The Centers for Medicare and Medicaid Services (CMS) recently announced the negotiated prices for ten high-cost drugs under Medicare Part D, following the authority granted by the 2022 Inflation Reduction Act. This move addresses the pharmaceutical industry's excessive pricing, which has made the U.S. an outlier in global drug spending. A deeper look at the pharmaceutical industry's justifications for high prices reveals contradictions, and understanding the changes in R&D, intellectual property laws, and diminishing negotiating power for private purchasers is crucial for effective policymaking. Click here for article.
Industry Justifications for High Prices: Claims about recouping R&D costs, incremental clinical benefits, and the role of middlemen are increasingly questioned by evidence.
Disaggregation of R&D: Changes, particularly from the 1980 Bayh-Dole Act, led to new biopharma companies and investors, disaggregating the R&D process and increasing pricing power.
Diminished Negotiating Power: Policies like the Medicaid Drug Rebate Program and Medicare Modernization Act reduced private plans' ability to negotiate prices, benefiting manufacturers.
Need for Policy Change: Policymakers must better understand the new R&D ecosystem, expose financial flows, and seek reasonable pricing models, balancing public benefits and private profits.
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