Search

ISSUE: The Elijah E. Cummings Lower Drug Costs Now Act (H.R. 3) promises a fundamental shift in efforts to lower the cost of prescription drugs in the United States. A key provision is a requirement for the government to establish prices for selected drugs that have little competition and account for substantial spending. The bill would require a drug's price to be set between the lowest price in six high-income countries and 120 percent of the average price across those countries. GOALS: Describe how H.R. 3 would change current drug pricing, assess manufacturers' likely responses, and examine challenges of using prices set in other countries. KEY FINDINGS AND CONCLUSIONS: Drug prices would fall significantly, although the effect on prices would depend on: 1) the specific choices implemented in detailed federal regulations, which could vary significantly based on a presidential administration's policy preferences; 2) the measures instituted by other countries to constrain increases in their prices; and 3) the actions of pharmaceutical manufacturers intended to minimize the reduction in their revenues. Because constraining drug revenue would lessen expected profitability of new drugs, H.R. 3 is likely to reduce incentives for research and development. A key policy consideration involves weighing the societal trade-off between fewer new drugs coming to market versus the increased affordability of existing drugs. U.S. drug prices could be lowered either by pegging them to prices in other countries -- as specified in the legislation -- or by instituting a new regulatory process to set prices in the U.S. While utilizing prices in other countries is likely to achieve savings sooner, the approach may be more problematic over the long term due to efforts by other countries to avoid paying higher prices to benefit U.S. consumers. In addition, people in the U.S. may have a lower tolerance for regulation or for policies that limit access to new therapies. Initially pegging U.S. prices to those in other countries could provide a transition period for creating a U.S. regulatory regime to lower drug prices without tying our drug prices directly to those in other countries. [ABSTRACT FROM AUTHOR]