President-elect Joe Biden is proposing that the US look to Germany as a model for drug pricing. On one hand, a German model could be a step forward, putting in place a national system for evaluating and pricing drugs. But, the devil is in the details; how will they compare with President Trump’s latest interim-final drug pricing rule for Medicare.
Germany, like many other countries, has a government-run system for determining the value of a drug and pricing the drug. The US has no such system at the moment. Our federal government does nothing to assess the value of drugs it approves or to rein in drug prices.
Biden’s proposal would establish a government team charged with determining a drug’s fair value. It could work much like the non-profit Institute for Clinical and Economic Review. That group has taken on a significant amount of work evaluating the cost-effectiveness of drugs.
Biden also proposes that, as in Germany, pharmaceutical companies would be required to negotiate drug prices, in collaboration, at the national level, that would apply to both public and private insurance.
It’s not clear what pricing elements a Biden administration would factor into the determination of a drug’s price. Everything turns on how much weight the group gave to various pricing elements. Under Biden’s proposal, if a “quality-adjusted life year” or QALY was worth as much as $150,000, much higher than in Europe, drug prices likely would not come down much. And, tens of millions of Americans would continue to be forced to forego needed medicines.
The international reference pricing bill, which passed in the House of Representatives, HR3, gives significant weight to the price paid by other wealthy nations, which makes tremendous sense. Why should we be paying more than the Germans and the Japanese for our drugs?
HR3 would bring down the price of 350 drugs significantly. But, it is going nowhere in the Senate. That said, the Trump administration has issued an interim final rule that would set Medicare drug prices at a level comparable to what other wealthy countries pay. President-elect Biden might intend to undo Trump’s rule, even though it would drive down prices considerably and eat deeply into pharmaceutical company profits.
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