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Health Policy Experts Voice Ways to Tame Rising Drug Costs, Protect Patients

Allison Inserro
Health policy experts laid out a series of proposals to bring down prescription drug costs, lower US healthcare spending, and protect patients in a series of 3 papers published recently in Health Affairs. The papers, supported by the Commonwealth Fund, advocate for increasing competition, applying value-based purchasing, and protecting patients from high out-of-pocket costs.
Health policy experts laid out a series of proposals to bring down prescription drug costs, lower US healthcare spending, and protect patients in a series of 3 papers published recently as Health Affairs Policy Options Papers.

The papers, supported by the Commonwealth Fund, advocate for increasing competition, applying value-based purchasing, and protecting patients from high out-of-pocket costs.

The first 2 papers—one by Jonathan J. Darrow and Aaron S. Kesselheim, MD, JD, MPH; and the other by Steven D. Pearson, MD, and co-authors—propose 5 ways to increase competition, both among brand name manufacturers and through lower-cost generic drugs:
  • Government agencies could make more information available about a drug’s value relative to its clinical benefit.
  • Pharmacists could have expanded ability to substitute prescribed medications with less expensive drugs that are chemically similar and just as effective.
  • The FDA could expedite the approval process for generic drugs and other potential competitors to existing therapies.
  • Policy makers could allow the importation of generic drugs from other countries, particularly during periods of drug shortages in the United States.
  • Regulators could crack down on frivolous patents that protect brand name drugs from generic competition.
In addition, Darrow and Kesselheim1 argue for Medicare, Medicaid, and other government payers to exclude coverage of low-value drugs altogether.

Pearson et al2 further propose allowing the government to make patent protection and other forms of market exclusivity for drugs contingent on manufacturers fairly pricing their products. Under such a system, higher-value drugs would be rewarded with longer periods of protection from competitors. They propose 4 additional ways to use value-based purchasing:
  • The United States could make greater use of comparative effectiveness research to negotiate the prices it pays to drug manufacturers—a strategy that all other industrialized countries follow.
  • Federal and state governments could assess penalties on drug manufacturers that fail to provide good value.
  • Insurers could pay different rates for drugs used to treat multiple conditions, based on the relative benefits of each treatment.
  • Insurers could negotiate outcomes-based agreements with manufacturers, which would be required to provide a larger rebate or a full refund when a drug doesn’t work as advertised.
The third paper, by Stacie Dusetzina, PhD, and colleagues,3 looked at how high prescription drug prices and a shift toward higher cost sharing by insurers interfere with the care of patients who need expensive specialty drugs. Both commercial insurers and Medicare Part D have moved away from co-payments and toward both coinsurance (where the patient pays a percentage of the drug’s total price) and higher deductibles.

However, when out-of-pocket costs become unaffordable, patients may stop taking necessary medicine. The authors propose instead that insurers charge co-payments for specialty drugs, rather than coinsurance.

Coinsurance is intended to make patients more cost sensitive, so they will “shop around” for better value. Coinsurance, however, serves little economic purpose in a market where patients cannot compare pricing because only 1 manufacturer sells each specialty drug.

Insurers also could give patients incentives to choose high-value drugs, perhaps by exempting them from deductibles or allowing lower cost sharing.

Policy makers could impose a limit on how much Medicare beneficiaries with Part D plans must spend out of pocket on prescription drugs.

References

1. Darrow J, Kesselheim AS. Promoting competition to address pharmaceutical prices. Health Affairs website. healthaffairs.org/do/10.1377/hpb20180116.967310/full. Published March 15, 2018. Accessed April 3, 2018.

2. Pearson S, Nichols L, Chandra A. Policy strategies for aligning price and value for brand-name pharmaceuticals. Health Affairs website. healthaffairs.org/do/10.1377/hpb20180216.92303/full. Published March 15, 2018. Accessed April 3, 2018.

3. Dusetzina S, Cubanski J, Rowland D, Ramsey D. Improving the affordability of specialty drugs by addressing patients' out-of-pocket spending. Health Affairs website. healthaffairs.org/do/10.1377/hpb20180116.800715/full. Published March 15, 2018. Accessed April 3, 2018.

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