Government Report Outlines Steps to Address Rising Drug Costs


A recent report highlights how Americans pay more for prescription drugs compared with other countries.

The cost of health care and prescription drugs are a rising concern for Americans. Many studies show that Americans pay considerably more for these products and services compared with other countries.

The Council of Economic Advisors (CEA), which advises President Donald Trump on fiscal policy, recently addressed these concerns by releasing a report detailing the government’s plan to decrease the cost of prescription drugs, while continuing to promote innovation in the pharmaceutical industry.

Although innovation and affordability generally do not go hand-in-hand, the CEA report discusses how it may be possible to achieve both.

Through innovation, new medicine that was previously unavailable at any price can be provided. Innovation can also render more costly methods of care obsolete via the development of novel approaches, according to a CEA press release.

The CEA outlined 2 policy goals that state Americans should pay less out of pocket for domestic drugs and that future health care spending should be reduced through efforts to spark innovation.

The government has recognized that drug cost inflation results from policies that deter healthy price competition and that regulation can artificially raise the price of drugs, according to the CEA.

However, changing Medicare and Medicaid programs may address these issues, along with changes within the FDA that encourage healthier price competition, according to the release. The CEA also outlines how affordable drug prices can be achieved while preserving incentives for innovation.

The financial return from developing a new product is currently not high enough to spark innovation due to foreign policies that require strict price compliance to gain market access. This allows foreign countries to decrease drug prices and reduce the returns to the manufacturer, according to the release.

“The US government and biopharmaceutical industry have been the central engines in lowering the price of better health for patients worldwide by being both the world leaders in biopharmaceutical innovation as well as the source of innovative returns to those investing in such innovations,” the CEA wrote.

Americans are currently paying more than 70% of the patented biopharmaceutical profits, while only utilizing 34% of the market, the CEA noted. As a result, other countries rely on Americans to finance innovation in the pharmaceutical industry, according to the report.

The government plans to develop new policies that ensure competition and investment in innovations that will contribute to a more cost-effective health care in the future, according to the CEA. The first step will be to fix policies that limit domestic competition and prevent foreign dependency on American innovation, according to the release.

“Simply put, other nations are free-riding, or taking unfair advantage of the United States’ progress in this area. In addition, prices paid by Americans for many drugs are too high, particularly so when paid for in government programs,” the CEA wrote. “This is the result of poorly designed reimbursement policies and regulations that inhibit price competition, and it is therefore a poor use of taxpayer money.”

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