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Government Price Setting Has Potentially Devastating Consequences for Patients

Government price-setting policies come in a variety of forms, but they all empower the government to insert itself between patients and providers, threatening access to treatments, and chilling research and development of new medicines. Instead of pursuing proposals that could hurt patients and cripple innovation, we need policies that protect access to treatment and affordable medication.

Medicare Negotiation

Medicare Part D gives seniors and people with disabilities access to affordable and comprehensive prescription medicine coverage, due in large part to a provision of the law known as the “noninterference clause.”

Unfortunately, some members of Congress have proposed to repeal or waive this provision of the Medicare statute, giving the government power to negotiate medication prices.

According to the Congressional Budget Office, repealing the noninterference clause will only save patients and the government money if access to medicines is sacrificed through the creation of a restrictive national formulary, or through the expansion of policies forcing patients to go through prior approvals or fail on an older, cheaper drug before they can receive the medication prescribed by their doctor.

Reference Pricing

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Foreign Reference Pricing

Some government price-setting proposals implement foreign reference pricing, a system that allows the government to set medication prices based on those paid by foreign governments.

This approach opens the door for the government to determine which medicines are worth providing access to, and which are not, based on the decisions of foreign governments—regardless of what patients and their doctors think.

Foreign reference pricing discourages continued research and development, meaning patients would have access to fewer new medicines and be forced to wait longer to get the medicines they need. One such proposal, known as H.R. 3, is estimated to result in a close to 90% reduction in new medicines developed by small U.S. biotech companies and the loss of more than 1 million U.S. jobs.

Domestic Reference Pricing

Other proposed approaches would implement “domestic reference pricing,” a mechanism allowing the government to calculate a maximum price for a given medication using its average domestic price, and then request deeper discounts from manufacturers based on the medication’s clinical benefits.

This is the approach used by Congress in the drug pricing provisions of the Build Back Better Act. Despite repeated concerns by a broader group of stakeholders, its policies are structured in a way that guts the critical incentives necessary to support further investment in R&D after medicines are approved.

Prescription Drug Affordability Boards

Prescription drug affordability boards give bureaucrats the power to arbitrarily set medication prices in a given state. As a result, decisions about medicines would be a part of a political process that changes with elections and the whims of politicians.

Under this policy, the state would evaluate whether certain medicines and treatments are “worth” paying for, meaning the state’s bureaucracy could come between patients and the treatments their doctors prescribe. This spells disaster for patients as they could face barriers to obtaining life-saving medication.

Government price setting threatens families’ access to the medicine they need

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Building a Better Health Care System

Americans deserve better solutions to the problem of skyrocketing pharmaceutical costs than government price setting. For Medicare Part D, these include capping annual out-of-pocket costs for medicines, lowering cost-sharing, making out-of-pocket costs more predictable throughout the year, and ensuring savings negotiated with health plans are passed on to patients at the pharmacy counter.

In the commercial market, insurance should work like insurance, sharing negotiated savings with patients at the pharmacy counter, ensuring cost-sharing assistance applies to out-of-pocket maximums, covering more medicines from day one, and making out-of-pocket costs more predictable.

Our goal should be lowering out-of-pocket costs and improving patient access through commonsense, patient-centered solutions that don’t upend the healthcare system or stall American innovation. Government price setting isn’t the answer.