Wednesday, September 9, 2015

The Solution to Drug Prices - The New York Times

We're paying too much for prescription drugs. The price for cancer drugs like Yervoy, Opdivo and Keytruda routinely exceeds $120,000 a year.

Some other specialty drugs have even higher prices. Cerezyme for Gaucher disease costs about $300,000 per year for life. Kalydeco for cystic fibrosis also costs about $300,000 per year.

Despite representing about 1 percent of prescriptions in 2014, these types of high-cost drugs accounted for some 32 percent of all spending on pharmaceuticals.

Polls show that Americans are fed up with high drug costs. A commonly proposed solution has been to let the federal government, through Medicare, negotiate with drug companies. Currently, while Medicare tells hospitals and doctors what it will pay for services, by law it cannot negotiate with companies for lower drug prices. Some independent estimates suggest that negotiated drug prices could save the federal government $15 billion or more per year.

But this approach will not solve the problem of stratospheric drug prices, for several reasons. For many diseases, there exist only a couple of effective drugs, with little price competition. Also, Medicare would have little negotiating leverage since, unlike private insurers, it cannot maintain an approved drug list and exclude overly expensive drugs from coverage.

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