RELEASE: CAP Framework for Value-Based Drug Pricing Negotiation

Washington, D.C. — The Center for American Progress issued an updated policy proposal today to support value-based drug pricing negotiation. CAP’s drug pricing framework would empower Medicare and private payers to negotiate effectively for drug prices, backed by binding arbitration.

The issue brief builds on CAP’s previous drug pricing proposals and outlines a framework to establish a negotiation process for Medicare and private health care payers. This approach incorporates comparative effectiveness research, or CER, which compares the clinical benefits of two or more treatment alternatives, such as prescription drugs.

“This framework sets a much needed pro-patient, value-based system for drug pricing,” said Topher Spiro, Vice President for Health Policy at CAP. “It gives doctors more information on a drug’s clinical effectiveness. It makes critical medicines more affordable to patients and helps put their needs above those of drug corporations’ bottom lines.”

CAP offers four steps to encourage more effective negotiations of drug prices and help curb the cost of existing drugs:

  1. CER review determination
  2. Price recommendation report
  3. Public- and private-sector negotiations
  4. Protecting against excessive price increases

The Congressional Budget Office has said that Medicare would lack sufficient leverage to negotiate lower prices effectively absent additional policy changes, such as permitting Medicare to establish a formulary, or list of covered drugs. Under this proposal, the existence of the arbitration process would provide the needed leverage for Medicare without the need to develop a formulary. Lawmakers should consider adopting this framework to help consumers.

Read the full issue brief, “Negotiation Plus: A Framework for Value-Based Drug Pricing Negotiation,” by Topher Spiro, Maura Calsyn, and Thomas Huelskoetter, online here.

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For more information on this topic or to speak with an expert, contact Liz Bartolomeo at or 202.481.8151.