Health Affairs July 9, 2019
The Trump administration has proposed to test reforms in the way Medicare pays for drugs and biologics covered under Part B. Those reforms would promote competition but also impose tighter price regulation using international reference pricing. This hybrid policy is not as unusual as it first appears.
The proposal is motivated in part by the concern that other highly developed countries are taking advantage of American investments in pharmaceutical research by paying lower prices for products that are sold at much higher prices in the U.S. We explain below that the proposed International Pricing Index (IPI) methodology is effectively an across-the-board price cut for selected Part B drugs—which could be accomplished without incorporating international prices into the payment formula....
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