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The Trump administration has proposed using international reference pricing for medicines. This would mean that the US government would pay less for certain medicines provided to older Americans through Medicare. The new rates would be closer to the lower prices paid by other developed countries.
While making medicines affordable to patients and improving the healthcare system is a laudable goal, this policy will have little impact on the federal budget or on the costs borne by patients. Pharmaceutical companies could easily get around it by refusing to sell their products to the countries used as reference, or by offering a confidentially contracted discount to them and keeping the public price high. A much better way for the federal government to glean valuable information and determine how to spend less on health care, would be to take advantage of the existing data found in the millions of medical records available in America.
In most developed countries outside of America, the government is the only, or the dominant healthcare payer. This enables the authorities to set the price, leaving physicians, hospitals, and pharmaceutical companies with little choice but to accept it. Some governments use health economic models to determine the amount they will pay, others reference the prices in other countries including the US When pharmaceutical companies introduce new medicines globally, they consider prices and the size of the country. If a country is small and pays a low price, or if they are referenced by other countries, then they often don’t get the newest medicines.
In the US, major health plans like United and Aetna have more enrolled beneficiaries than the populations of small European countries — giving a private insurer the same “purchasing power” as a nation. While patients in America pay more they also have more choices, including the ability to select their health insurance company. Those who have good insurance coverage or the means to afford them, have access to more drugs and services. Not so elsewhere. In many countries with government-run health plans, patients have no recourse if authorities decide not to cover a medicine or service because of price constraints. So it isn’t just purchasing power that allows foreign governments to get a price break relative to the US price, it’s also that their patients lack the ability to choose.
Because other countries pay less than the US for drugs, hospitalization and physician services, America subsidizes innovation and research investment for the rest of the world. If the US weren’t such a big and profitable market, consumers wouldn’t get the same access to therapeutic advancements. While it may feel unfair, it is the reality. Other countries can’t be “forced” to pay their fair share, and many have shown they are willing to deny care when prices are too high.
Rather than price referencing, a smarter way to arrive at more effective purchasing in the US would be to analyze existing healthcare data to make better decisions. There is a lot of useful information about the cost of medicines and the value they provide in the health claims and medical records of the millions of people who take medications. These data — collected by health insurers, physicians and their practice management software — are far more diverse that the ones from clinical trials which are what most patients see on the drug information insert or in television commercials. Yet today, despite a lot of praise for the promise of real-world evidence, there has been no significant effort by the administration to use and disseminate it to doctors and patients, nor has it been broadly utilized in state or federal health insurance plans to determine if a medicine, hospital visit, scan or doctor treatment is worth its price.
While several private companies collect real-world data and sell analyses or datasets — which are often used by health insurers to improve their services or profitability — there is no commercially viable market for public use. Federal or state governments could step in to fill that gap. Authorities could set standards for reporting which medicines have the best outcomes, which hospitals have the lowest rates of readmissions for avoidable events, and where scans and imaging are least expensive and readable. They should also require that those reports include subpopulation analysis by gender, age, or place of residence; thus demonstrating which treatment are most valuable. This information could be used to set policy, including reimbursement.
Today, without established standards, companies having access to real-world evidence have little reason to present the full information for several reasons. They may prefer to release the most favorable data. Pharmaceutical companies would be hesitant to discuss information that isn’t an FDA-approved labeled indication out of fear of backlash from regulators. For example, if a company did an analysis of real-world evidence and found that people taking a certain cancer medicine had less emergency room visits for nausea than a competing drug, it wouldn’t likely publicize that result out of concern that it would be seen as promoting an “off label” use since the information wasn’t determined in the clinical trial. Knowing a medicine had a better or worse side effect profile would be valuable information in a price negotiation, specifically it would be less costly to pay for the medicine associated with fewer emergency department visits. Price referencing wouldn’t reveal this.
Using real-world evidence to get better information for price negotiations isn’t perfect, but tying pharmaceutical prices to what others pay outside the US isn’t either. Examining healthcare data and assessing value in practice would benefit patients as well as budgets.
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