Recommendations for more affordable drugs

The National Academy of Sciences issued a report that outlined recommendations for the federal government to make medicines more affordable. The New York Times and NPR both summarized the recommendations.

Among the recommendations are the ideas that the federal government should negotiate prices with drug manufacturers and that the government should be able to deny coverage of certain drugs. The first part seems obvious, although prior legislation prohibits the federal government from doing so. The second part is also important in that it gives drug manufacturers a strong incentive to market their products heavily to physicians and patients without concern for efficacy or price-effectiveness. Generally, people would not be willing to pay more for a product than the perceived benefit; however, since insurance shields consumers from much of the cost, the manufacturers can be paid handsomely by the government as long as they can convince consumers that the benefit of their product exceeds the out-of-pocket costs. In such a situation, the payer (the government, in this case) may design policies to encourage the use of more cost-effective products.

The report also recommended steps to foster competition, including expediting the review of generics and attacking an industry practice known as "pay for delay," where a drug manufacturer pays a generics manufacturer to delay introducing a competing product.

Interestingly, the report also recommended removing the financial incentives given to doctors to prescribe more expensive medicines (for example, giving the doctor a percentage of the price of the drug). Apparently, when HHS considered such changes last year, parts of the medical community "launched an intense lobbying effort against it."