State and Federal Policy Solutions to Rising Prescription Drug Prices in the U.S.

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Right now is the greatest opportunity in over 30 years to curb the rising prices of prescription drugs. One of the last major pieces of federal legislation
passed solely to reduce drug spending was the Drug Price Competition and Patient Term Restoration Act (aka the “Hatch-Waxman” Act) of 1984.(1) HatchWaxman is estimated to have introduced more than $1 trillion in savings over the past decade alone due to the availability of low cost generics.(2) However, the U.S. has recently witnessed the prices of generics increasing, particularly older generics with little competition such as Daraprim and EpiPen.(3) Coverage of these price hikes by politicians and popular media has invigorated a national push to reform many aspects of the system that regulates drug pricing – a system that all but exists in a free market economy.(4)

In addition to price hikes on generics, new branded drugs have consistently become more expensive. Thankfully, new life-saving technologies have been introduced in recent history such as imatinib mesylate (brand name: Gleevec®; manufacturer: Novartis) for chronic myeloid leukemia, as well as cures for hepatitis C virus such as sofosbuvir (brand name: Solvaldi®; manufacturer: Gilead) and ledipasvir/sofosbuvir (brand name: Harvoni®; manufacturer: Gilead).(5) Given the investment that pharmaceutical manufacturers make to
develop these life saving technologies, many economists claim that the prices may be justifiably high.(6) Nonetheless, these drugs seriously impact payers’ budgets when trying to cover the costs of newly introduced health technologies in addition to existing health services.(7) And more so, the cost of high-priced drugs can be paralyzing to patients who are underinsured and must tradeoff outof-pocket copays for other necessities.(8)

Padula outlines the priority policy solutions to high drug prices at the state and federal levels in the remainder of the piece (download available above).

Editor’s note: The piece was originally published at Journal of Health Care Law & Policy through the University of Maryland.  Padula was supported by an unrestricted grant from the John and Laura Arnold Foundation for research on drug pricing.

1. Drug Price Competition and Patient Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585.
2. Letter from John E. Dicken, Health Care Director, GAO, to Senator Orin Hatch, Drug Pricing: Research on Savings from Generic Drug Use (Jan. 31, 2012) (on file with GAO).
4. Corrina Sorenson, et al., Advancing Value Assessment in the United States: A Multistakeholder Perspective, 20 VALUE IN HEALTH. 299, 299–300 (2017)
5. See Rena M. Conti, et al., Changing the Cost of Care for Chronic Myeloid Leukemia: the Availability of Generic Imatinib in the USA and EU, 94 ANNALS OF HEMATOLOGY 249, 249 (2015) (explaining that imatinib was introduced for the treatment of chronic myeloid leukemia and other malignant diseases); Jay H. Hoofnagle & Averell H. Sherker, Therapy for Hepatitis C—the Costs of Success, 370 N. ENGL. J. MED. 1552, 1552 (2014) (explaining that ledipasvir and sofosbuvir are used for the treatment of hepatitis C); William V. Padula, et al., Cost-effectiveness of Tyrosine Kinase Inhibitor Treatment Strategies for Chronic Phase After Generic Entry of Imatinib in the United States, 108 J. NAT’ CANCER INST., Mar. 2016, at 1, 2 (explaining that generic imatinib is used to treat chronic myeloi leukemia).
6. Joseph A. DiMasi, et al., The Price of Innovation: New Estimates of Drug Development Costs, 22 J. HEALTH ECON. 151, 180–81 (2015).
7. See Rena M. Conti & Meredith B. Rosnethal, Pharmaceutical Policy Reform – Balancing Affordability with Incentives for Innovation, NEW ENG. J. MED. (2016) (describing the prohibitive costs that payers must assume).
8. William V. Padula et al., Paying for Drugs After the Medicare Part D Beneficiary Reaches the Catastrophic Limit: Lessons of Cost Sharing from Other US Policy Partnerships Between Government and Commercial Industry, APPLIED HEALTH ECON. & HEALTH POL’Y, July 2018, at 2 (stating that copays can be quite prohibitive to people paying out of pocket).