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Analysis

Managing prescription drug prices

What policies are on the table to manage drug prices?

The cost of prescription drugs is once again in the spotlight as health care stakeholders push to get better value for the health care dollar. A number of policies have been proposed to address prescription drug price and spend. Explore the impact these policies could have on the future of prescription drug pricing.

Getting better value from prescription drugs

Health care stakeholders agree that the United States needs to improve the value of health care spending; recently, many have focused on how to get to better value for prescription drugs. Drug therapies are important contributors to managing chronic conditions and improving outcomes. What policies are on the table to create incentives for taking full advantage of drugs’ therapeutic benefits while meeting society’s goal of better value for the health care dollar?

This health policy brief, produced by the Deloitte Center for Health Solutions and Center for Regulatory Strategy, examines some options that health care industry stakeholders and policymakers have proposed for getting better value from prescription drugs, including those related to drug prices. It describes the major policy proposals and outlines the key elements of each—the mechanisms, goals, unanswered questions, and potential unanticipated consequences. This brief is intended to help readers understand the policy landscape and possible implications around emerging value-based strategies to manage drug price and spend.

Policies discussed include:

  • Clarifying or removing potential regulatory barriers to value-based contracts between private health plans and pharmaceutical companies
  • Medicare Part B pilot of a new payment formula for reimbursing drugs under the medical benefit 
  • Medicare price negotiation for Part D drugs and how value may play a role

The market landscape points to increasingly complex negotiations between biopharma1 companies and payers including government, health plans, and pharmacy benefit managers (PBMs), with new pricing mechanisms such as risk-sharing and outcomes-based agreements.

As a result: 

  • Biopharma companies may consider a development strategy centered on generating evidence that both supports product approval and informs value-based pricing negotiations. 
  • Health plans may focus on improving drug therapy-associated outcomes by advancing collaborations with providers and patients and offering benefit design strategies that engage consumers.
  • PBMs may aim to strengthen their role in understanding and monitoring each patient’s response to therapies and gaps in care, and encourage the use of cost-effective and generic medications. 
  • Providers might consider engaging in alternative payment models that capture drug costs, and leveraging value-assessment frameworks as a tool to inform shared decision making with patients. 
  • The health care ecosystem as a whole should work toward alignment on how to define the value for drug treatment. 

The health care system’s transformation toward value-based care continues to gain momentum. The proposed policies described in this brief for getting better value in health care all have unanswered questions—finding consensus on how to determine value, figuring out the appropriate boundaries of partnerships between biopharma companies and providers or health plans, access challenges for patients—to name a few.

1The term biopharma is used throughout the brief to apply to pharmaceutical and biotech companies that make traditional small molecule drugs and/or biologics.

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