One of the fairest and most effective ways for the nation to reduce its health care costs is for the federal government to use its massive purchasing power to negotiate more affordable prices for prescription drugs. That long-recognized reality is a key finding of a recent report by the National Academy of Sciences that makes practical recommendations for reducing drug costs while protecting the role pharmaceuticals play in the modern health care system.
The report, Making Medicines Affordable, is notable for the 32 findings that address the challenge of curbing drug costs in both economic and political terms. To its credit, the academy balanced the debate by drawing attention at the outset to the contribution that the drug industry has made in delivering products that have been "very successful" in improving health and fighting disease.
But success, as the academy noted, has come at a price: The nation spends about $500 billion a year on prescriptions, or nearly one-fifth of the nation’s health care bill. And spending on drugs is the fastest growing aspect of health care costs, outpacing both inflation and growth in family incomes. Noting that two-thirds of personal bankruptcies have been attributed either entirely or in part to the burden of health care costs, the academy found that making prescriptions more affordable would serve a broad national interest.
The recommendations would be good for consumers, taxpayers and public health. The federal government should consolidate and apply its purchasing power to negotiate drug prices with producers and suppliers, the panel said. It urged Congress to authorize Medicare to negotiate with drugmakers, and called for the greater use of less expensive, generic drugs as an alternative in some cases to brand-name medicines.
The report did not endorse price controls; it took on the pricing floors that exist under the current system. It called for new regulations that restrict the ability of drug manufacturers to block generics into the market. It said the industry needed to be more transparent about pricing and discounts so that consumers could become smarter buyers. And it called for new restrictions on advertising and contacts the drug companies have with doctors and hospitals, which the report said skew the market for fair competition. The academy found the burden of high drug prices falls disproportionately on the poor, and it noted that while generics represent 89 percent of all drug prescriptions, they account for only 24 percent of the total cost of all prescriptions.
The report shows how the nation’s drug costs are impacting America’s pocketbook, which the academy called "unsustainable to society as a whole." It declared that access to drugs was "an imperative for public health" but rightly took aim at a pricing and regulatory framework that serves the industry more than consumers. With more than half of Americans regularly taking a prescription drug, this is an issue that Congress must address.