It’s time to bring drug pricing down

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EY - Susan Garfield

Susan Garfield, EY

Stakeholders, including governments, payers, the media, academics and the general public are concerned about prescription drug prices. Despite comprising only 10% of overall spending in the US, drug prices have been steadily increasing for some time, and political pressure is growing to do something.

President Trump himself said in his presentation to the joint session of Congress, “It’s time to bring drug prices down.” But there is no consensus on how that should be done. Within industry, some are calling for self-regulation and greater transparency. In fact, several companies have opted to publicize their average annual price increases, with some going so far as to describe their levels of discounting.

In contrast to self-regulation, many believe the solution must be imposed by regulatory and/or policy changes. Examples of potential pricing policy options include:

  • Forced transparency related to drug price increases and list-to-net contracting specifics
  • Re-importation of drugs from Canada
  • Drug price negotiation by Medicare as a large-block purchaser
  • Special rules for drug price increases for public payers, like Medicaid
  • Increase in the government’s exercise of its march-in rights to grant additional licenses to the product if federal funds were utilized in its development
  • Testing of additional payment models to determine if efficiencies can be developed in the Part B and Part D Medicare drug programs
  • Extension of Medicaid rebates to prescription drugs purchased under Medicare
  • Reference pricing
  • Expedited FDA approval of generics

Over the next few months, there will be increased focus on the drug pricing debate in the US as these and other actions are considered. Frank dialogue among industry, payers, providers, patients and government will be needed to develop an approach that rewards products that deliver value and incent innovation, while also addressing the challenges associated with rising health care costs.

From an industry perspective, changes to the current drug pricing paradigm create potential for numerous risks to their organizations. Understanding those risks, from an enterprise perspective, will help companies prepare for and adapt to several possible realities driven by pricing reform or changes. The thorough contemplation of pricing changes as a corporate risk will enable companies to be better prepared and to act as true partners in developing solutions for the drug pricing challenge.

EY’s white paper, The US drug pricing debate 2017: Managing risk to results, discussing the US drug pricing debate provides an overview of key pricing issues as well as a framework for industry to consider how pricing changes could introduce risk to various parts of their business.