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Obtaining prescription drugs in America: it’s no bargain
Arthur L. Caplan
New York University Langone Medical Center, New York, New York, USA.
Address correspondence to: Arthur L. Caplan, Division of Medical Ethics, NYU SOM, 227 East 30th St. 7th floor, New York, New York 10016, USA. Email: arthur.caplan@nyumc.org.
Find articles by Caplan, A. in: JCI | PubMed | Google Scholar
Published September 23, 2019 - More info
J Clin Invest. 2019;129(11):4558–4559. https://doi.org/10.1172/JCI132977.
© 2019 American Society for Clinical Investigation
Just about everything related to health care in America costs too much. The validity of that claim rests on what other economically advanced nations pay for the same health services and treatments. The prices of a hospital bed per night, physician salaries, medical devices, surgeries, lab tests, ambulances, and nursing home stays all are more per capita in the United States than they are in Europe, Japan, Australia, New Zealand, or Canada. Despite the across-the-board price disparities, nothing commands the outrage or the political rhetoric in the US more than the price of prescription drugs.
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Serious solutions to reducing costs
Morally, Americans in need of drugs deserve affordable access. Aside from permitting mail-order importation from Canada, which would quickly overwhelm Canada (9), are there any serious steps that can be taken to rein in drug costs? Yes, there are.
The single most important step that should be taken is to consolidate all federal drug purchasing under one agency. The best prices that the Veterans Administration and the Department of Defense get for the drugs in their health systems ought to be the same for Medicare, Medicaid, and the Indian Health Service. The federal government should put its enormous bargaining power to use, anchored by the moral reality that drug companies will not want to be seen as creating financial obstacles to drug treatments to the military or veterans, groups with real political clout in Congress (Figure 1). If private insurance companies want to continue to peg their coverage to their own bargaining or to outsource the job to expensive pharmacy benefits management entities (PBMs), they are free to do so and can sell insurance policies accordingly.
Figure 1Letting the US government bargain for drug prices could help achieve lower drug costs for Americans. Illustrated by Bruce Worden, after Leslie Thrasher’s Tipping the Scales.
Next, the federal payer should begin to link payment to performance. The current market model, in which taxpayers largely fund basic drug research while companies reap enormous financial rewards by picking the winners, continues to be an abject failure. The most promising development opportunities are ultimately handed off to companies with no public return, and companies then barter with for-profit, third-party PBMs that control access and price by cutting nontransparent, sweetheart deals solely to maximize their own returns. Linking payment to performance provides a much-needed incentive that will bring costs down.
Payments to drug companies by all government payers should be linked to outcomes. Pay for performance (P4P), also known as value-based payment, is a promising path for containing drug costs. Britain, Italy, and other nations have achieved much better cost containment by creating systems that should be emulated here.
In Italy, P4P has been in operation since 2006. Centrally managed by Agenzia Italiana del Farmaco (AIFA), it has four types of outcomes-based agreements: (a) cost sharing, for which manufacturers offer a full or partial discount for initial cycles of treatment for eligible patients; (b) risk sharing, for which manufacturers offer partial reimbursement (usually 50%) for patients not responding to treatment; (c) payment by results, which requires total reimbursement to the payer by the drug manufacturer for nonresponding patients; and (d) success fee, wherein payment is due only for patients who respond to treatment (10).
Any of these models could be tried for various categories of drugs. Committees that include healthcare experts, patient advocates, and providers could begin the process by debating metrics, outcomes, and quality-of-life considerations to guide payment and price decisions. The P4P strategy can be introduced slowly, but it should ultimately be clear that price and payment for all payers will hinge on drug performance.
Finally, the NIH should institute a program along the lines of the current orphan disease program, with a specific mandate to incentivize drugs that are likely to achieve cost reduction through better efficacy or prevention of disease. There are many details to work out, but the flood of drugs flowing out of the current orphan drug program shows what incentivized research program can do (11). Let’s tackle the staggering price tags of new drugs by building cost considerations into the incentive program.
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