Categories: ASHEcon

Tuesday Plenary: Economics and the Drug Pricing Debate

Sanjula Jain, PhD Student
Rollins School of Public Health
Emory University


There is growing momentum among policymakers to address rising prescription drug prices. With the recent release of the Trump Administration’s Drug Pricing Plan, there remain many questions as to what direction future reforms should take. During this panel discussion moderated by Gregory Daniel, Deputy Director of the Duke-Robert J. Margolis Center for Health Policy, experts spanning the field discussed the impact of recent trends in drug pricing and offered policy options to incentivize innovations that improve both value and access for patients.

Daniel opened up the session by drawing the audience’s attention how the U.S. healthcare system is grappling with paying for high-cost, transformative therapies. With a pipeline of cutting-edge therapies and technologies, we are poised to disrupt the current treatment paradigm for cancer, genetic disorders and other serious conditions. Yet, these high-cost innovations also create short-term budgetary pressures for healthcare payers. In light of the projected growth in drug spending, we need to balance the need to continue developing new drugs and therapies to provide durable responses and cures for disease, but also determine how to price these therapies with lifetime benefits within an outdated fee-for-service payment structure. In order to create this value, future policies must consider the trade-off between promoting access versus incentives for innovation.

With this framework, panelists weighed in with considerations for future regulatory and market-based approaches. First, Mark Miller, Vice President of Health Care at the Laura and John Arnold Foundation, advised that future initiatives should consider non-traditional mechanisms for funding innovation such as tax incentives, the role of state laws in managing drug development and access, supporting value-based payment policies, and supply chain behaviors to understand if competition really affects the formulary prices. From a pricing perspective, Liz Fowler, Vice President of Global Health Policy in the Government Affairs at Johnson & Johnson, discussed the importance of factoring in the cost of illnesses over time. C. Bernie Good, Senior Medical Director for UPMC Health Plan’s Center for Value Based Pharmacy Initiatives further commented that when determining the value of a drug or therapy, there is a substantial gap in evidence. New drugs are often compared against a placebo, but moving forward true effectiveness will be captured when we compare drugs to similar active therapies. Accordingly, for drugs that clearly are effective and treat chronic disease, we should have lower prices and increased access. Meanwhile, Rena Conti, Associate Professor for Health Policy and Economics at the University of Chicago, reminded us that we just don’t have many good incentive options to increase drug competition, making it difficult to provide patients with lower out-of-pocket costs.

Although we are incrementally taking steps in the right direction and are seeing unprecedented coordination of agencies like the FDA in addressing the complexities of drug access and pricing, all panelists agreed that maintaining the status quo is inadequate. Regardless of whether the solution to controlling costs and improving the value of drugs is viewed from government negotiation of market-based perspective, both camps are struggling to make the necessary transformations. While we may have a long blueprint of ideas for improving the system, we remain short on action. Looking ahead, health economists can play an instrumental role in filling many of the gaps in evidence that are needed to devise effective and sustainable solutions.