Basing Medicare Drug Prices on International Benchmarks is a Start—And Here's Why it Matters

Maybe you know this already, maybe you don’t, but the fact is that American consumers pay more for prescription drugs than any other country in the world. What’s more, American spending on prescription drugs is expected to increase by as much as 6% every year through 2026.

Prescription Drugs and the Expensive American Reality

The way things are right now, pharmaceutical companies can charge whatever they want because their patent rights to the drugs they develop protect them from competition for 20 years. They also have ways to effectively delay the release of cheaper generic versions of their drugs. It’s important to note that on average, a single new drug takes about 10 years to research, develop, and test, and costs the company about $2.6 billion on average before it even reaches the public.

Unfortunately, with drug prices the way that they are, it has also meant that many Americans are not buying the medications doctors prescribe because they cannot afford them.

Trump’s Proposed Solution: An International Pricing Index

Medicare Part B pays for drugs administered in a doctor’s office, hospital outpatient centers, and drugs that treat diseases brought by age. The catch? Medicare is obligated to pay whatever price the pharmaceutical company sets if the prescribed drug falls under Part B (which includes drugs that treat conditions like cancer, multiple sclerosis, autoimmune disorders, etc.), and taxpayers are paying for it.

Because of this, President Trump outlined a plan he says will significantly reduce the price of certain drugs administered under Medicare. The proposed solution involves three prongs:

1. Base Medicare prescription drug prices on what other industrialized countries pay. U.S. drug prices would be benchmarked against what 16 other industrialized countries pay. The plan would draw on the U.S. Health and Human Services’ analysis of what those countries pay for the same drugs (44% lower on average than what Americans pay). The costs would be lowered in phases over the course of five years so that eventually, U.S. prices start to match international prices.
2. Let private sector vendors do the negotiating with the drug makers; cut out doctors and health care providers from the process. Currently, doctors and health care providers buy these medications at a discount, and they then turn around and bill Medicare for the full price. Taxpayers and the people who need the medications end up absorbing the cost of the discount.
3. Replace the 6% commission doctors receive from administering high-priced drug options. Instead of trying to administer higher-priced medicine in order to get more money, doctors would receive a comparable amount but without the high incentives.

How This Could Affect You

Many pundits say that Trump’s proposal is a reasonable first step to reining in the out-of-control pharmaceutical industry in the U.S. However, keep in mind that this is a proposal that President Trump was trying to push just before the midterm elections.

We at the NC Coalition for Fiscal Health are monitoring how this proposal will play out in Congress. Those who stand to lose a lot by this proposal—Big Pharma, doctors, providers—will be putting considerable money and influence into lobbying against it. It remains to be seen whether or not this proposal will get through its initial stages or if it will gain traction. What we do know is that both Democrats and Republicans have put health care issues at the forefront of today’s debates, and consumers should be aware of what is being put through legislation. Visit the Campaign for Sustainable Rx Pricing’s website by clicking here.

Have the sky-high costs of healthcare in our state impacted you and/or your family’s lives? Do you want to do something about it? Join the Coalition now to receive updates about new legislation and policies that will affect YOUR healthcare. Sign up now!