Price drugs based on the benefits they provide. In the United States, any drug is allowed to enter the market as long as the Food and Drug Administration decides it is safe and effective. And once it enters the market, drug makers are allowed to charge whatever they want for it. That’s not how it works in the rest of the world. In most other developed countries, insurance regulators and national advisory panels apply an extra level of scrutiny in deciding whether they’re willing to cover a new drug, and if so, how much they’re willing to pay for it. For example, Britain will cover a new medication only if the benefits it provides are high relative to its price. Germany will pay more money for a new drug, compared with an older one, only if the new drug is better in some way. By tying a drug’s price to its actual value, these countries ensure that their consumers have access to effective medications — while also protecting them from getting ripped off.
The United States government could begin to put a similar system into effect if it directed the Department of Health and Human Services to evaluate and rank medications based on their cost-effectiveness. The nonprofit Institute for Clinical and Economic Review already does this independently and has had success in getting some drug companies to lower some of their prices.
Negotiate with drug makers. In other countries, the government negotiates directly with the pharmaceutical industry (using comparative effectiveness data, among other things). In the United States, the system is scattershot. Private insurers and the Department of Veterans Affairs all negotiate with drug makers separately, which diminishes their bargaining power. In the meantime, Medicare is legally required to cover nearly all drugs approved by the Food and Drug Administration at whatever price the drug maker sets — direct, collective negotiation is prohibited.
Medicaid is similarly required to cover all drugs, no matter how well or poorly they work. The program receives an across-the-board discount from drug makers, but as critics note, that discount has not kept pace with the changing drug market. The Centers for Medicare and Medicaid Services does have the power to grant waivers to individual states that want to exclude certain drugs from their Medicaid plans — as some experts have argued — or that want to negotiate additional discounts for certain Medicaid prescriptions. But last year, when Massachusetts asked for such a waiver (the state wanted to exclude some medications that had been fast-tracked by the F.D.A. and approved with limited clinical data) the administration denied the state’s request.
Experts generally agree that haphazard bargaining is a key reason prescription drugs cost so much in the United States. If the Department of Health and Human Services were to permit such waivers in the future, it could lead the way to a better system.
Consider seizing patents. Two statutes enable the federal government to override patents on F.D.A.-approved medications and produce them at cost. The first, known as Section 1498, works as a sort of eminent domain and allows the government to override any patent if the patent holder is compensated fairly. The provision was invoked frequently in the 1950s and ’60s to obtain crucial medications at a discount. Its use waned in later decades as the drug industry’s influence over government grew.
The second statute, known as march-in rights, allows the federal government to take similar action on any product invented with government money. The United States has never used this power for a prescription drug, but a growing number of policy experts and consumer advocates are pressing the federal government to use it now, for drugs like Truvada (the only drug approved to prevent infection with H.I.V.), which the government funded and holds some patents on. Patent overrides certainly won’t work for every medication, but they have been used successfully in the past to force the drug industry to the negotiating table. Mr. Trump could send a powerful signal to drug makers if he utilized them now.