Tag Archives: medication costs

For Policy Wonks: Bayh-Dole Act and Reducing Pharmaceutical Costs

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AB Engelberg et al. NEJM 2022; 386: 1104-1106 (Commentary). A New Way to Contain Unaffordable Medication Costs — Exercising the Government’s Existing Rights

This commentary notes that the National Institutes of Health (NIH) spends more than $40 billion each year to fund biomedical research. “We believe that medicines discovered at public expense should be affordable.”

A Few Excerpts:

  • “Existing laws provide two paths for achieving this result. First, the Bayh–Dole Act of 1980 gives the government a royalty-free license to use patented inventions that were discovered using federal funding. The government has never exercised its Bayh–Dole license”
  • “Second, 28 U.S. Code §1498, which dates to 1910, gives the government immunity from being sued for patent infringement in federal courts, while giving patent owners the right to receive reasonable compensation when the government makes or uses a patent-protected product”
  • Case in point: “Recently, the government signed a contract with Merck to purchase molnupiravir (Lagevrio), an oral antiviral drug that reduces the severity of Covid-19. The contract price of $712 per treatment is estimated to be more than 35 times the cost of producing the drug at a reasonable profit. Molnupiravir was discovered at Emory University using government funding, and Emory’s patent applications acknowledge the government’s Bayh–Dole license.5 Molnupiravir payments for Medicare, Medicaid, and VHA patients could cost the government billions in 2022. This amount could be reduced by more than 90% if the government exercised its license and allowed a generic manufacturer to supply the drug for patients in government-supported programs.”

My take: U.S. taxpayers should get a return on their investment when new medications are developed with government funding rather than paying more for these medications than any other country.

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“Reference Pricing” to Improve Costs in Medication Selection

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A recent study (JC Robinson et al. NEJM 2017; 377: 658-65) examined the topic of “reference pricing” and how this could be used to lower costs of medication usage.

“Under reference pricing, the insurer or employer establishes a maximum contribution it will make toward the price of a drug or procedure, and the patient pays the remainder.”

In this study, the authors examined 1302 drugs and more than 1.1 million prescriptions (2010-2014). Specifically, the authors compared RETA Trust, a national association of 55 Catholic organizations, which implemented reference pricing and compared costs with  a labor union that maintained a drug formulary with copayments similar to RETA Trust but did not implement reference pricing. Key findings:

  • “Implementation of reference pricing was associated with a higher percentage of prescriptions that were filled for the lowest-priced reference drug within its therapeutic class” (increase in 7%) along with a lower average price paid per prescription (-13.9%) than the comparison group.
  • Reference pricing was associated with increase in copayment by patients (5.2%)
  • Reference pricing was associated with reduced spending for employers by $1.34 million and increase in copays for employees by $0.12 million than in the comparison group.

Reference pricing has been associated with decreases of 10-12% in medication costs in European nations, as well.

The authors conclude: “Reference pricing may be one instrument for influencing drug choices by patients…pharmaceutical manufacturers who wish to charge premium prices may need to supply evidence of commensurately premium performance.”

My take: Although in concept reference pricing makes sense, I do worry that patients may be pushed towards less effective medications as not all medications in the same class are equally-effective.

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This graph shows the percentages of prescriptions for the lowest-priced drugs before and after implementation of reference pricing for RETA Trust. Union Trust is the comparison control.