cancer drugs and other medicines...

January 17, 2019 Price and Costs

In one of his first acts, Governor Newsom signed an executive order that will change how medicines are purchased in California. With visions of big-box store discounts dancing in his head, Governor Newsom has established a bulk program that will now purchase drugs for the state’s Medicaid program (Medi-Cal). The Governor believes that his executive order will create significant health care savings for the state, but he will be sorely disappointed. Imposing more government mandates and increasing bureaucratic control of the...

December 31, 2018 Price and Costs

On Dec. 18, Sen. Elizabeth Warren, D-Mass., introduced the Affordable Drug Manufacturing Act. The bill would create an Office of Drug Manufacturing to produce and sell generic medications. Warren hopes this government entity would solve "market failures" — her term for generic drug shortages and steep price hikes on off-patent medicines. The plan is absurd. The federal government has no business operating a drug manufacturer. If federal officials want to expand access to generic drugs (a worthy goal) they should harness the power of free markets. Within...

December 17, 2018 Innovation, Price and Costs

Despite the constant barrage of negative news, this is an exciting time for patients. Truly innovative medicines and gene therapies are under development. New gene therapies are particularly exciting because these therapies do not just treat diseases – they often cure them by fixing underlying genetic defects, frequently with only one dose. There is great optimism that these fundamentally new therapies will, ultimately, cure diseases like hemophilia and sickle cell disease, and even many ultra-rare diseases that were previously untreatable. Take...

November 19, 2018 Price and Costs

There is no shortage of bad ideas when it comes to the pharmaceutical market. One such proposal would allow drugs to be imported directly from other countries, such as Canada. Then there is the Trump Administration’s proposal that would effectively adopt foreign price controls on Medicare Part B drugs by implementing an international pricing index (IPI). These policies, if implemented, would harm the quality of health care in the U.S. by reducing patients’ access to medicines and harming future innovations. What’s...

November 16, 2018 Price and Costs

Health and Human Services Secretary Alex Azar just released a sweeping proposal that would drastically change how Medicare pays for advanced cancer therapies and other potent medicines. The plan relies on foreign price controls to reduce drug spending by $17 billion over five years. Although drug spending may decline, as the Congressional Budget Office has noted, the plan could result in increased healthcare spending elsewhere, as patients will inevitably lose access to medicines. So while the savings is questionable, the negative...

November 9, 2018 Price and Costs

Last month, the Trump administration proposed several reforms to drive down prescription drug prices. One measure would force pharmaceutical companies to mention the sticker prices of their medicines in television advertisements. The new mandate covers all prescriptions drugs reimbursed by Medicare or Medicaid that cost more than $35 a month. The administration hopes this change will empower patients to choose more affordable drugs and embarrass companies into reducing their prices. But the rule won’t achieve those goals. Instead, it would mislead customers into thinking drug prices are...

October 23, 2018 Price and Costs

This month, the Trump administration proposed a new rule that would require advertisements for prescription drugs covered by Medicare or Medicaid to include the list price of the medicine. To be sure, a free market is dependent on consumers making informed decisions. But this move would provide patients with incomplete, misleading numbers that would muddle their healthcare decisions. Patients almost never pay the full list price for their medication. After a drug is manufactured by a pharmaceutical company, its price and distribution are influenced by...

October 17, 2018 Price and Costs

The largest problems in the health care industry are often created by reformers envisioning themselves as free market saviors, when in reality they are merely advocates for more intrusive government regulations. The Trump administration’s proposal to require that drug advertisements include the medicine’s list price is such an example. On its face, requiring price disclosure appears to promote transparency and free markets. Why shouldn’t consumers know the price of a good before they purchase it? Of course, consumers should. The problem is that,...

September 4, 2018 Price and Costs

How can you tell if competition is working in a given market? Generally speaking, prices go down while quality goes up. Productivity increases as more efficient methods are discovered. Shortages are rare to nonexistent. And, most important, consumers win. Government intervention, monopolies, and other market distortions can disrupt the normal rules of supply and demand, fostering competition that's actually pernicious to consumers. These distortions are now a major problem in healthcare. With respect to medicines, the problem is that "everybody wins when list...

August 16, 2018 Price and Costs

Pfizer CEO Ian Read recently told investors that he believes pharmaceuticals will soon be sold without rebates. While this change, if it comes to pass, is undoubtedly positive for patients, a question naturally arises: why? After all, rebates and discounts are a normal part of most competitive markets. The problem is that a healthy competitive process does not currently exist in the pharmaceutical market because the current market structure does not effectively account for the interests of patients, who are the...

August 7, 2018 Price and Costs

Through its purchases of durable medical equipment (DME), the Centers for Medicare & Medicaid Services’ (CMS) helps many patients remain in their home and out of hospitals or other long-term care settings. These purchases cover a wide array of medical equipment including diabetes testing strips, wheelchairs, and oxygen tanks. Previously, CMS maintained a set fee schedule to compensate medical equipment suppliers, but this system was widely panned. The critics, including the General Accounting Office (GAO) and the Inspector General of the...

June 5, 2018 Price and Costs

In 2017, there were 46 new novel drug innovations, including new treatments for cancers, Parkinson’s disease, and serious skin infections. These innovations are essential for improving the quality of health care in the U.S. However, innovation is not sufficient. It is equally imperative to promote drug affordability through greater competition. Promoting both innovation and competition requires a careful balance. Thanks to the Hatch-Waxman Act of 1984, the incentives for chemically-based medicines reasonably promote both pharmaceutical innovation and a competitive drug market. Due to...

June 5, 2018 Price and Costs, Studies

By removing barriers holding back the increased use of biosimilars, savings could be significant. In a case study of infliximab, used to treat rheumatoid arthritis, Crohn’s disease, and other illnesses, reforms could realize an annual savings of between $412 million and $465 million....