About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (March 1, 2023)

handle is hein.crs/goveljy0001 and id is 1 raw text is: Congressional Research Service informing the legislative debate since 1914 0 March 1, 2023 Selected Issues in Pharmaceutical Drug Pricing Many factors influence the prices consumers pay for prescription drugs. Congress has repeatedly attempted to address high drug prices through legislation, including bills that seek to increase generic competition, lower prices for certain health care entities that serve rural and vulnerable populations, and regulate drug price negotiations through the Medicare program. Congress has also proposed to cap out-of-pocket Medicare costs, increase drug price transparency, permit more drug importation, and regulate pharmacy benefit managers. This In Focus reviews several issues affecting drug prices of potential interest to the 118th Congress. Economics of the Pharmaceutical Industry and the Life Cycle of Drugs In 2020, U.S. expenditures on outpatient prescription drugs were $348 billion, accounting for 8.4% of total health care expenditures. Over the last 20 years, this percentage has been as high as 10.5% in 2006 but has otherwise remained between 8% to 10%. The Congressional Budget Office found that from 2009 to 2018, the average net price of a prescription-the price of a prescription after subtracting the discounts and rebates that manufacturers provide to private insurers and federal programs-fell in both the Medicare Part D and Medicaid program, reflecting the increased use of lower-cost generic drugs, which was partially offset by rising prices for brand-name drugs. Despite these trends, concern about the price of prescription drugs has drawn much attention in Congress, partly due to the high price of sole-source (brand-name) drugs and biological products (biologics). Researching, developing, obtaining approval for, and marketing pharmaceutical products has generally been a high-risk, high-reward endeavor. The discovery, development, and testing phases can be complex and lengthy, with a low success rate (-1 in 10,000 candidate molecules, according to some studies). However, pharmaceutical companies that succeed in bringing a new product to market benefit from exclusivity and, as sole- source providers, can set a higher price for their product in the absence of competition. As the market for a pharmaceutical product grows, sales and profits typically increase until competitors enter the market, either (1) as other products with similar functions and clinical applications receive their own separate approvals and are launched; (2) as exclusivity rights expire, permitting others to produce bioequivalent versions of the original product (i.e., generics or biosimilars); or (3) as the market matures and sales decline. While pharmaceutical companies that produce sole-source drugs benefit from a lack of competition, the buyers' market for drugs (purchasers) also lacks sufficient competition to lower drug prices for patients through an efficient market. Health insurers, including private plans and public programs, typically contract with pharmacy benefit managers (PBMs) for drug benefit management services that include developing and maintaining formularies (lists of covered drugs), negotiating prices with drug companies including discounts and rebates, and reimbursing pharmacies for drugs dispensed to beneficiaries. Currently, the PBM market is dominated by three companies, raising questions about adequate competition and whether the negotiated discounts and rebates result in lower prescription drug prices for patients. Policies to mitigate the high price of sole-source drugs include efforts to modify the timing and degree of competition through changes in the length and scope of exclusivity rights, and to impose certain restrictions on drug prices and price increases over time. Patent Rights, Regulatory Exdlusivkties, and Generic Competition Intellectual property (IP) rights play an important role in the development and pricing of prescription drugs and biologics. Two forms of IP are particularly important for pharmaceuticals. To encourage innovation, patents grant inventors the exclusive right to make and sell a novel invention (such as a new drug), potentially enabling the patent holder to charge higher-than-competitive prices during the patent term. Similarly, the Food and Drug Administration (FDA) grants regulatory exclusivities to pharmaceuticals meeting certain criteria. During a period of regulatory exclusivity, FDA will not accept and/or approve applications for a generic or biosimilar form of the drug. IP rights are typically justified as necessary for pharmaceutical manufacturers to recoup their costs in research and development, including clinical trials and other tests necessary to obtain FDA approval and bring a drug to market. However, IP rights are sometimes criticized as contributing to high prices for pharmaceutical products in the United States by deterring or delaying competition from generic drug and biosimilar manufacturers. For example, some Members of Congress have criticized certain pharmaceutical patenting practices as unduly extending periods of exclusivity. Studies show that generic competition lowers drug prices. Generic forms of prescription drugs often cost a fraction of the price of a brand-name drug before generic entry. Whether and when generic or biosimilar competition is permitted, however, depends on the IP rights in the drug and, in many cases, litigation under the specialized patent dispute procedures of the Hatch-Waxman Act (P.L. 98-417)

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Already a HeinOnline Subscriber?

Log In

profiles profiles most