• A market-based approach to address drug prices

    In advance of President Trump’s announcement on drug prices (twice delayed, but expected today), I have a post up at Bloomberg View that discusses a market-based approach that is gaining traction.* That’s not to say that some additional action from Congress or the administration wouldn’t be worthwhile (and we can debate what that should be). But let’s not overlook other, non-governmental organizations.

    [T]he biggest problem is that it’s hard to generate enough reliable cost-effectiveness information to give insurers the leverage to say “no” to unreasonably expensive drugs. […]

    The nonprofit and privately financed Institute for Clinical and Economic Review has proposed a way to solve that problem. Largely funded by the Laura and John Arnold Foundation, it is an independent organization that weighs the benefits of medical technologies against their prices.

    For each new drug that comes to market, the organization conducts a clinical and economic analysis that’s available to the public. It then suggests to payers and manufacturers a price range that’s aligned with benefits and budgets.

    There’s evidence that the exercise is helping insurers cut better deals.

    The piece provides several examples, which you can go read about. But here’s the most important point:

    By providing cost-effectiveness analysis to the market, ICER is not facilitating what many patient advocates and drug manufacturers fear — reducing access to lifesaving treatments. Instead, it is helping to expand it through voluntary exchange in a market, not government price control.

    Bringing information to the market that demonstrates that proposed launch prices are way out of line may shame drug manufacturers into coming to the bargaining table. Working with payers to remove barriers to access in exchange for lower prices helps seal the deal. It’s a carrot and stick approach that addresses the worst drug-pricing excesses. Finally.

    * As acknowledged in the Bloomberg View piece, research for it was supported by the Laura and John Arnold Foundation.

    @afrakt

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