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American Workers’ Unfair Burden: The Need to Innovate and/or Regulate Drug Prices

Posted By Louise Probst, Wednesday, August 5, 2020
Updated: Wednesday, August 5, 2020

Last week, President Trump issued Executive Orders intended to restructure the prescription drug market. If they sounded familiar to you, they were. The President directed similar actions from the Rose Garden early in his Administration, only to have them dismissed in the months that followed. The reasons for dismissal included significant implementation challenge, uncertain impact on Medicare drug spending, and questionable enforceability by Executive Order. 

Driven by an abundance of evidence that American workers shoulder an unfair and heavier drug spend burden than the workers of other industrialized nations, the President’s action is correctly directed. Even more concerning is the mounting evidence that this gap is widening.

A Painful Pill to Swallow: U.S. vs. International Prescription Drug Prices is rich in detail. Prepared by the Ways and Means Committee staff, the report confirms that the United States’ disproportionately high drug spend is driven more by differences in price than utilization. Drug prices in the U.S. are significantly higher than 11 other nations, being nearly four times higher than average prices. Most notable for plan sponsors: U.S. consumers pay significantly more for drugs than other countries, even when accounting for rebates.

Other nations began taking actions years ago to counter high and escalating drug prices, despite spending dramatically less than the U.S. Ongoing comparisons of drug spending trends demonstrate their success and the widening gap of missed opportunity for U.S. workers. Two common strategies employed are: (1) reference pricing, based on prices set in other nations, and (2) requirements that prices be aligned with evidence of unique clinical value. Both strategies are hallmarks of American values for innovation and competition.

So why have U.S. lawmakers and dominant market players failed to deliver effective solutions? Is it a lack of will or innovative genius? COVID-19 has so clearly revealed the cost of allowing health care spending to crowd out investments in public health and other critical infrastructure. It is time for action.

Warm regards, 

Louise Y. Probst
BHC Executive Director

 

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