Despite talk of reform, drug prices keep climbing. Here’s how to change that.

By The NYT Editorial Board

Despite talk of reform, drug prices keep climbing. Here’s how to change that.

By The NYT Editorial Board

Nothing typifies the failures of health care in the United States like prescription drugs. Americans pay more for their medications — including those developed in America, with taxpayer dollars — than residents of any other country in the world. So many patients are rationing or outright skipping essential medications that stories of people dying for want of basic drugs — or fleeing the country to avoid that fate — have become commonplace. And despite years in the spotlight, the issue is no closer to being resolved: Prescription drug prices rose four times faster than inflation in the past six months alone.

So it’s easy to see why some officials, not to mention individual patients, would feel the need to seek relief outside the United States.

In recent months, President Trump has indicated that he would support state laws to allow the import of drugs from Canada (the closest country with a comparable regulatory system), an approach several governors have been clamoring for. The administration has also proposed using an “international pricing index,” based on prices paid in several other developed countries, to set drug prices in the United States. Then, on Friday, Mr. Trump announced that he would soon sign an executive order, creating a “favored-nations clause,” under which the United States would pay no more than the lowest price charged to any other nation for a given drug.

It’s unclear how some of these measures would work together. But as the election nears, the president seems increasingly determined to find a solution to the drug cost conundrum.

Mr. Trump campaigned on promises to “negotiate like crazy” with drug makers to lower prescription drug prices. But so far his administration has struggled to live up to those promises. His public shaming of pharmaceutical giants like Pfizer last summer succeeded in getting several companies to delay scheduled price increases, but only for a few months. A new rule requiring drug makers to include the prices of their products in television advertisements is unlikely to accomplish much more — it, too, is predicated on the idea that shame will change behavior, even though the industry has proved remarkably shame-resistant.

The administration has several more ambitious proposals in the offing, including one to eliminate the rebates that drug makers routinely pay to insurers and pharmacy benefit managers (those rebates would instead go directly to patients). But those plans have yet to be formally carried out.

It’s worth noting that drug importation comes with many logistical pitfalls. The United States market is colossal compared with Canada’s; expecting the latter to fully accommodate the former would be like “putting a hippo on the back of a puppy,” as one expert put it. What’s more, the pharmaceutical industry and the Canadian government could easily erect roadblocks that would cancel out any potential savings, and many crucial drugs — like insulin — would be prohibitively expensive to transport and store across long distances. Officials in Vermont have spent at least a year working out their importation plan, and so far have found only a handful of drugs for which the savings would justify the effort.

As the 2020 election draws near, presidential candidates are putting forth numerous other solutions to the drug cost crisis. Those solutions range from the practical (tax drug companies on their price hikes) to the ambitious (let the federal government make its own drugs) to the fantastical (blow up the patent system and start over). If the plans get serious consideration, they would advance a long overdue dialogue about how the country wants to evaluate medications and what it is and isn’t willing to spend on them — a question that sits at the heart of America’s deeply flawed prescription drug system.

In the meantime, there are several things that the administration could do now, using the power it already has, to help the situation.

Price drugs based on the benefits they provide. In the United States, any drug is allowed to enter the market as long as the Food and Drug Administration decides it is safe and effective. And once it enters the market, drug makers are allowed to charge whatever they want for it. That’s not how it works in the rest of the world. In most other developed countries, insurance regulators and national advisory panels apply an extra level of scrutiny in deciding whether they’re willing to cover a new drug, and if so, how much they’re willing to pay for it. For example, Britain will cover a new medication only if the benefits it provides are high relative to its price. Germany will pay more money for a new drug, compared with an older one, only if the new drug is better in some way. By tying a drug’s price to its actual value, these countries ensure that their consumers have access to effective medications — while also protecting them from getting ripped off.

The United States government could begin to put a similar system into effect if it directed the Department of Health and Human Services to evaluate and rank medications based on their cost-effectiveness. The nonprofit Institute for Clinical and Economic Review already does this independently and has had success in getting some drug companies to lower some of their prices.

Negotiate with drug makers. In other countries, the government negotiates directly with the pharmaceutical industry (using comparative effectiveness data, among other things). In the United States, the system is scattershot. Private insurers and the Department of Veterans Affairs all negotiate with drug makers separately, which diminishes their bargaining power. In the meantime, Medicare is legally required to cover nearly all drugs approved by the Food and Drug Administration at whatever price the drug maker sets — direct, collective negotiation is prohibited.

Medicaid is similarly required to cover all drugs, no matter how well or poorly they work. The program receives an across-the-board discount from drug makers, but as critics note, that discount has not kept pace with the changing drug market. The Centers for Medicare and Medicaid Services does have the power to grant waivers to individual states that want to exclude certain drugs from their Medicaid plans — as some experts have argued — or that want to negotiate additional discounts for certain Medicaid prescriptions. But last year, when Massachusetts asked for such a waiver (the state wanted to exclude some medications that had been fast-tracked by the F.D.A. and approved with limited clinical data) the administration denied the state’s request.

Experts generally agree that haphazard bargaining is a key reason prescription drugs cost so much in the United States. If the Department of Health and Human Services were to permit such waivers in the future, it could lead the way to a better system.

Consider seizing patents. Two statutes enable the federal government to override patents on F.D.A.-approved medications and produce them at cost. The first, known as Section 1498, works as a sort of eminent domain and allows the government to override any patent if the patent holder is compensated fairly. The provision was invoked frequently in the 1950s and ’60s to obtain crucial medications at a discount. Its use waned in later decades as the drug industry’s influence over government grew.

The second statute, known as march-in rights, allows the federal government to take similar action on any product invented with government money. The United States has never used this power for a prescription drug, but a growing number of policy experts and consumer advocates are pressing the federal government to use it now, for drugs like Truvada (the only drug approved to prevent infection with H.I.V.), which the government funded and holds some patents on. Patent overrides certainly won’t work for every medication, but they have been used successfully in the past to force the drug industry to the negotiating table. Mr. Trump could send a powerful signal to drug makers if he utilized them now.

Involve the Federal Trade Commission. The F.D.A. has attempted to name and shame drug makers who use dubious tactics to prevent generic medications from coming to market, though it’s not clear how well those measures have worked. The F.D.A. has approved some 1,600 generic drugs in the past two years — an uptick from the final two years of the Obama administration, according to Kaiser Health News.

But many of those drugs still aren’t available in the United States, and experts say that anti-competitive practices are at least partly to blame. The administration could help combat such practices by directing the Federal Trade Commission to crack down on drug companies that employ them. The threat of investigations and steep fines — which the F.T.C. can levy — may finally succeed where shame has failed.

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