Health Affairs November 4, 2019
Congress is currently debating proposals to reform drug pricing. One prominent strategy would empower the federal government to negotiate prices for prescription drugs purchased through Medicare’s pharmacy benefit (Part D). This strategy faces a key design question: What happens if the drug manufacturer and the government cannot agree on a fair price? Where there are patents or other barriers to competition—as is typical for expensive medicines—companies can threaten to withhold the product until they achieve their preferred price. While this strategy risks harm to the company, and so cannot be expected to happen often, it does occur overseas. The government’s leverage to ensure fair pricing can be undermined by the exclusive rights that the government has granted to inventors and...
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