Takeaways from Galen Institute’s “Examination of International Drug Pricing Policies in Selected Countries Shows Prevalent Government Control over Pricing and Restrictions on Access”
The Trump Administration has proposed using its demonstration authority under the Social Security Act to test a method of reimbursement for physician-administered drugs (Medicare Part B) based on prices in 14 countries.
The proposal is controversial and raises a variety of concerns, both constitutional and technical:
It raises constitutional questions about the Administration’s authority to modify Medicare reimbursement absent congressional action.
It suggests using international reference pricing—that is, the reimbursement amount for selected Part B drugs would be aligned with an International Price Index (IPI) based on prices for those drugs in selected countries.
The Administration’s selected countries appear to be arbitrarily chosen.
In its initial phase, the demonstration would cover enough geographic area to account for 50 percent of Medicare spending on separately payable Part B drugs.
The Administration would compel doctors and hospital outpatient departments and patients in these geographic areas to participate in the demonstration.
The Foundation for Research on Equal Opportunity (FREOPP) published a paper proposing an alternative to the Administration’s IPI, called “Market-Based International Index” (MBII).
FREOPP offers a more cogent rationale for selecting countries for a reference pricing regime than does the Administration.
Closer analysis reveals that drug prices in the MBII countries are generally not market-based.
It is unclear how the price for a drug in some MBII countries, like Singapore or Slovakia, would relate to the market price in the United States, especially given differences in living standards and consumption patterns.
FREOPP asserts that “not all foreign countries have access problems to new medicines,” but evidence suggests such problems exist in both MBII and IPI countries.
Of the 290 new active substances that became available between 2011 and 2018, 89 percent are available in the United States.
Among MBII countries, the percentage of available drugs ranges from 29 percent in Singapore to 62 percent in Germany.
The diminished access complicates the Administration’s task of establishing international reference pricing for its proposed Part B Medicare reimbursement demonstration.
Patients in other countries pay at least an implicit cost for their lack of access. Some may travel to countries where the drug is available; others bear the cost in the form of adverse outcomes.
Rather than advocating that the United States become like these other countries, letting markets set Medicare prices for drugs and other medical goods and services would be a fruitful path for Congress to explore.
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