Free Essay on the Control of Drug Pricing in the US by Medicare

Policy Statement and Evidence

The US health care system particularly the pharmaceutical industry should be changed because of the rising drug prices. There should be a creation of laws that limit the cost of pharmaceuticals so that patients can afford proper medication. The US is the largest pharmaceutical drug market in the world a represents 43% of the global sales (Kaeger & Stoesz, 2018). In the past few decades, the pharmaceutical industry has been very profitable especially since the passage of the Affordable Care Act (ACA). According to 2015 data, ACA expanded the insurance coverage of 16.9 million people who were previously uninsured implying that a larger pool of people can access medication. In the US, prescription drugs account for 10% of health care costs (Conti & Rosenthal, 2016). Every 2 to 3 visits to a physician account to drug prescription. As a result, 10 of the world's largest pharmaceutical companies are located in the US. However, the US pharmaceutical industry is plagued with overpriced drugs limiting their affordability. According to a 2010 AARP (Association for retired persons) study carried out in the US, the prices of drugs increased by 8.3% in 2009 despite the economic recession (Karger & Stoesz, 2018). The increase in prices was 8 times more than the inflation rate according to Karger and Stoesz (2018). In 2016, prescription drugs accounted for $425 billion dollars in health care costs (The Hub, n.d). 2015 statistics indicate that one in every five people aged 19-64 did not have access to prescription drugs because of costs (Fieldstein, 2015). As such, America is the only wealthiest nation where people live in anxiety because they could go bankrupt or even die because they cannot afford medication. Therefore, to solve this menace, the paper proposes that health care should be financed and administered by the public sector, nonprofit organization called Medicare. Furthermore, Medicare should negotiate drug pricing in the US.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Policy Change

The overpriced drug menace facing the US is a social policy issue that is a public policy challenge. Social policy advocates the implementation of solutions to improve human welfare. Unfortunately, the healthcare system in the US has failed in providing affordable welfare to Americans. Therefore, to solve the pricing challenge that has profited the pharmaceutical industries, the US Congress should allow Medicare to negotiate for prescription drugs. Medicare has purchasing power advantage that can help the program to demand discounts for the millions of Americans covered by the plan. Medicare should be made a countrywide program and all Americans should be enrolled in the plan to ensure enhanced care delivery. In 2016, Medicare's expenditure on drugs was $$100 billion and experts estimate that by 2021, the cost would increase to $150 billion (Conti & Rosenthal, 2016). The 2015 Medicare expenditure was double the spending in 2006. Therefore, the Federal government should revoke the 2003 legislation that rebuked the interference of Medicare on drug pricing. The program has worked because under Part D of the plan, private prescription drugs plans (PDPs) ensure drug coverage for people enrolled in Medicare. The PDPs negotiate for discounts from drug manufacturers which allow the plan to compete with premium medical coverage.

The federal government should, therefore, enhance legislations to restrict the overpricing of prescription drugs. The system has worked efficiently for other industrialized nations such as the United Kingdom. In the UK, for instance, the government has set thresholds that drug manufacturers must meet in terms of pricing (Feldstein, 2015). However, the Social Security noninterference clause prevents the Department of Health and Human Services (HHS) from interfering with drug negotiations. Therefore, the US pharmaceutical industry is driven by market forces having no restrictions on pricing as opposed to the UK. As a result, it is high time that the HHS through Medicare control pricing decisions in the US pharmaceutical industry (Sofer, 2016). The HHS can use negotiating techniques that are not limited to reference pricing, rebates, and discounts. Through the intervention of the federal government, under Medicare's plan D would also lower the prices paid for PDPs. The efficacy of the program would be successful if the government impacted drug pricing especially with regards to Plan D. Most importantly, policymakers should define the scope of the negotiations instituted by the government. For example, there should be a clear definition of the drugs that HHS has the negotiation authority (Conti & Rosenthal, 2016).

Pros and Cons

The positive impact of allowing Medicare or the federal government to negotiate and impose price limits for prescription drugs is that millions of Americans will have access to affordable pharmaceuticals. Proper access to medication translates to a healthy population. Another benefit is that a publicly administered program managed by the government is successful in fulfilling its objectives. Medicare has proven to be a success over the years due to reduced administration costs (Karger & Stoesz, 2018). Nevertheless, the proposal would benefit American companies because the policymakers would not be lured to allow cheap pharmaceutical imports. For example, during the 2016 presidential campaigns, Bernie Sanders proposed that Americans crossover to Canada to buy cheap and approved medications.

On the contrary, there are potential trade-offs associated with every public and social policy. There are fears within the pharmaceutical industries that government negotiations and interventions would impose price controls instead of allowing the market forces to control pricing. Secondly, negotiations would affect the revenues received by pharmaceutical companies. Critics argue that government regulations could lead to limited drugs in the market because these companies spend twice the money used in research and development in promotions and marketing. Therefore, the innovation pace would decline over time if the revenues decreased (Sood, de Vries, Gutierrez, Lakdawalla & Goldman, 2008). However, some studies suggest that pharmaceutical companies would adjust to the new regulations since the pricing model has worked in other wealthy nations.

Recommendations

The trend in increased prices for the drugs in the US is both a social and public policy nightmare. Therefore, the US should transition to a single-payer healthcare system so that the government can have one entity that deals with price control and negotiations. Centralization while transacting with pharmaceutical industries will ensure that Medicare is effective and transparent while ensuring that Americans access cheap, safe and affordable medications (Sofer, 2016). Furthermore, the proposal would ensure that pharmaceutical industries continue with innovations. Technological advancement in pharmacology has promoted the innovations in both the generic and branded drugs. Moreover, if Medicare is allowed to control pricing, it will help denounce the practice by big pharmaceutical companies to pay generic drug makers to stay out of the market to increase drug prices. Market-driven policies and the laissez-faire system has proven that it cannot achieve the incentives and affordability Americans need Conti & Rosenthal, 2016). In summation, the control of drug pricing in the US will save taxpayers the billions of dollars spent on prescription drugs without factoring other health care costs.

References

Conti, R. M., & Rosenthal, M. B. (2016, February 24). Pharmaceutical Policy Reform? Balancing Affordability with Incentives for Innovation | NEJM. Retrieved from http://www.nejm.org/doi/full/10.1056/NEJMp1515068?af=R&rss=currentIssue&

Feldstein, P. J. (2015). Health policy issues: An economic perspective (6th ed.). Chicago, Illinois: Health Administration Press (HAP).

Karger, H. J., & Stoesz, D. (2018). American social welfare policy: A pluralist approach. NY, NY: Pearson.

Sofer, D. (2016). The High Cost of Prescription Drugs in America. AJN, American Journal of Nursing, 116(12), 14. doi:10.1097/01.naj.0000508647.48317.35

Sood, N., de Vries, H., Gutierrez, I., Lakdawalla, D., & Goldman, D. (2008). The Effect Of Regulation On Pharmaceutical Revenues: Experience In Nineteen Countries. Health Affairs, 28(1), w125-w137. http://dx.doi.org/10.1377/hlthaff.28.1.w125

The Hub. (n.d). Examining the rising costs of prescription drugs in the U.S., and possible alternatives. Retrieved 20 April 2018, from https://hub.jhu.edu/2017/04/03/drug-pricing-health-policy-expert-gerard-anderson/