Washington, D.C. — Compared with peer nations, the United States has had the highest per capita prescription drug prices for more than a decade. Today, 3 in 10 U.S. adults taking prescriptions say that they cannot take their medication as prescribed due to high costs. A new report from the Center for American Progress explains how money flows through the pharmaceutical ecosystem and provides recommendations on how policymakers should address their high prices.
Through the Inflation Reduction Act, the federal government now has new authority to negotiate Medicare drug prices, which the Congressional Budget Office projects will generate savings of more than $100 billion over 10 years. This report examines the pharmaceutical supply chain, the drug payment system, and what actions policymakers can take to lower the cost of prescription drugs for more people.
The report outlines six key policy recommendations to address high prescriptions drug costs:
- Stop patent abuse by pharmaceutical manufacturers: Policymakers should pass several bipartisan bills that would revise the patent and U.S. Food and Drug Administration (FDA) approval processes and explicitly enumerate the authority of antitrust enforcement agencies to police bad behavior.
- Tighten regulation of pharmacy benefit managers: Congress should support the bipartisan Pharmacy Benefit Manager Reform Act of 2023, which would provide a clear-cut road map for how to conduct federal oversight of pharmacy benefit managers (PBMs).
- Introduce value-based drug pricing: Implementing value-based pricing would require drug prices to correspond to the benefit they provide to patients. Value-based pricing models consider alternative therapies and whether new drugs present a safer or more effective option than what is currently on the market.
- Expand Inflation Reduction Act drug negotiation and inflation rebate provisions: Policymakers should expand the scope of the Inflation Reduction Act’s maximum fair price negotiation and inflation-based rebates to protect even more Americans from price hikes on medications.
- Implement limits on out-of-pocket costs: Congress should extend the maximum out-of-pocket expenditure protections of the Inflation Reduction Act to the commercial market as well as its out-of-pocket “smoothing” provisions to protect patients from massive pharmacy bills at the beginning of their plan year.
- Build greater resiliency into the supply chain: Congress should expand the FDA’s authority to monitor the drug market by requiring greater manufacturer transparency. Congress should also consider policies to incentivize domestic manufacturing of drugs and sourcing raw materials to further protect the American drug supply.
“The Inflation Reduction Act was a monumental step toward addressing high prescription drug prices and costs under Medicare, protecting millions of American older adults and disabled people,” said Nicole Rapfogel, policy analyst for Health at CAP and co-author of the report. “Now it is up to Congress to build on this progress and create a prescription drug reform package that addresses the industry as a whole, from manufacturing to the point of sale. Policymakers must move forward with a comprehensive legislative approach to bring down prescription drug costs and improve access to lifesaving medicines for all Americans.”
Read the report: “Following the Money: Untangling U.S. Prescription Drug Financing” by Sam Hughes and Nicole Rapfogel
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