Bending Versus Transforming the Drug Cost Curve

Abstract

There is increasing consensus that comprehensive reforms are needed to curb the rising costs of specialty drugs and growing bipartisan agreement on the basic principles that these reforms must address (1) constraints on yearly inflation of drug prices, (2) limits on practices to extend patents and restrict generic competition, (3) increased transparency of rebates provided by pharmaceutical companies to pharmacy benefit managers and insurance companies, and (4) caps on the total yearly out-of-pocket costs for Medicare patients. While such reforms will improve the current system, they are unlikely to be truly transformative. Transformative change requires that all the relevant stakeholders be forced, by a legislative or administrative mandate, to come to an agreement on value. Whether federal policy makers have the will to do so will determine whether we truly change the trajectory of the currently unsustainable drug cost curve.

Over the past 5 years, the care of cancer patients has become increasingly complex as the number of novel agents and new US Food and Drug Administration (FDA) drug approvals grows—63 in 2018 and 46 in 2019 alone¹—and personalized medicine with tumor-agnostic therapies becomes the standard of care. As these drugs flood the market and rapidly enter clinical practice, the cost of cancer care has accelerated and is driven by the high costs of these novel agents.² As such, there has been pressing emphasis on development of innovative drug cost-containment frameworks by policy makers, which has been complicated by the accordingly complex policy landscape with patients, clinicians, pharmaceutical companies, pharmacy benefit managers (PBMs), venture capital markets, and insurers as stakeholders.

The interests of these myriad groups are often in direct opposition, creating tension for lawmakers who are confronted by the well-financed lobbying arms of many of these stakeholders. The pharmaceutical industry spends more than any other group in industry lobbying—$228 million in the first 3 quarters of 2019. If you combine the lobbying contributions by hospitals, nursing homes, and health professionals, they would make no. 2 on the list, at approximately $150 million in the first 3 quarters of 2019. The insurance industry follows just behind, at $117 million over the same time period.³ To understand the policy paralysis, you have to go no further than the fact that 3 of the top 4 industry lobbying groups are involved in health care, lobbying on the same issues and often in antagonism to each other.

Despite this major impediment to change, lawmakers understand that health care price inflation, in general, and drug costs, in particular, are hampering the real wage growth of their constituents and forcing many of them to choose between health care spending and other necessities or face bankruptcy. Estimates suggest that health policy premiums will equal median family income in the United States within the decade.⁴ Almost everyone understands that this is not sustainable. In a representative democracy, intense and sustained voter concern and anger will ultimately trump the dollars spent by industry on lobbying. It is for this reason that both sides of the political aisle have begun to put forward serious proposals for reform.

At the same time, members of both parties understand that the need to reform the pharmaceutical pricing, distribution, and prescribing system in the United States must also not significantly hamper the economic incentives for risk taking and innovation that has led to incredible advancements in fields such as oncology. A recent analysis estimates the median cost of bringing a new antineoplastic or immunomodulating agent to market at $2.8 billion.⁵ Balancing the need for reform against the risk of hampering innovation lies at the heart of many policy disputes.

While the system leading to high prices of oncology drugs in the United States is labyrinthine, we examine the following major areas of focus for policy makers and discuss legislative and administrative proposals that have been put forward to address each of them, as displayed in Table 1.

TABLE 1.

Federal Legislative and Administrative Efforts to Address Drug Pricing

Bill	House	Senate	Constrain Drug Price Inflation	Biosimilar Reform	Pharmacy Benefit Manager Reform	Patent Reform and Generic Entry Reform	Enhanced Negotiating Authority for Drug Prices	Reduced Out-of-Pocket Expenses for Patients	Address the Disconnect Between Drug Price and Value	Curb Systems That Reward Use of High-Priced Drugs
Acting to Cancel Copays and Ensure Substantial Savings for Biosimilars (ACCESS) Act	HR 4597	S 3466		X				X
Ensuring Access to Lower-Cost Medicines for Seniors Act	HR 4913			X		X		X		X
Lower Drug Costs Now Act	HR 3		X				X	X
Prescription Drug Pricing Reduction Act of 2019		S 2543	X		X			X		X
Lower Costs, More Cures Act of 2019	HR 19					X	X	X		X
C-THRU Act of 2019		S 476			X			X
Prescription Drug Sunshine, Transparency, Accountability and Reporting (STAR) Act of 2019	HR 2113		X		X					X
Affordable Prescriptions for Patients Act of 2019		S 1416		X		X
CREATES Act of 2019	HR 965	S 340		X		X
Protecting Consumer Access to Generic Drugs Act of 2019	HR 1499			X		X
Preserve Access to Affordable Generics and Biosimilars Act	HR 2375	S 64		X		X
2016 CMS Proposed Rule	N/A								X	X
American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs	N/A			X		X			X	X

1. lack of a truly competitive market for many high-priced specialty drugs resulting in monopoly pricing power

2. lack of true price transparency resulting from a complex drug distribution and financing system

3. patent laws that have been exploited to preserve monopoly advantage

4. lack of an explicit link between the price of a drug and its clinical value

5. a drug reimbursement system that rewards the use of high-priced drugs

6. financial toxicity for patients who increasingly shoulder drug price inflation

Lack of a Truly Competitive Market for Many High-Priced Specialty Drugs Resulting in Monopoly Pricing Power

Although the number of new cancer drugs or existing cancer drugs for new indications has been growing in what should be an increasingly competitive market, research has indicated that market competition may not be sufficient to curb drug costs. In a landmark study by Gordon et al.⁶ of changes in the mean monthly costs for 24 patented cancer drugs, the mean cost change was +18% after adjusting for inflation over a mean follow-up period of 8 years, and the introduction of new market competitors did not influence the rates of price change. Other studies have demonstrated small reductions in monthly drug costs with market entry of competitor drugs, on the range of −2%.⁷

Overall, it is likely that the oncology drug market violates classic microeconomics theory of competition and instead exists as an imperfect competition market structure such as monopolistic competition. In monopolistic competition, products are not perfect substitutes and are differentiated from each other based on advertising or name branding, so that consumers have imperfect information about the products.⁸ This is highly analogous to the oncology drug market, in which therapeutics are heavily advertised to patients and clinicians and their true differences—their “value” or their comparison to all other drugs in the market with respect to survival and toxicity—are unknown.

There have been policy-based attempts at introducing further competition into the oncology drug market, namely, the approval of biosimilars. Biologic agents, including monoclonal antibodies and hematopoietic agents, are used ubiquitously in oncology and now represent half of the oncology drug market, with high costs for novel biologics.⁹ Biosimilars, which are biologic products that are highly similar to already licensed reference biologics with no clinically meaningful differences, may cost up to 30% less than reference biologics and have resulted in significant cost savings in Europe where biosimilars have been approved and adopted into clinical practice more widely than the United States.^9,10 Biosimilars also introduce competition into the oncology drug market and thus have been a target for policy makers.^10,11

Numerous bills regarding biosimilars have been introduced, including HR 4597¹² and S 3466,¹³ which seek to eliminate copays for biosimilars covered under Medicare Part B, as well as HR 4913,¹⁴ which would require Medicare formularies to include generics and biosimilars at lower cost-sharing requirements for these drugs. While improving affordability of biosimilars for patients is important, emerging evidence suggests that the introduction of biosimilars in the United States has not had a robust effect on competition and price reductions. Using the example of filgrastim, the initial Neupogen patent expired in the United States in 2013, followed by market introductions of nonbiosimilar Granix in 2013 and biosimilar Zarxio in 2015.¹⁵ Although these new agents somewhat flattened the average sales price (ASP) curve of Neupogen, there was no cost reduction of Neupogen, and Neupogen still retained the largest share of the filgrastim market in 2018.¹⁵ Modest 20% to 30% price reductions on average are predicted with the introduction of biosimilars,¹⁵ which is unsurprising when taken into context of the aforementioned discussion on monopolistic competition. Although biosimilars do present a promising option for inducing competition in the oncology drug market and will be a focus of any federal legislative efforts, their ultimate impact on drug price inflation is likely to be at the margin rather than truly transformative.

Additional legislative proposals such as the Elijah E. Cummings Lower Drug Costs Now Act (HR 3),¹⁶ which passed the House in December 2019 and was received in the Senate, and the bipartisan Senate Finance Committee Prescription Drug Pricing Reduction Act of 2019 (S 2543),¹⁷ seek to put constraints on the rate of price increases for drugs. Under HR 3, drug companies would have to rebate to the Treasury any price increases that exceed the rate of inflation. This bill would apply retroactively to 2016 in order to limit the incentive to simply inflate launch prices and would apply to both Medicare and multistate self-funded insurance plans covered under the Employment Retirement Income Security Act. S 2543 would also require rebates for drug price increases that exceed the rate of inflation but would be applied prospectively and would not cover Employment Retirement Income Security Act plans. The House Republican Lower Costs, More Cures Act of 2019 (HR 19)¹⁸ would only require that pharmaceutical companies provide notification if their price increases exceeded 10% in 1 year or 25% over 3 years. Given the similarities between HR 3 and S 2543, it is likely that some constraint on future price increases would be included in any bipartisan legislation that could pass both chambers.

Lack of True Price Transparency Resulting From a Complex Drug Distribution and Financing System

The extreme complexity of insurance benefit design in the United States has been implicated as a significant barrier in delivering price transparency to patients, and policy makers have focused heavily on one segment of the insurance market, PBMs. Pharmacy benefit managers are for-profit companies that serve as intermediaries for health insurance companies, including private insurers, self-insured employers, Medicare, and government purchasers, and they are involved in the distribution of pharmaceutical products for a majority of the US population.¹⁹

Further study has revealed a number of concerns about PBMs that may contribute to increasing drug costs, as well as lack of price transparency. Contracts negotiated between PBMs and pharmaceutical companies are confidential, so there is no transparency in how rebates are calculated and how savings may trickle down to patients. Pharmacy benefit managers have significantly increased their profits over the past decade—from $3.4 billion in 2007 to $12.4 billion in 2016 for the 3 largest PBMs—and PBMs are estimated to retain 10% to 15% of rebates as profits.²⁰

The lack of transparency in PBMs is amplified in their coverage of specialty drugs, as they also benefit from the rebates that are provided to specialty pharmacies that dispense high-cost cancer drugs. The 3 PBMs with the largest market share own 3 of the 4 largest specialty pharmacies in the United States, so there are obvious financial conflicts of interest when PBM-owned specialty pharmacies obtain rebates on high-price chemotherapy drugs with unknown cost savings to patients.²⁰ Further, PBMs have an incentive to negotiate for higher-price oncology drugs—which may not necessarily provide superior value to patients—to obtain higher profits.

There have been numerous policy attempts to make PBMs more transparent, primarily through state-level laws to prohibit “gag clauses,” which have been historically used to prevent pharmacists from disclosing lower prices for medications if patients pay out of pocket versus through their insurance plan, which have been enacted in 27 states from 2017 to 2018.¹⁹ Although these state bills are promising, a comprehensive cross-sectional study of state drug pricing transparency laws in 2019 found that most state-level laws were insufficient to reveal true transaction prices across the entire pharmaceutical supply chain, making policy solutions targeted at excess profit structures challenging.²¹

Given that piecemeal legislation may not provide policy makers with the information they need to design policies that actually make drug prices transparent, there have been some national policy efforts directed toward PBMs. S 476, the C-THRU (Creating Transparency to Have Drug Rebates Unlocked) Act of 2019,²² would require PBMs to publicly disclose the aggregate rebates they receive from pharmaceutical companies and what portion of those rebates are passed along to Medicare beneficiaries. The bill would also require PBMs that participate as contractors under Medicare to pass on a minimum percentage of the rebates to health plans with the goal of decreasing patient cost sharing. Another bill, HR 2113, the Prescription Drug Sunshine, Transparency, Accountability, and Reporting Act of 2019,²³ would require the Department of Health and Human Services to publicly disclose the aggregate rebates and discounts achieved by PBMs.

Patent Laws That Have Been Exploited to Preserve Monopoly Advantage

There are a number of anticompetitive practices that pharmaceutical companies employ to prolong their drug patents or reduce competition from generic drug manufacturers, including evergreening, product-hopping, and pay-for-delay. “Evergreening” is the practice of making small adjustments to a drug with no real therapeutic value to secure longer patent protection, and product-hopping is the practice of removing drugs with expired or soon-to-expire patents from the market to force patients to switch to a newer patented drug.²⁴ One study that analyzed FDA filings found that of the 100 best-selling drugs 70% extended their patent once and 50% more than once.²⁵

Several House and Senate bills over the last few years have attempted to restrict the ability of pharmaceutical companies to extend the patent on branded drugs or delay the entry of generic competition. A bill from the Senate Judiciary Committee, the Affordable Prescriptions for Patients Act of 2019 (S 1416),²⁶ established the following provisions:

• Define “product hopping” in the Federal Trade Commission Act and establish a statutory framework for the Federal Trade Commission’s litigation authority against manufacturers that engage in such practices.

• Allow Federal Trade Commission to impose civil penalties and seek other appropriate relief in district court from parties that violate antitrust law in this area.

• Limit the number of patents that can be litigated under some provisions of the Biologics Price Competition and Innovation Act of 2009.

• Impose a private sector mandate by limiting the number of patents that may be asserted in infringement claims for a small number of biological products.

Efforts to delay generic entry into the market often take 1 of 2 forms. In 1 set of tactics, pharmaceutical companies holding a branded patent restrict the ability of generic manufacturers to obtain adequate supplies of the patented drug needed to make a generic version. A similar tactic is used for drugs subject to FDA-mandated Risk Evaluation and Mitigation Strategy programs. In this tactic, branded companies do not allow generic manufacturers to use their already established and costly-to-develop Risk Evaluation and Mitigation Strategy programs, thereby making it prohibitively difficult for them to file with the FDA for generic approval. Two pieces of legislation in the House and the Senate seek to restrict these delaying tactics: the CRE-ATES (Creating and Restoring Equal Access to Equivalent Samples) Act of 2019, introduced in both the House (HR 965)²⁷ and Senate (S 340),²⁸ and the Protecting Consumer Access to Generic Drugs Act of 2019 (HR 1499).²⁹ Neither of these has become law.

In another tactic, called “pay for delay,” pharmaceutical companies take advantage of the 180-day exclusivity—established under the 1984 Hatch-Waxman Act—that is awarded to the generic manufacturer that first files with the FDA.²⁴ While intended to encourage generic manufacturers to quickly enter the market after patent expiration, holders of the branded patent will often pay the generic manufacturer to not enter the market for months and sometimes even years. Given that the generic manufacturer holds marketing exclusivity, no other generic manufacturers can enter the market while this delay is occurring. Two pieces of legislation would seek to make these practices illegal under antitrust law: the Preserve Access to Affordable Generics and Biosimilars Act in the House (HR 2375)³⁰ and in the Senate (S 64).³¹

While none of the aforementioned bills have become law and certainly face intense lobbying from the pharmaceutical industry, the fact that they have bipartisan support of key members of the relevant House and Senate committees suggest that if any comprehensive drug pricing bill were to emerge from Congress, these elements would almost certainly be included.

Lack of an Explicit Link Between the Price of a Drug and Its Clinical Value

In a truly competitive market, the price of a product should reflect the underlying value of the product to a consumer. Such a system does not exist in establishing drug prices. A drug that extends life by 3 months will often be priced the same and sometimes higher than a drug that extends life by 2 years. As explored above, this antimarket phenomenon exists because the ultimate consumer of the drug (the patient) is often shielded from the true price because of third-party payment (the insurers or employers).

The market response to this phenomenon has been to shift more of the costs to patients through higher deductibles and copayments. This puts patients at significant and disparate risk for financial toxicity, depending on their individual resources and the type of insurance coverage they have. As discussed below, there are several legislative proposals aimed at stopping this practice by limiting the liability of patients through out-of-pocket caps and limitations on the amount a patient can be required to pay at the point of service.

On March 11, 2016, the Center for Medicare & Medicaid Services (CMS) issued a proposed rule in the Federal Register to test a change in reimbursement for Part B drugs.³² The first part of this proposal dealt with changes in ASP reimbursement to physicians and hospital outpatient infusion centers to begin to break the link between the price of the drug and the increased reimbursement to a facility. The second part proposed testing several “value-based purchasing approaches”:

• Indication-based pricing: The same drug is reimbursed differently if used for one indication versus another.

• Reference pricing (also called least costly alternative): If multiple drugs in the same class have equal efficacy, then Medicare would pay for the lowest-priced drug or at a blend rate of the multiple drugs.

• Outcomes-based pricing: Reimbursement is set based on how well the drug works in a particular patient. For example, if patients who receive the drug live beyond the median survival described in the registration trial, then the pharmaceutical company is paid more. If actual patient survival is less than the median described in the literature, then reimbursement is less.

• Cost sharing linked to value: Medicare would pick up a higher percentage of the costs for drugs deemed to be of higher value.

Under intense pressure from the clinical community and the pharmaceutical industry, the proposed rule was never made final and therefore was never implemented. However, many of these concepts continue to be on the radar for policy makers. In addition, the Trump Administration Blueprint to Lower Drug Prices put forward a proposal to move Part B drugs (typically the intravenous drugs infused in an outpatient infusion center or clinic) to the Part D system, which is managed by private health plans.³³

The underlying problem for many of these proposals is that effective implementation requires some agreement on how to assess value. For example, indication-specific pricing would require some agreement on whether a programmed cell death protein 1 inhibitor is more valuable when used in melanoma than in lung or breast cancer. Without this ascertainment of relative value, then an indication-specific price cannot be set. Fortunately, there has been recent progress in developing value-based frameworks for cancer drugs. England has been studying drug value and quality-adjusted life-years of new therapeutics for many years under the National Institute for Health and Care Excellence.³⁴ In the United States, the American Society of Clinical Oncology developed a value-based framework that assigned a score to a drug based on its efficacy and toxicity profile in relation to its competitor in a head-to-head clinical trial. A complementary framework was developed by European Society for Medical Oncology.³⁵ In addition, the Memorial Sloan Kettering Cancer Center’s Center for Health Policy and Outcomes developed the Drug Abacus.³⁶ Finally, one of the most developed models in the United States is the Institute for Clinical and Economic Review framework.³⁷ Through a careful economic evaluation of efficacy and toxicity and incorporating accepted values of utility, this group has begun to produce manuscripts that indicate what the price of a drug should be based on established willingness to pay thresholds.

This is not to suggest that the above models are without methodological flaws, but to make the point that quantifying value in the cancer drug space is not unattainable and is closer to reality than many skeptics give it credit. The primary policy obstacle is how to officially recognize a source of truth for value and then to actually incorporate those value-based findings into payment policy. This will require a convener with power—CMS would be the logical choice—to require an agreement on value among all stakeholders. If an agreement is not attained, then CMS would be authorized to set the price of drugs at their discretion. Given the choice, it is likely that stakeholders would opt for a more collaborative approach rather than a government-imposed approach.

The movement of Part B drugs to Part D is based on the assumption that the private insurance companies that manage the Part D program will do a better job of negotiating drug prices than the government could. This would require changes to the Part D program, allowing insurance companies to create strict formularies where they could restrict the number of cancer drugs within a class on the formulary. Currently, Part D insurers must cover all approved oral cancer therapies in Part D because these drugs belong to “protected classes” under current law. The nuances of this proposal are beyond the scope of this review, but Part D is a less generous benefit for most Medicare beneficiaries with cancer who also have supplemental or Medicaid coverage (representing 90% of all beneficiaries) that cover the Part B coinsurance amounts. Most cancer patients would quickly reach the catastrophic phase of the Part D benefit when they are required to pay 5% of their costs. Kaiser Health estimates that, on average, a Medicare beneficiary receiving prescription drugs in the specialty tier would face out-of-pocket costs of $5444 in the catastrophic phase alone.³⁸ This approach is endorsed more frequently by conservative policy makers.

The other approach, included in the Democrat House of Representative plan, HR3, is to give the Medicare program the right to negotiate drug prices. The assumption here is that the monopoly power of drug companies can be tempered if faced by the monopsony power of the federal government. Like the Part D proposal above, this would require that Medicare be given the right to establish strict formularies; otherwise, their bargaining advantage would be limited. Put simply, unless Medicare is given the right to say “no,” then their ability to bargain substantial discounts will be limited.

Regardless of whether one wants to give increased negotiating authority to the private insurance market or the federal government, a definition of value will still be critical to inform formulary decisions. Absent this, then there is little protection against the exclusion of high cost drugs that may also actually have very high value.

A Drug Reimbursement System That Rewards the Use of High-Priced Drug

The Medicare Payment Advisory Committee is an independent federal body authorized by law to advise Congress on Medicare payment policy. The Medicare Payment Advisory Committee has focused for several years on what they perceive as the perverse incentives built into the ASP reimbursement formulary that gives higher absolute payments to providers who prescribe higher-cost drugs. This is because the formula is based on an add-on percentage (6%) to the ASP of a drug. The ASP is a market-based price that reflects the weighted average of all manufacturer sales prices and includes all rebates and discounts that are privately negotiated between manufacturers and purchasers.

The 2016 proposed rule by CMS discussed above regarding a change in reimbursement for Part B drugs was initially issued by the Obama administration and was referenced in the Trump Administration Blueprint and included in the Senate Finance committee bill, endorsed the Medicare Payment Advisory Committee recommendation. In the 2016 proposed rule, providers would get a flat dollar amount for each drug administration ($16.80) plus a 2.5% add-on to the ASP. Theoretically, this would shift the incentive somewhat to lower-priced drugs, because the $16.80 reimbursement would represent a much higher percentage of lower-cost versus higher-cost drugs. Discussion of the strengths and weaknesses of this proposal is beyond the scope of this article, but this provision was strongly opposed by the provider community because many argued that ASP + 2.5% would put them “underwater” (costs higher than the reimbursement) for many high-priced specialty drugs. As ASP represents an average and includes discounts and rebates that are not passed on to providers when they purchase the drug, it is easy to understand why many practices would be underwater under this proposal. How oncology practices would react to this is not known, but many argue that they would simply shift the site of service to higher-cost hospital-based facilities that may be better able to absorb this reimbursement reduction given the other advantages that many hospital-based clinics have, such as bulk purchasing and 340B discounts.

Another proposal that has been adopted by the Center for Medicare and Medicaid Innovation in their Oncology Care Model effectively bundles the costs of drugs into a total cost of care value-based reimbursement model. Under the 2-sided risk version of this model, practices whose costs exceed a defined value amount would be responsible for paying back a portion of this to Medicare, and those below would receive a portion of this back to them. Under the current model, drug costs represent nearly 60% of the total costs of care and are expected to reach nearly 90% of the total costs of care over the next decade.³⁹ The assumption of this type of payment model is that practices should be incentivized to seek out lower-cost drug options either through choosing less costly alternatives (biosimilars, as an example) or perhaps finding a way to administer current drugs in a more efficient manner, such as the use of reduced doses of drugs such as abiraterone given with food or perhaps less frequent dosing of immunotherapy drugs.^40,41 Whether such substitution exists at a large enough level to achieve savings (or avoid losses) is a matter of vigorous debate.

Other proposals, such as the American Society of Clinical Oncology Patient-Centered Oncology Payment model, utilize value-based pathways to incentive the use of higher-value drugs. Under such a proposal, the ability to realize enhanced payments or shared savings would be subject to adherence to pathways. Those who go “off pathway” at a greater rate than comparator practices would have their enhanced payments or savings reduced. The economic behavioral assumption underlying this proposal is that pharmaceutical companies would be incentivized to either increase the value of their drugs—by setting higher efficacy endpoints for their registration trials, for example, to justify high prices—or to reduce the price in order to be included in the value-based pathway. As discussed above, the creation of such value-based pathways with restricted choice is predicated on an agreed-upon definition of value.

Financial Toxicity for Patients

Cancer is one of the most expensive diseases to treat in the United States, and the term “financial toxicity” has been described as the constellation of physical, financial, and social effects that excessive costs of cancer treatment have on patients and their families.⁴² Thus far, national policy approaches have focused primarily on pharmaceutical and insurance companies, which unfortunately has done little to help individual patients reduce their out-of-pocket costs, with 42% of cancer patients depleting their entire life savings in 1 study.⁴³ As we have presented in this review, incorporating the value of cancer treatments into all aspects of cancer care, including benefit design and drug pricing, is a critical policy intervention that protects patients from receiving expensive therapeutics that have limited efficacy.⁴²

Federal policies focused on directly curbing out-of-pocket costs for pharmaceutical drugs in general have broad bipartisan agreement. Both HR 3 and the S 2543 would cap yearly out-of-pocket expenses for patients under Part D ($2000 under the House plan and $3100 under the Senate plan). HR 19 would allow beneficiaries to spread their out-of-pocket costs over a year rather than having to provide the full payment at the point of sale. It is very likely that any bipartisan bill would contain provisions to protect patients from significantly burdensome out-of-pocket drug costs.

CONCLUSIONS

Despite the complexity of the drug pricing, distribution, and payment system in the United States, there is growing consensus that comprehensive reforms are needed, and there is an increasing bipartisan agreement on the basic principles that these legislative reforms must address: (1) constraints on the unconstrained yearly inflation of drug prices; (2) limits on practices by pharmaceutical companies that extend patents and restrict generic competition into the market; (3) increased transparency of rebates provided by pharmaceutical companies to PBMs and insurance companies and a requirement that some of these rebates be passed on to Medicare patients; and (4) caps on the total yearly out-of-pocket costs that Medicare patients must pay for Part D drugs and an increased ability to spread these costs out over a longer period of time. It is likely that a bill containing the above provisions could pass today if actually brought to the floor of both houses of Congress for a vote. That it has not happened is a reflection on our broken political system.

The next level of reforms, including more restrictive formularies—whether through private or federal direct price negotiation—and value-based pricing proposals, is much farther from being actualized. We have argued that this policy paralysis is because a precursor to any successful and safe implementation of such proposals requires that all stakeholders come to an agreement on how we determine value. Such an agreement will not happen unless federal regulators require that the stakeholders come to an agreement. Expecting any one of the stakeholders to do this on their own is not realistic. The difficult societal ethics involved in making challenging resource allocation decisions cannot be shouldered by any one group, because it is too easy for other stakeholders to demonize any hard choice made. Whether federal policy makers have the will to force these difficult choices will determine whether we truly change the trajectory of the unsustainable drug cost curve.