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Stanford University School of Medicine

New report provides recommendations to reduce the cost of prescription drugs in the U.S.

People living in the United States spend more per capita on prescription drugs than people living in any other country. In an effort to make prescription drugs more affordable and accessible for people living in the U.S., the National Academies of Sciences, Engineering and Medicines, recently published a report that makes recommendations on key issues affecting drug prices.

The report was co-authored by Stanford health policy specialist Michelle Mello, PhD, JD. In a recent Q&A with Sharon Driscoll on the Stanford Law School blog, she discusses some barriers that prevent Americans from getting affordable prescription drugs, and reviews the report's recommendations.

So why are prescription drugs in so expensive in the United States? "It’s not just one factor, but a whole ecosystem in which multiple actors and factors are contributing" to the high cost of prescription drugs, Mello explained. The underlying cause is, "distortions in the market for drugs that permit things to happen that wouldn’t occur in a truly competitive market."

Three of the report's 27 recommendations, Mello said, are particularly important.

First, the federal government should be allowed to negotiate drug prices. Currently, for Medicare, insurance companies can negotiate prices with drug makers, but the federal government cannot. The report points out the government, partnering with any states that wanted to join, could leverage its buying power to lower prices.

Second, biopharmaceutical companies and insurance plans should make data on what they receive and pay for drugs public to improve transparency.

"Third, insurance plans — especially Medicare plans — should provide better protection against out-of-pocket drug costs," Mello said. "There should be limits on total out-of-pocket costs, and patients’ deductibles and coinsurance payments should be based on the net price of the drug, not the list price."

Another important issue affecting drug prices is drug development. Mello commented:

American taxpayers foot the lion’s share of the bill for the basic-science research that generates information about which molecules are promising to pursue.  Private companies pay most of the development costs — that is, testing the molecule in clinical trials to see if it’s safe and effective. The public has gotten a great return on investment in the sense that the industry, particularly in the last decade or so, has been turning out a lot of very innovative, useful products.

All that remains, Mello says, is to make sure the final products are affordable and accessible for the people who need them.

Previously: Study: Offering apology in patient injury cases doesn’t lead to increase in lawsuitsMedical malpractice reform likely back on table and Stanford health policy researchers examine new health care bill
Photo of Michelle Mello with former Senator Jeff Bingaman by Noel St. John/National Press Club

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