Loyola University Chicago School of Law, JD 2022
Prescription medications are one of the most common forms of health care intervention, with approximately sixty-six percent (66%) of adults in the United States using prescription drugs. Prescription drugs can provide major benefits to an individual as well as the general population’s health; if successful, prescription drugs can lead to longer and higher-quality lives. However, as drug prices rise unnecessarily, nearly a fourth of American patients experience difficulty affording their medications. A majority of these patients are people with lower incomes and those who are nearing Medicare age.
The United States has higher drug prices than all other developed nations, where in 2010 the average post-rebate medication price was fifteen percent (15%) higher in the United States than in Canada, France, and Germany. Domestic drug companies argue that the price is due to the cost of research and development, however it is the lack of market regulation by the United States government that allows these exorbitant prices. In response to the outcry against high drug prices, on September 13, 2020, President Trump signed an Executive Order on Lowering Drug Prices by Putting America First. The Order includes a “most favored nations” pricing scheme that includes both Medicare Parts B and D, meaning that Medicare now is able to refuse to pay more for drugs than other developed nations. However, this is not enough. The United States needs to take action at both the state and federal level to ensure that prescription drugs are accessible and affordable to all Americans.
Why Do Costs Continue to Rise?
Lowering drug prices has become a bipartisan cause that all parties can agree needs to be addressed, where all parties agree that drug companies can continue to uphold high prices for two reasons: there is a lack of competition and there is relatively no contest to their negotiating power.
Within the United States, lack of competition results from many different practices. At the federal level, the United States Patent and Trademark Office continues to issue patent-related exclusivity lasting twenty (20) years or more on the product, such that the top-grossing drugs have been on the United States market for nearly fifteen (15) years without any real competition. This patent practice essentially grants manufacturers monopoly control over the market for a period of at least twenty (20) years, thus allowing drug companies complete control over prices. Additionally, the FDA review approval process has an average duration of ten (10) years, during which the manufacturers possess monopoly control. After the monopoly period ends, generic drugs may enter the market. Once a generic drug is FDA approved, it may be substituted for the brand-named drug at the discretion of state-licensed pharmacists. However, only twelve (12) states mandate that pharmacists substitute a generic version of a prescribed drug if all the prescriptions requirements are met. In the other thirty-eight (38) states which possess restrictive drug selection laws, it is more difficult for generic drugs to enter the market, even though on average the consumer, if prescribed a generic drug, will pay as much as ninety (90) percent less than brand-named drug costs.
Additionally, the United States’ lack of negotiating power often results in higher prices. Both public and private payers are constrained from negotiating for lower drug prices. At the federal level, Medicare, which insures more than sixty (60) million beneficiaries, is legally unable to negotiate with drug companies to secure lower prices. However, in 2019, Congress introduced a bill that would require federal officials and Medicare to negotiate with drug companies and use its considerable purchasing power to secure reduced prices, but this effort was to no avail and remains undecided. Additionally, at the state level, rather than encouraging state Medicaid programs to cover effective and cost-saving drug alternatives, the programs are required to cover all FDA-approved drugs. State programs have taken it upon themselves to negotiate, but not to a degree substantial enough to affect prices.
At the federal level, Congress should back Trump’s Executive Order and strengthen the allowance of the importation of prescription drugs from other countries. As a result of the importation, domestic drug manufacturers would be forced to lower prices, so that they could compete in the market. Additionally, in order to increase competition, the United States Patent and Trademark Office should increase market inclusivity by limiting the approval of patents on brand-name drugs when there is no evidence of clinical difference in the drug effect. This in turn would limit drug companies from patenting a new drug that is essentially the same as a drug whose patent is about to expire, thus keeping generic drugs from entering the market, when the only change in the drug is the coating or formulation. The FDA should also be authorized to accelerate the review of generic products and decrease the duration of the approval process. Finally, Congress should adopt the proposed bill that would authorize Medicare to negotiate drug prices.
At the state level, one solution is that states should adopt less restrictive drug production selection laws, so that pharmacists could prescribe generic drugs instead of brand-name prescription drugs. As a result of more generic drugs on the market, there would be an increase in competition, ultimately leading to a decrease in drug price. Additionally, in adopting less restrictive drug production selection laws, states could also require that physicians and pharmacists are educated on the generic comparable cost-saving alternatives, so that they may offer patients more inexpensive drugs.