Assessing US Pharmaceutical Policy and Pricing Reform Legislation in Light of European Price and Cost Control Strategies

This article compares the pharmaceutical pricing policies employed by public and private insurers in the United States with seven price and spending control strategies employed in the United Kingdom, France, and Germany. Differences between American and European policies explain why American pharmaceutical prices and per capita spending are higher than in European nations. The article then analyzes two recent bills as examples of significant American reform ideas-H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act (introduced in 2019) and the Build Back Better Act (BBBA, introduced in 2021)-and compares them with European cost control strategies. Key drug price provisions of the BBBA were incorporated into the recently enacted Inflation Reduction Act (IRA). H.R. 3 would have used an international (mostly European) price index to cap U.S. prices; the BBBA would cap Medicare prices at a discount from average U.S. market prices. Neither bill would employ the key cost control strategies that European nations do. Both bills would have significantly less impact on prices than legislation that employs European-style cost controls. This article proposes steps that Congress could take in line with European strategies to lower purchase prices and costs for patients. These measures would have to overcome political obstacles that currently stymie reform.

The No Surprises Act: A Conservative Band-Aid to Protect Business as Usual

Hailed as a major reform, the No Surprises Act (NSA) is a profoundly conservative law that aims neither to reform design of insurance, to regulate fees, nor to limit health care spending. The NSA mitigates a perverse but narrow problem: unpredictable and uncontrollable high out-of-pocket bills for individuals who are unable to receive care within their insurance network. However, the NSA neglects to address the broader high medical costs, limited choice of caregivers, and the resulting insecurity and unfairness that characterize American health care. It allows caregivers to extract high payments and insurers to restrict choice of caregivers. Insurers can continue to employ ineffective cost controls that generate unpredictable high out-of-pocket costs for patients-and high levels of denial of payments to doctors and hospitals. The law amputated the most politically and visibly gangrenous consequences of unregulated private insurance in the United States in ways that enable business as usual in private health insurance to persist, subject to unnecessarily complex arbitration rules that magnify administrative waste.

German Pharmaceutical Pricing: Lessons for the United States

To control pharmaceutical spending and improve access, the United States could adopt strategies similar to those introduced in Germany by the 2011 German Pharmaceutical Market Reorganization Act. In Germany, manufacturers sell new drugs immediately upon receiving marketing approval. During the first year, the German Federal Joint Committee assesses new drugs to determine their added medical benefit. It assigns them a score indicating their added benefit. New drugs comparable to drugs in a reference price group are assigned to that group and receive the same reimbursement, unless they are therapeutically superior. The National Association of Statutory Health Insurance Funds then negotiates with manufacturers the maximum reimbursement starting the 13th month, consistent with the drug's added benefit assessment and price caps in other European countries. In the absence of agreement, an arbitration board sets the price. Manufacturers accept the price resolution or exit the market. Thereafter, prices generally are not increased, even for inflation. US public and private insurers control prices in diverse ways, but typically obtain discounts by designating certain drugs as preferred and by restricting patient access or charging high copayment for nonpreferred drugs. This article draws 10 lessons for drug pricing reform in US federal programs and private insurance.

How the United Kingdom Controls Pharmaceutical Prices and Spending: Learning From Its Experience

To control costs and improve access, nations can adopt strategies employed in the United Kingdom to control pharmaceutical prices and spending. Current policy evolved from a system created in 1957 that allowed manufacturers to set launch prices, capped manufacturers' rates of return, and later cut list prices. These policies did not effectively control spending and had limited effects on purchase prices. The United Kingdom currently controls pharmaceutical spending in 4 ways. (a) Since 1999, it has typically paid no more than is cost-effective. (b) Since 2017, for medicines that will have a significant budget impact, National Health Service England seeks discounts from cost-effective prices or seeks to limit access for 2 years to patients with the greatest need. (c) Since 2014, statutes and a voluntary scheme have required branded manufacturers to pay the government rebates to recoup the difference between the global pharmaceutical budget and actual spending. (d) For hospitals, generics and some patented drugs are procured through competitive bidding; community pharmacies are reimbursed through a system that provides an incentive to beat average generic market prices. These policies controlled the growth of spending, with the largest effects following budget controls in 2014. Changes since 2008 have reduced savings, first by paying more than is cost-effective for cancer drugs and then by applying higher cost-effectiveness thresholds for some drugs used to treat cancer and certain other drugs.

Common Pharmaceutical Price and Cost Controls in the United Kingdom, France, and Germany: Lessons for the United States

To identify pharmaceutical spending-control options for the United States, we analyzed the policies of the United Kingdom, France, and Germany, which encourage drugmakers to undertake innovations that improve health while controlling spending. Their main strategies today include: using legislation to set default rules that increase the insurer's bargaining position, employing health technology assessment that measures cost-effectiveness or comparative effectiveness and caps the purchase or reimbursement price, setting a single maximum price for similar drugs (reference group pricing), capping prices near prices in other European countries (external reference pricing), prohibiting price increases, contracting to obtain discounts as sales volume rises, procuring drugs through competitive bids, and requiring manufacturers to pay rebates when spending exceeds a global budget. Each strategy addresses a distinct cause of high spending and supports overall goals. Most recent US reform proposals recommend incremental changes that would not address the major sources of high and increasing pharmaceutical prices. However, some US reform proposals resemble certain European strategies and could bring more significant change. US policymakers should consider adopting each of the strategies employed in these countries.

WHO's Attempt to Navigate Commercial Influence and Conflicts of Interest in Nutrition Programs While Engaging With Non-State Actors: Reflections on WHO Guidance for Nation States Comment on "Towards Preventing and Managing Conflict of Interest in Nutrition Policy? An Analysis of Submissions to a Consultation on a Draft WHO Tool"

This commentary situates the comments submitted in response to the World Health Organization (WHO) draft guidance on conflicts of interest in national nutrition programs in light of: (1) WHO policies to protect WHO integrity; (2) the Framework of Engagement with Non-State Actors (FENSA); (3) WHO's attempt to seek funds due to cuts in member contributions; and (4) attempts-often by corporate entities-to redefine conflicts of interest to avoid oversight of conflicts of interest and increase corporate influence. The WHO guidance defines conflicts of interest in ways that deviate from standard legal usage which confuses its analysis and facilitates the creation of conflicted public-private partnerships. The guidance suggests that nations can allow engagement with non-state actors when the benefits are greater than risks without separate check due to conflicts of interest. Instead, the WHO should have recommended that nations seek alternative ways to achieve their goals when non-state actors have significant institutional conflicts of interest.

Pharmaceutical Price and Spending Controls in France: Lessons for the United States

As U.S. policymakers consider strategies to control pharmaceutical spending, they can learn from France, which has stopped drug spending growth without slowing access to innovative medicines. France determines the comparative therapeutic value of new drugs. Insurance pays more for drugs superior to their comparator and the same or less for drugs offering modest or no improvement. Contracts require discounts for high sales volume and prohibit price increases. In addition, payers reduce prices of older drugs. Furthermore, Parliament sets an insurance pharmaceutical spending budget, and manufacturers pay clawbacks when spending exceeds the budget. France offers these lessons: setting prices based on added therapeutic value is a principled means to cap new drug prices and provides incentives for manufacturers to negotiate prices. Restricting formularies can help lower prices. Insurers can link prices and quantity to control spending and improper uses. Insurers can use global budgets to control spending and negotiate prices. Contracts can prevent manufacturers from raising prices after launch. External reference pricing can reduce price discrimination but is difficult to implement. Nations can ensure rapid access to new drugs while controlling prices. Regulation and competition are complementary strategies to control drug spending.

Conflicts of Interest in Human Subject Research: The Insufficiency of U.S. and International Standards

Researchers, as well as individuals and institutions that oversee their conduct, sometimes have conflicts of interest that weaken or render ineffective efforts to protect human research subjects. This article analyzes United States and international standards used to address conflicts of interest and reviews evidence regarding compliance. It finds current standards are insufficient and recommends that the federal government and international organizations adopt stronger legal standards that require resolving most significant conflicts of interest and specifying how to manage conflicts of interest not resolved.

Do We Need Stronger Sanctions to Ensure Legal Compliance By Pharmaceutical Firms?

The increasing number of enforcement lawsuits against pharmaceutical firms and the large size of settlement payments suggest that misconduct is widespread and even risks slipping into the banalities of ordinary business practices. It also raises questions as to whether current sanctions are an effective means to ensure compliance. This article explores the causes of the frequent illegal conduct, why prosecutors rarely use the strongest sanctions in their arsenal--criminal penalties and debarment from participation in public programs--and asks whether the use of the strongest sanctions would be desirable. Prosecutors might not use the strongest penalties available because of divided enforcement authority or because they prefer to seek monetary penalties to support their budgets. Moreover, strong sanctions might be perceived as imposing steep collateral damages on the-general public and being politically costly. If prosecutors are reluctant to impose the strongest possible sanctions, then policymakers need to develop alternative responses. One option is to create stronger economic penalties than the ones that currently exist. Corporations and their managers have incentives to increase their income, and their pursuit of profit sometimes leads these managers to violate the law. To deter illegal conduct, legislation typically allows courts to impose penalties--including fines and incarceration--on convicted individuals and firms. The increasing wide-scale illegal conduct by pharmaceutical firms and their employees over the last two decades prompts three questions. Are current sanctions sufficient? Are stronger sanctions and enforcement policy possible? If so, would they effectively deter harmful illegal conduct?

Introduction: Institutional corruption and the pharmaceutical policy

Today, the goals of pharmaceutical policy and medical practice are often undermined due to institutional corruption - that is, widespread or systemic practices, usually legal, that undermine an institution's objectives or integrity. In this symposium, 16 articles investigate the corruption of pharmaceutical policy, each taking a different look at the sources of corruption, how it occurs, and what is corrupted. We will see that the pharmaceutical industry's own purposes are often undermined. Furthermore, pharmaceutical industry funding of election campaigns and lobbying skews the legislative process that sets pharmaceutical policy. Moreover, certain practices have corrupted medical research, the production of medical knowledge, the practice of medicine, drug safety, the Food and Drug Administration's oversight of the pharmaceutical market, and the trustworthiness of patient advocacy organizations.

Five un-easy pieces of pharmaceutical policy reform

Improper dependencies slant policy over a drug's life span, biasing the development of new drugs, the testing and marketing approval for new drugs, and the monitoring of patient safety after drugs are marketed. This article examines five ways in which the public improperly depends on pharmaceutical firms that compromise the integrity of pharmaceutical policy. Today the public relies on pharmaceutical firms: (1) to set priorities on drug research and development; (2) to conduct clinical trials to test whether drugs are safe and effective; (3) to decide what clinical trial data to disclose to the public; (4) to monitor post marketing drug safety; (5) to supply product information to physicians and to finance continuing medical education and other professional activities. The article suggests options to overcome each of these dependencies.

Rooting out institutional corruption to manage inappropriate off-label drug use

Prescribing drugs for uses that the FDA has not approved - off-label drug use - can sometimes be justified but is typically not supported by substantial evidence of effectiveness. At the root of inappropriate off-label drug use lie perverse incentives for pharmaceutical firms and flawed oversight of prescribing physicians. Typical reform proposals such as increased sanctions for manufacturers might reduce the incidence of unjustified off-label use, but they do not remove the source of the problem. Public policy should address the cause and control the practice. To manage inappropriate off-label drug use, off-label prescriptions must be tracked in order to monitor the risks and benefits and the manufacturers' conduct. Even more important, reimbursement rules should be changed so that manufacturers cannot profit from off-label sales. When off-label sales pass a critical threshold, manufacturers should also be required to pay for independent testing of the safety and effectiveness of off-label drug uses and for the FDA to review the evidence. Manufacturers should also finance, under FDA supervision, programs designed to warn physicians and the public about the risks of off-label drug use.

Conflicts of interest, institutional corruption, and pharma: an agenda for reform

When physicians' conflicts of interest arise from ties with drug firms, we should shift our focus to the pharmaceutical industry and improper dependencies that cause institutional corruption. This article analyzes eight forms of improper dependencies on pharma and proposes reforms.

New standards for medical review organizations: holding them and health plans accountable for their decisions

Most states have laws that allow patients to appeal to an independent review organization when their health plan or insurer deems a service unnecessary or experimental and denies coverage. The Affordable Care Act requires the Department of Health and Human Services to develop standards for these independent review organizations. The standards can help hold review organizations and health plans accountable for their decisions and also can facilitate the evaluation of emerging therapies and technologies as well as coverage policy. To this end, the department should require health plans and independent review organizations to report basic information, including what medical issues and contested therapies were the subject of appeals, and the grounds for their decisions. What's more, to preclude conflicts of interest, the Department of Health and Human Services standards should prohibit independent review organizations from participating in appeals involving health plans that have employed them for other work.

Reforming pharmaceutical industry-physician financial relationships: lessons from the United States, France, and Japan

This article compares the means that the United States, France, and Japan use to oversee pharmaceutical industry-physician financial relationships. These countries rely on professional and/or industry ethical codes, anti-kickback laws, and fair trade practice laws. They restrict kickbacks the most strictly, allow wide latitude on gifts, and generally permit drug firms to fund professional activities and associations. Consequently, to avoid legal liability, drug firms often replace kickbacks with gifts and grants. The paper concludes by proposing reforms that address problems that persist when firms replace kickbacks with gifts and grants based on the experience of the three countries.

Drug advertising, continuing medical education, and physician prescribing: a historical review and reform proposal

Through the 1960s, many people claimed that drug advertising was educational and physicians often relied on it. Continuing Medical Education (CME) was developed to provide an alternative. However, because CME relied on grants, industry funders chose the subjects offered. Now policymakers worry that drug firms support CME to promote sales and that commercial support biases prescribing and fosters inappropriate drug use. A historical review reveals parallel problems between advertising and industry-funded CME. To preclude industry influence and improve CME, we should ensure independent funding by taxing medical industries, facilities and physicians. Independent public and professional authorities should create CME curricula. An independent agency should allocate all funds to educational institutions for approved curricula.

Patient data: property, privacy & the public interest

Changes in technology sometimes raise important public policy choices and require that we clarify key values and reexamine legal concepts. Such is the case with the development of electronic medical records (EMRs), which facilitate obtaining patient data from provider and insurer records. EMRs expand our ability to tap patient data and thereby create great potential benefits as well as risks. This new technology requires that we clarify the ambiguous property interests in patient data. How the law defines ownership of patient data will shape whether its benefits can be developed and also affects patient confidentiality.

EMRs make it feasible to collect aggregate patient data that can be used to vastly improve medical knowledge, patient safety and public health. Researchers have long used patient data from clinical trials to evaluate the benefits and risks of drugs and medical therapy, compare their relative effectiveness, and analyze health care cost and quality.

The metamorphosis of managed care: implications for health reform internationally

The conventional wisdom is that managed care's brief life is over and we are now in a post-managed care era. In fact, managed care has a long history and continues to thrive. Writers also often assume that managed care is a fixed thing. They overlook that managed care has evolved and neglect to examine the role that it plays in the health system. Furthermore, private actors and the state have used managed care tools to promote diverse goals. These include the following: increasing access to medical care; restricting physician entrepreneurialism; challenging professional control over the medical economy; curbing medical spending; managing medical practice and markets; furthering the growth of medical markets and private insurance; promoting for-profit medical facilities and insurers; earning bounties for reducing medical expenditures: and reducing governmental responsibility for, and oversight of, medical care. Struggles over these competing goals spurred the metamorphosis of managed care. This article explores how managed care transformed physicians' conflicts of interests and responses to them. It also examines how managed care altered the opportunities for patients/medical consumers to use exit and voice to spur change.

Malpractice Premiums And Physicians’ Income: Perceptions Of A Crisis Conflict With Empirical Evidence

The conventional wisdom is that malpractice premiums have steadily risen and now constitute a crisis for medical practice. The best available data suggest otherwise. American Medical Association (AMA) surveys of self-employed physicians from 1970 to 2000 indicate that premiums rose until 1986, then declined until 1996, rose thereafter, but were lower in 2000 than in 1986. Other items represented a much greater share of total practice expenses in 1970 yet increased rapidly until 1996 and moderately thereafter, while spending on premiums fell during 1986-2000. National trends were reflected with variations in obstetrics/gynecology, surgery, and anesthesiology and in nine regions surveyed.

Case vignette: inside information

A research team at International Genetic Products (IGP) has been working quietly on a new product with significant market potential. Initial laboratory trials yielded significantly favorable results. A careful replication has now confirmed these findings, and both studies were described in a manuscript that has been accepted for publication in the prestigious journal Genome Today. The article will appear in print next month, and the staff at IGP are certain that it will attract considerable favorable attention to their company. The publication requirements of Genome Today included a pledge from all authors not to leak information on the study prior to the publication date press releases normally issued by the journal. Meanwhile, Dr. Phil T. Lucre, who was used as a reviewer of the manuscript by the editor of Genome Today, has learned that the article is to be published by routine editorial feedback. Based on this "inside information," Dr. Lucre plans to make a substantial investment in IGP stock before the embargo on information in the forthcoming article is lifted. He reasons that, although he may indeed have access to special information, he should not be limited in his investment options simply because he happened to be assigned to review this manuscript. What ethical issues are raised by Dr. Lucre's plans? Can/should journal editors take any steps to preclude problems of this sort from arising?

Physicians' conflicts of interest in Japan and the United States: lessons for the United States

Japanese health policy shows that even with physician ownership and the absence of for-profit, investor-owned health care, physicians' conflicts of interest thrive. Physician dispensing of drugs and ownership of hospitals and clinics were justified in Japan as ways to avoid commercialization of medicine. Instead, they create physicians' conflicts and fuel patient overuse of services. Japan's Ministry of Health and Welfare (MHW) has responded by introducing per-diem payment, thereby creating incentives to decrease services in ways similar to those of American managed care organizations, but with none of their benefits, such as coordination of care, oversight of physicians practices, and quality assurance. Although the United States and Japanese health care systems are organized and financed differently there is convergence in the source of their physicians' conflicts and the way they are addressed. The United States is starting to integrate institutional and physician payment and align their incentives, in a traditional Japanese way. In so doing, the United States creates new physicians' conflicts and reduces the role of countervailing incentives and power, an advantage of previous policy. Japan, in turn, has combined incentives to increase and decrease services, thus moving closer to the U.S. policy.

Consumer protection and managed care: the need for organized consumers

Despite its many advantages, managed care creates new problems for consumers. Activists have proposed four types of remedies: (1) increased information and choice; (2) standards for services and marketing; (3) administrative oversight; and (4) procedural due process for complaints. Each approach offers some benefits, but they are insufficient to cope with consumer problems. What is lacking is effective, organized consumer advocacy.