Is Regulation the Answer to Rising Pharma Costs?

National pressure has been building for government regulation on pharmaceutical costs.  A recent poll from the Kaiser Family Foundation found that 72% of Americans think drug costs are unreasonable and demand more transparency from drug companies, especially when it comes to how they set prices.(1) In the face of this discourse, the accountability of pharmaceutical companies has grown as a key focus of recent state and federal regulations.

In the state of Vermont, expensive prescriptions drugs distributed by manufacturers must now justify their exorbitant costs, according to a newly introduced state bill. This new approach, dubbed ‘transparency bills’ stipulates that the information provided by drug makers will be made public, and if they fail to submit, fining will result. It further requires that health insurers provide information to enrollees, potential enrollees, and providers regarding the exchange plans’ drug formularies, including covered drugs, cost-sharing prices, drug tiers, prior authorization, step therapy and utilization management requirements, whose facets are rarely known and understood. Similar measures have also been introduced in other states including California, New York, North Carolina, Oregon, Pennsylvania, Texas, and Virginia.

A debate has been brewing around whether regulation is truly the best solution for pharmaceutical cost containment. Opposing views are camped around the significance of immediate verse long-term effects. Those in opposition raise concerns that such regulation will only produce modest consumer savings while the reduction in pharmaceutical revenues will slow the pace of innovation thus reducing life expectancy and the release of new drugs for future generations. Proponents believe that the benefit of lower prices experienced by consumers now far outweighs these concerns. Influenced by this growing debate, researchers at RAND Corporation examined the impact of drug price regulation in the US. Key findings include(2):

• The regulation of pharmaceutical prices has increased in recent years on a global scale
• Regulation has been seen to reduce pharmaceutical revenues.
• Alternative approaches that reduce consumer costs without affecting pharmaceutical revenues are more likely to benefit current and future generations of consumers.

Ans Solutions specializes in pharmaceutical cost containment that optimizes outcomes for the injured worker while also minimizing financial impact for payers.

Sources

• http://kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-august-2015/
• http://www.rand.org/pubs/research_briefs/RB9412.html

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