Prescription drugs can be affordable and innovative



In the United States, patients pay exorbitant prices for prescription drugs. american prices for prescription drugs are 256 percent those of other industrialized countries – the highest prices in the world for the same drugs. The pharmaceutical industry maintains that Americans directly benefit from low price regulation as this facilitates access to new medicines and lower prices will reduce patients’ access to medicines. Expert analysis shows that other countries with significant drug price regulations actually have proportionately more pharmaceutical innovation than the United States.

Current laws encourage pharmaceutical companies to prioritize profits over patients. Unlike other industrialized countries which use different systems, including negotiation process– to ensure affordable drug prices, the United States allows pharmaceutical companies to set prices at the level they believe make them the most money. Although drug manufacturers must offer discounts for drugs paid for by programs such as Medicaid, Medicare, which spend 105 billion dollars in drugs per year — negotiating drug prices is legally prohibited. Even private insurers have less ability to lobby for discounts due to the monopoly power of pharmaceutical companies. These high prices harm the health of patients and drain the resources of federal, state and private health care payers.

Legislation such as RH 3—The Lower Drug Costs Now Act — would allow the US Department of Health and Human Services to negotiate prices directly with drug companies to reduce the cost of drugs. The bill ensures that Medicare registrants and privately insured patients will benefit from these prices, and it sets an upper limit of 120% of the average drug price in several peer countries if drug companies refuse to come to the table. negotiations.

According to the Congressional Budget Office (CBO), Medicare save around $ 448 billion over 10 years using this approach. HR 3 also limits price increases to keep pace with inflation, thus preventing exorbitant increases in drug prices. Opponents say this loss of revenue by drug makers will dramatically reduce drug innovation, thereby reducing patients’ access to drugs. The reality, however, is that drug price negotiations can promote drugs that benefit patients, not just the profits of drug companies.

Federal investment would promote truly useful drug research

The industry’s approach to drug development is focused on what will bring them the most money. A recent CBO report found that drug manufacturers decide how to spend on research and development according to the expected benefits. Pharmaceutical companies develop drugs to generate returns on their investment, not to develop dramatically improved treatments. For example, of the 47 new drugs approved in 2017, more than a third had no additional health benefits on those already approved.

In addition to the impact that price negotiation can have on drug development through pricing, the federal government also influences early stage drug development. HR 3 would increase the level of funding by using some of the savings from Medicare negotiations to reinvest in basic drug research.

First, HR3 invests billions of dollars in the National Institutes of Health (NIH) Innovative projects. Established under the 21st Century Cures Act, the four projects are:

In addition to NIH innovation projects, HR 3 would establish a pilot program to help fund later-stage clinical trials for urgently needed remedies, drugs for which existing financial incentives are unlikely to expand. As part of this project, the NIH would award contracts to pharmaceutical companies seeking to develop these drugs. Examples of innovation that the federal investment can induce include the COVID-19 vaccines used in the United States, which have all been built on federally funded research.

These targeted investments will help ensure that drug innovation continues as part of a drug pricing negotiation approach. Rather than allowing drug companies to focus research on what will maximize their profits, investing the savings from Medicare negotiations will ensure that drug companies focus on the health needs of the American people.


US patients and insurance programs pay the highest prices in the world for prescription drugs, making US healthcare spending less efficient and harming the health of patients. As part of a negotiating approach that also reinvests savings in critical medical research, prescription drugs will be more affordable and accessible to patients.

By reinvesting the savings that medicare negotiations would realize, the federal government can ensure that the drugs that will eventually hit the market reflect the needs of the public and are affordable.

Gabriela Gutierrez is a former intern with the Center for American Progress health policy team and a student at the University of Richmond. Thomas Waldrop is a policy analyst for health policy at the Center.



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