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Regulating Drug Prices in the U.S.

Big Picture


The pharmaceutical industry is a large part of the healthcare and technology sectors. However, prescription drug prices are especially high in the United States. There has been improvement in drug coverage for those covered by Medicare or Medicaid, but because the United States does not have a universal health insurance system, many are left paying for prescriptions out of pocket, especially because of the high deductibles seen in many commercial insurance plans.


Operative Definitions


  1. Generic: Generally a lower cost prescription drug that is identical to the brand name in all chemical and medical ways but no longer has a patent on it.

  2. Copay: The set out-of-pocket price paid for a medical service after insurance. 

  3. Coinsurance: When the patient shares the price of a service with the insurer at a specified ratio, such as 80% insurance coverage and 20% patient contribution. 

  4. Real time prescription benefit (RTPB): A tool embedded into the Electronic Health Record  (EHR) software to help physicians and patients make joint and informed decisions regarding up-to-date prescription drug pricing. Currently backed by the American Medical Association (AMA).

  5. Price-gouging: The price increase of pharmaceutical drugs to a level that is considered unreasonable or unfair.


Important Facts and Statistics 


  1. The average copay for generic drugs is $6.06, while brand-name drugs tend to have a copay of $40.30.

  2. About 78%, or 8 in 10 Americans across political parties, believe that pharmaceutical company profits are the reason for such high prices, as opposed to the cost of research and development (68%) or marketing and advertising (52%), according to the Kaiser Family Foundation (KFF).

  3. Prescription drug prices in the United States ring in at 2.56 times those in 32 other countries that belong to the Organization for Economic Co-operation and Development (OECD).

  4. The Congressional Committee’s Oversight and Reform’s investigation of the pharmaceutical industry found that large drug companies spend more on payouts for investors and executives than on research and development. Also, most drug development is funded by taxpayers and the research and development done by drug companies involves minor changes to already existing drugs. 

  5. In the case of Pfizer’s drug Lyrica, the Congressional Committee’s investigation found that the company intentionally targeted the US market for price increases and used patent protections, market exclusivities and other tactics to delay generic competitions.


Four-Point Plan


(1) Investigate the pharmaceutical industry to inform prescription drug pricing legislation. 

The Congressional review of the pharmaceutical industry has made it clear that drug prices are too high for Americans and that federal intervention is necessary to proceed. The current investigation also made it apparent to Americans that Congress is concerned with the pharmaceutical industry. This can help Americans have some confidence in their government and its ability to regulate these exorbitantly high prices. Further attention should be placed on the pharmaceutical industry and its proceedings by Congress. 


(2) Expand Biden’s Build Back Better (BBB) Act.

The BBB Act should be expanded to include price regulations and R&D regulations for prescription drug companies to further its negotiation of Medicare insulin and drug prices. Currently, the BBB Act focuses on helping Medicare negotiate and set prices with pharmaceutical companies for drugs like insulin. However, while the Medicare population makes up a large percentage of prescription drug users, this policy action is not sufficient to help the majority of Americans meet drug costs. Prescription drug reform is necessary now more than ever, with instances of price gouging and highly increasing profit margins due to out of pocket costs. The BBB Act comes at the right time to make necessary changes.


(3) Require commercial insurance companies to increase their coverage of name-brand drugs. 

Part of the cost-burden placed on Americans is the limited coverage of brand-name drugs by commercial insurance companies. Price negotiation works for Medicare, so commercial insurances should also work towards having more fairly negotiated prices, by federal regulation. 


(4) Encourage doctors to prescribe more generics and require electronic health records to include real-time prescription benefits. 

Another aspect of drug pricing that needs to be addressed is how prescription drugs are prescribed. Though this is majorly a problem at the top in the drug industry, it would still be necessary for the government, particularly state governments, to subsidize hospitals and their networks to prescribe more generic drugs. When a generic medication is available it should be prescribed before any name-brand options are tried. Incentivizing physicians to prescribe less expensive drugs could improve patient trust in the healthcare delivery industry and alleviate the burden of high drug pricing on the ground. Furthermore, requiring hospitals to use electronic health records that have real-time prescription benefit tools embedded in them can help physicians and patients to find the best drug for patients, both medically and financially. 


Why This Initiative Is Important: 


The United States shouldn't have the highest prescription drug prices. Pharmaceutical companies and the industry as a whole make up a large segment of the healthcare market and overall economy. A resolution to this issue is necessary both ethically and financially. More legislative oversight on the industry and its far reaches could help regulate prices and improve health outcomes for all U.S. citizens. 


The opinions expressed in this article are those of the individual author.


Sources


Lubell, Jennifer. “Enable Real-Time RX Benefit Info to Boost Truth in Drug Pricing.” American Medical Association, 17 Nov. 2021, https://www.ama-assn.org/delivering-care/public-health/enable-real-time-rx-benefit-info-boost-truth-drug-pricing.

Mulcahy, Andrew W. “Prescription Drug Prices in the United States Are 2.56 Times Those in Other Countries.” RAND Corporation, 28 Jan. 2021, https://www.rand.org/news/press/2021/01/28.html.

NCSL Prescription Drug Policy Resource Center. National Conference of State Legislatures, https://www.ncsl.org/research/health/ncsl-prescription-drug-policy-resources-center.aspx.

“Public Opinion on Prescription Drugs and Their Prices.” KFF, Kaiser Family Foundation, 5 Apr. 2022, https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/

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