How to solve a problem like US drug prices

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In the US, the ever increasing amounts spent on branded drugs is a serious issue. It has been a major factor behind the increase in insurance premiums and the unaffordability of health care.

So is there a solution to the drug spend issue?

Government intervention

This is unlikely.

Trump would not get Republican support. He couldn’t even pass his healthcare reforms. And he’s signalled to drug makers he won’t pressure them on costs.

Market forces

There could be more pressure on drug prices through commercial channels, and this will happen in some therapeutic areas. But the sort of price cuts we’ve seen in diabetes, for instance, has not spread to other areas. However, we have seen selfregulation by drug makers limiting annual price increases to under 10%. So far pressure has just been on new drug launches and some therapeutic areas where many similar drugs exist that can be played off against each other, such as diabetes and respiratory diseases.

Pharmacy Benefit Managers (PBMs)

And this is what many think the solution is.

PBMs negotiate drug prices on behalf of insurers, but critics say add little other value, whilst taking a big chunk of the drug reimbursement for themselves. If they were eliminated from the transaction, then there’s a big saving to be had. And the markets agree: one of the biggest PBMs, Express Scripts, has seen a 20% fall in its share price.

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