With the U.S. election season in full swing, pharmaceutical pricing proposals that go beyond the scope of the Inflation Reduction Act (IRA) are frequently discussed in Washington and around the country. But how much of a dent on retail drug prices could be made through some of the proposals on the table? The nonpartisan Congressional Budget Office (CBO) sought to find out through its “Alternative Approaches to Reducing Drug Prices” report.
The report looks at how seven specific approaches to reducing prices would play out for purchasers by 2031 if implemented in 2025. By 2031, the total retail prescription drug market is projected to exceed $690 billion, the Centers for Medicare & Medicaid Services (CMS) has said.
Some of the examined policies would cap prices, while others would work to promote competition or adjust rules around “the flow of information,” the agency noted.
In the latter category, popular proposals include allowing commercial importation, reducing or eliminating direct-to-consumer advertising, allowing generics and biosimilars to come to market earlier or boosting transparency in pricing. These would all result in "very small" price reductions, no changes or even slight increases, according to the CBO report.
Conversely, capping U.S. prices based on costs overseas could result in average price reductions of around 5%, CBO found. The measure, which was proposed in 2019, would have the largest impact on prices out of the seven reviewed by CBO.
Republican presidential candidate former President Donald Trump previously supported a similar plan but has since stepped away from the idea.
Prices overseas are estimated to be 45% to 70% lower than in the U.S., the CBO said, citing a 2022 report. However, drugmakers could respond to the policy by delaying launches outside of the U.S. or withdrawing their products in smaller countries.
Two other approaches, both of which fall under the price caps category, would result in small average price reductions of 1% to 3%. Those are expanding the IRA’s Medicare negotiation program, which Democratic presidential candidate Vice President Kamala Harris has backed, and requiring drug manufacturers to pay inflation rebates for sales in the commercial market.
Already, as part of IRA, companies must pay rebates to Medicare for price hikes that outpace inflation in the federal healthcare program.
As the national conversation around reducing prices continues, the industry has taken numerous chances to warn about the consequences on R&D and innovation. Pharmaceutical companies and their trade groups were fervent opponents to the Inflation Reduction Act and have challenged the law in courts.