As state and federal governments seek to help people who can’t afford needed medications, their policies are likely to move through three phases.
The first—throwing money—is the method of states’ senior pharmacy programs and most proposals for a Medicare drug benefit. But high drug prices make that approach very expensive. This undermines coverage expansions. Further, because the marginal cost of producing additional pills is low, simply paying today’s high prices to expand coverage gives huge windfall profits to drug makers.
In 2000, Maine opened phase 2 by adopting legislation to cut drug prices substantially. Other states are now considering this strategy to aid people of all ages. And if states or Medicare do enact major coverage expansions, high costs will inevitably drive them to seek price cuts. Drug makers vigorously oppose any government efforts to cut prices and say such cuts would reduce their ability to finance vital research.
Phase 3 frames a peace treaty. Prices are cut substantially but drug manufacturers make up the resulting lost revenue through higher private and publicly-subsidized volume. Drug makers would win protection of their current profits and ability to finance research—and would commit to provide all the prescription drugs that all Americans need. Drug makers should negotiate a peace treaty before an angry Congress or numerous states slash prices unilaterally.
See dcc2.bumc.bu.edu/hs/ushealthreform.htmLearning Objectives: 1. Identify the evolution of state and federal efforts to make presription drugs more affordable. 2. Identify the political and financial reasons for this evolution.
Keywords: Access to Health Care, Drugs
Presenting author's disclosure statement:
Organization/institution whose products or services will be discussed: None
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.