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.

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....

May 22, 2018 Price and Costs

Massachusetts may soon stop paying for some of the lifesaving medicines its poorest residents count on. State officials recently requested permission from the federal government to restructure MassHealth, the state's Medicaid program. If their waiver is approved, a small group of state bureaucrats will determine which drugs are off limits to the state's 1.9 million Medicaid beneficiaries. Many foreign countries tightly restrict which medications patients can take. Such rationing often proves fatal. Importing this system to Massachusetts would be a callous mistake. The...

May 17, 2018 Price and Costs

Due to its national implications, last week’s introduction of the Department of Health and Human Services’ (HHS) blueprint on drug prices is garnering all the attention. Despite its importance, HHS’ blueprint should not overshadow the many poor, and even unconstitutional, policy proposals that are occurring at the state level. For example, Maryland passed a drug-price-gouging law in 2017 that empowered the Attorney General (AG) to take legal action against generic drug companies if the AG judged these price increases to be...

May 4, 2018 Price and Costs

A U.S. district court in Montana just imposed a $34 million fine on Canada Drugs, an online pharmacy charged with selling counterfeit medications to unsuspecting Americans. Some of the drugs contained no active ingredients. Canada Drugs isn’t the only online pharmacy that puts patients’ lives in serious jeopardy. The National Association of Boards of Pharmacy recently examined more than 11,000 online pharmacies and found that 96 percent were operating illegally. Many of these sites claim to be Canadian. But they often have no...

April 12, 2018 Price and Costs

Expenditures on prescription drugs grew 12.4 percent in 2014 and 8.9 percent in 2015. These eye-popping data are not representative of the long-term expenditure trend, however. Not only did the growth in prescription drugs expenditures slow to 1.3 percent in 2016, longer-term (between 2009 and 2016), the average annual growth in pharmaceutical expenditures was 3.8 percent while the average annual growth in health care expenditure was a faster 4.2 percent. Obviously, if the growth in pharmaceutical expenditures is less than the growth...

February 7, 2018 Price and Costs

During Tuesday's State of the Union address, President Trump pledged to drive down drug prices. That's a worthy goal. And fortunately, the Trump administration is already pursuing it in a way that protects patients and encourages research and development. Many of the strategies that candidate Trump proposed on the campaign trail would have done more harm than good. Candidate Trump often agreed with Hillary Clinton and Sen. Bernie Sanders on drug prices. They all wanted to repeal Medicare Part D's "non-interference clause,"...

December 14, 2017 Price and Costs

According to the five-second rule, you can still eat your food that has fallen on the floor, so long as you picked it up within five seconds. Only, this common perception is bad advice. In reality, if a person eats food that has fallen on a dirty floor, he risks getting sick because it only takes milliseconds for bacteria to contaminate it. The five-second rule is a myth. The myth of the five-second rule exemplifies how common perceptions can often lead to...

December 12, 2017 Price and Costs

The Trump administration recently announced a $1.6 billion cut to the badly abused "340B" program, which forces pharmaceutical companies to sell medicines to hospitals that treat significant numbers of poor patients at steep discounts. A bipartisan group of senators -- including supposed fiscal hawks like Sens. John Thune, R-S.D., and Rob Portman, R-Ohio -- are trying to block the reform. That's disappointing. Hospitals are exploiting 340B to enrich themselves at the expense of poor patients. Their abuse of the program drives up...

December 11, 2017 Price and Costs

Tomorrow, the Senate Health, Education, Labor & Pensions Committee (HELP) will discuss a proposed alteration to Medicare. The proposal comes from a report released in late November by the National Academies of Sciences, Engineering, and Medicine. NASEM urges Congress to allow federal bureaucrats to negotiate Medicare drug prices directly with pharmaceutical companies. Currently, private insurance companies conduct these negotiations. The academies believe the federal government could use its bulk purchasing power to obtain lower drug prices for Medicare beneficiaries. NASEM is wrong. Giving the government negotiating authority would stifle...

October 12, 2017 Price and Costs

Abraham Kaplan famously noted that if you, “give a small boy a hammer, he will find that everything he encounters needs pounding.” Put differently, solving problems requires the right tool, not the convenient tool. Congress should remember this wisdom in its upcoming deliberations regarding the cost of prescription drugs. The convenient tool when it comes to the health care system’s affordability problem is price controls. After all, the government can limit price increases in any part of the health care system...

October 10, 2017 Price and Costs

The U.S. health care system needs systemic reforms that comprehensively address the problems of declining quality and rising costs. Alas, beneficial systemic reforms will not be implemented any time soon. There are still opportunities for Congress to implement tailored reforms that can help address these problems in the near term. One such opportunity is reforming the out-of-control 340B drug pricing program (the federal drug discount program created under the Veterans Health Care Act of 1992). The intent of the 340B program...

September 20, 2017 Price and Costs

Imagine a pharmaceutical market designed by Lewis Carroll’s Mad Hatter. In contrast to almost every other market, he might begin by charging wholesale prices that are higher than retail prices. He would then make sure that the higher wholesale price goes, the lower retail prices can become. And finally, he would ensure that not everyone could purchase their medicines at the low retail prices – although the reason why would be convoluted and random. While we can be certain that the...

September 11, 2017 Price and Costs

The refrain that pharmaceuticals are driving the health care affordability problem has been repeated so often that it is becoming an illusory truth – people believe it to be true simply because they have heard it repeated so often. Obviously, repeating the same incorrect statement over and over again does not make it so. It does squander valuable time as legislatures continually consider bills with no hope of improving the quality, or reducing the costs, of health care. For instance, California is...

July 21, 2017 Price and Costs

The drama of “repeal and replace” resembled an unfunny version of a Monty Python skit, continuously claiming that it was “not dead yet”, and even that it was “getting better” only to be put out of its misery in the end. The end of repeal and replace will not end the push for health care reform. There are simply too many problems that must be addressed – one way or another. One of these issues gaining traction is the growing push...

May 9, 2017 Price and Costs

Click here to read PRI's new issue brief, The Economic Costs of Pharmacy Benefit Managers Express Scripts, the largest pharmacy benefit manager (PBM) in the nation, is discovering just how much customer service matters. It may also be discovering that suing your biggest customer in court is generally not considered good customer service. Should Anthem Inc. withdraw its business from Express Scripts as it has indicated, then clearly the largest for-profit health insurance company will have made the determination that the value...