Making Medicines Affordable A National Imperative (2018) / Chapter Skim
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Total medical expenditures are rapidly approaching 20 percent of the gross domestic product and are crowding out other priorities of national importance. The use of increasingly expensive prescription drugs is a significant part of this problem, making the cost of biopharmaceuticals a serious national concern with broad political implications.
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, who interact with prescription drug insurers -- and sometimes directly with employers offering health insurance plans -- to negotiate prices both with manufacturers and with retail pharmacies. Adding further to the complexity, drug manufacturers very commonly offer price rebates to PBMs, but no meaningful information exists to determine the size of those 1 The term "biopharmaceutical sector" used in this report encompasses a wide range of participants from researchers and physicians to industrial producers, from public and private payers to intermediaries such as pharmacy benefit managers, and from health care organizations and care providers who can prescribe medications to patient advocacy organizations.
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. The resulting complexity of the system makes it difficult to understand the contributions of the various factors that affect drug costs, a difficulty only magnified by the fact that there is very little publicly available information concerning the financial transactions among the various participants in the biopharmaceutical supply chain.
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The overarching conclusion of this resulting report, Making Medicines Affordable: A National Imperative, is that consumer access to effective and affordable medicines is an imperative for public health, social equity, and economic development; however, this imperative is not being adequately served by the biopharmaceutical sector today. This conclusion is supported by the report's 32 findings on a variety of issues relating to the affordability of medicines, including the vital need to broaden the current understanding of the biopharmaceutical supply chain, the financial interactions among its participants, and the often contradictory and confusing nature of the information that is available.
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PROPOSED STRATEGIES TO IMPROVE THE AFFORDABILITY OF MEDICINES To approach the proper balance between affordability and future availability of medicines in the interest of public health, this report offers a set of eight specific recommendations, with interlinked actions for their implementation.2 Many of the recommended actions can be implemented by the relevant federal agencies with existing legislative authority; some, however, will require new legislation. In a few cases it is unclear whether existing authority suffices.
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Recommendation C: Assure greater transparency of financial flows and profit margins in the biopharmaceutical supply chain. Specific implementation actions are: • Require biopharmaceutical companies and insurance plans to dis close net prices received and paid, including all discounts and rebates, at a National Drug Code level on a quarterly basis.
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Recommendation E: Modify insurance benefits designs to mitigate prescription drug cost burdens for patients. Specific implementation actions include: • Establish limits on the total annual out-of-pocket costs paid by enrollees in Medicare Part D plans that cover prescription drugs by removing the cost-sharing requirement for patients who reach the catastrophic coverage limit.
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Oversight should include systematic collection and assessment of data from qualified medical providers and partici pating drug manufacturers regarding the volume of drug purchases eligible for 340B discounts, revenues generated from 340B program participation, and safety-net services funded by these revenues. Recommendation G: Ensure that financial incentives for the prevention and treatment of rare diseases are not extended to widely sold drugs.
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STEPS TOWARD AN IMPROVED BIOPHARMACEUTICAL SECTOR Economic incentives created by laws that protect intellectual property have served the United States and other countries well in terms of increasing the availability of prescription drugs. However, for a number of reasons, including the widespread adoption of health insurance that covers prescription drugs, in the United States the normal market forces that would be expected to control prices on these drugs have been dissipated.
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These options range from taxation on excess profits and federal appropriation of intellectual property to the further centralization of government price negotiation or price control, and implementing pricing models similar to those used in public utilities or defense. While legitimate arguments can be made that the package of actions recommended in this report could themselves produce unintended changes in some parts of the biopharmaceutical sector, the alternative is to preserve and propagate the status quo -- which, along with the benefits it has offered, would continue to produce damaging consequences on the health and welfare of the public.
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