Benchmarking Drug Prices Could Save the U.S. Billions on Medicare Part D

The U.S. could save billions by pegging drug prices to what other countries pay, according to a new study in Health Affairs.

The research indicates that prices for 79 brand-name prescription drugs in the U.S. were, on average, 3.2 to 4.1 times higher than in Japan, the U.K., and Ontario. The federal Medicare Part D program could have saved $73 billion in 2018 alone if it used what is called “reference pricing” to benchmark drug prices to what is paid elsewhere, the study showed.

Different methods are used to set pricing by the governments of the three locations studied: The U.K. relies on cost-effectiveness to balance benefit, risk, and value; Japan uses referencing pricing, but resets prices every two years; and Canada uses both approaches, with variations in each province. However, the final prices paid by each country are similar.

There were large price variations for the same drug between the U.S. and the three studied locales – some drugs cost 30% more in the U.S., while others cost up to 7,000% more. Pricing differences varied depending on a drug’s class and dosage, but medication for diabetes and blood thinners had the largest average differences in price. According to the study, the longer a drug was on the market, the larger the difference in pricing became.

More than 25 other European countries, Australia, New Zealand, Brazil, and South Africa also use reference pricing for drugs. “We think there’s a lot of value in looking at international pricing,” Gerard Anderson, PhD, study co-author and health policy professor at the Bloomberg School of Public Health at Johns Hopkins University in Baltimore, told STAT. “We need to consider all approaches and this one offers significant savings and is easily implementable. If beneficiaries paid the same prices as in other countries, their bills would drop significantly.”

The authors found that to eliminate the price differentials between the U.S. and the other countries studied, rebates would need to approach 78% across all drugs.

Source: STAT, May 7, 2019.