Lowering drug prices can help more people get the treatment they need today, but what effect does it have on the future cures? Writing in the Washington Examiner, former White House official Joe Grogan articulates the hidden costs of some policy proposals making the rounds in Washington.
“The drug pricing framework embedded in former President Joe Biden’s Inflation Reduction Act holds the potential to do the most damage. Under the law — passed without one Republican vote — the Centers for Medicare and Medicaid Services must establish a Maximum Fair Price for certain medicines covered for beneficiaries. It accomplishes this by comparing a new drug to existing ones, using past prices as the starting point for negotiations, even if a new drug works better.
“Let’s say an older minivan sells for $20,000. Then a vehicle manufacturer creates a new minivan with superior safety technology that will save lives. By the logic of Maximum Fair Price, the new vehicle manufacturer would be forced to start price negotiations at $20,000, irrespective of the improvements it has made for American families.
Under that system, no rational company would invest in designing better cars. Yet, regulators apply these rules to drug development, expecting a different result.”
Grogan says the law effectively applies the same logic to drugs, and cancer could be the biggest loser.
“Progress in cancer treatment is cumulative. Each therapeutic advance builds on prior science, and over time, these successive breakthroughs fundamentally improve patients’ lives. New drugs take years to develop, with complex trials that enable researchers to follow patients long enough to measure survival outcomes.”
With the current round of Medicare price negotiations underway, Grogan argues that regulators should put more weight on the value treatment deliver to patients and families. For guidance he cites a model developed by the University of Southern California, where he is a scholar, called Generalized Risk Adjusted Cost Effectiveness.
“Where this model dictates a price range that exceeds the statutory ceiling price, the agency should make its initial offer the ceiling price. Such a model would maximize the value of innovation that it is statutorily permitted to capture. In cases where the initial offer is the ceiling price, this approach would minimize the burden on an understaffed agency and industry by obviating the need for additional meetings and continuous exchange of counteroffers. Relying on GRACE or other value-based approaches ensures the agency captures rather than dismisses the value of innovation to patients.”
Read the full op-ed in the Examiner here.
