Allowing the federal government to negotiate drug prices is a politically winning talking point. According to polling, Americans from across the political spectrum support this government intervention. However, the talking point is only a political winner if it is presented without context.
Americans back the policy if it leads to direct savings in their pocketbooks while not diminishing access to life-saving therapies — whether through less investment in research and development by the pharmaceutical industry or restricted access to approved treatments.
That this policy will lead to less investment in research and development is widely recognized. Both government-sponsored and private-sector analyses estimate that direct negotiation or price controls will cause between 30-60 fewer medicines to be introduced into the market over the next few decades.
It is also unlikely that the policy will directly reduce patients’ out-of-pocket costs at the pharmacy counter. Out-of-pocket costs are driven by the inefficiencies of the current drug supply chain. Market reforms, such as outlawing kickbacks to pharmacy benefit managers and insurers in the form of rebates and fees, would meaningfully reduce out-of-pocket costs. However, the federal government has failed to institute the necessary policies.
Perhaps most disturbing of all, the federal government justifies its drug price negotiation policy using outdated estimates derived from modeling and testimonials by the PBMs. Hence, every policymaker should be asking some tough questions.
First, there are the questions regarding the cited estimates: Why do the advocates of drug price negotiation use outdated estimations rather than current actual data to justify their policy? Doesn’t the largest purchaser of biopharmaceuticals — the federal government — have access to the actual real-time data? If not, shouldn’t the federal government first mandate audit rights of PBMs’ ledgers to find out the exact amount they are extracting from the biopharmaceutical industry before jumping in with both feet into the deep end of the pool?
Second, there are questions regarding the policy’s impact. Shouldn’t the impact, or lack thereof, on patients’ out-of-pocket costs be directly acknowledged? Similarly, shouldn’t the federal government pledge that there will not be a negative impact on health outcomes due to potential reductions in medication access and investment in research and development?
Then there are questions concerning the Veterans Administration. While proponents of negotiation point to how much money the VA saves, the VA national formulary covers fewer brand medicines than Medicare Part D plans. Shouldn’t these impacts be incorporated?
If we go down this road of mandated drug price negotiation, shouldn’t we do better than rely on outdated or estimated data points? For the sake of accuracy, the federal government should demand that PBMs and insurers open their books, grant the government officials unfettered audit rights and ensure the data is accurate and secure.
Most importantly, before considering the drug negotiation policy, the federal government should guarantee that PBMs and insurers are not hiding any concessions — whether it be a rebate, fee, discount or any other compensation from the biopharmaceutical industry.
It is time for the federal government to start relying on timely data instead of outdated estimations based on information from PBMs and insurers that has not been confirmed. When it comes to something as important as health, Americans deserve to know the full context before considering the policy’s merits.
Robert Popovian, Pharm.D., M.S., is chief science policy officer at Global Healthy Living Foundation and a senior health policy fellow at the Progressive Policy Institute. Wayne Winegarden, Ph.D., is a senior fellow and director of the Center for Medical Economics and Innovation at the Pacific Research Institute.
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