Grand Valley State University

The Rising Cost of Prescription Drugs:

Federal Solutions

Rik Horoky
PA 616: Public Policy Analysis
April 27th, 2021
Table of Contents

I. Cover Material
A. Letter of Transmittal pg. 2
B. Executive Summary pg. 3

II. Problem History

A. Background of the Problem pg. 4
B. Current Status of the Problem pg. 5
C. Importance of the Problem pg. 7

III. Problem Definition

A. Statement of the Problem pg. 8
B. Statement of Methodology Used in Analysis pg. 8
C. Identification of Actors Involved pg. 9
D. Impact of the Problem pg. 9

IV. Alternative Solutions/Policies

A. Listing of Alternatives Considered pg. 10
B. Comparison of Alternatives pg. 10
C. Constraints, Including Political pg. 12

V. Recommendations
A. Description of Policy Recommendation(s) pg. 14
B. Rationale for Recommendations pg. 14
C. Plan for Implementation pg. 15
D. Provisions for Monitoring/Evaluation pg. 15

VI. End Material

A. References pg. 16
B. Appendices pg. 19

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 I. Cover Material

A. Letter of Transmittal:

Secretary,
Department of Health and Human Services
200 Independence Ave., SW
Washington, DC 20201

Dear Secretary,

This policy analysis, titled ‘The Rising Cost of Prescription Drugs: Federal Solutions', attempts

to analyze the current policy issue of rising prescription drug costs and the ways in which your

department may be able to respond and provide solutions at the federal level. In this analysis, I

will address the history and background of the market failures that have led to rising drug prices,

and I will assess the current condition of the problem and the actors involved. After defining the

problem, I will present three alternatives and provide my policy recommendation that the federal

government begins participation in International Reference Pricing through powers vested within

the Department of Health and Human Services.

Sincerely,

Rik E. Horoky

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 B. Executive Summary

This paper seeks to address the problem of rising pharmaceutical drug prices in the

United States and the conditions and actors which have allowed it to become such a prominent

issue. There are two significant market issues which have caused rising drug prices: Firstly,

monopolization has allowed leading drug manufacturers to coalesce through shadow pricing

mechanisms to simultaneously raise drug prices. Secondly, information asymmetry, in which

drug manufacturers have more information than consumers and the government has contributed

to rising drug prices. Through these market failures, the government’s role in prescription drug

pricing has become increasingly obscured.

Drug prices have surged since 2014, and as of 2020 have seen a 33 percent increase in list

price (the official prices set by drug manufacturers), an annual increase double that of inflation.

This has been the largest price increase of all medical goods and services (Marsh, 2020). Rising

prices have had a profound impact on Americans, in which 8 out of 10 Americans believe that

prices are unreasonably high and are in support of alternative measures that will lower these

prices (Silverman, 2016).

Four alternatives will be proposed: Maintaining conditions that have allowed for rising

drug prices (status quo), federal participation in International Reference Pricing, the regulation of

shadow pricing, and removing pharmacy benefit manager protections from federal anti-kickback

law. Based on these alternatives, I will propose that the federal government begins participating

in International Reference Pricing as the most politically feasible, efficient, cost-effective, and

equitable solution to the issue of rising pharmaceutical drug prices.

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 II. Problem History and Background

A. Background of Rising Pharmaceutical Prices

Rising drug prices in the United States are resulting in unsustainable health care costs in

the United States. This issue is growing due to a large aging population and a greater use of

prescription medications amongst all ages. Prescription drug prices began rising sharply in 2010,

resulting largely from either price increases for drugs or a shift towards prescribing higher-priced

drugs (Waxman, 2017).

There have been numerous prior efforts to resolve the problem of rising drug prices, all of

which have been unable to properly address the magnitude of this issue. The Hatch-Waxman Act

of 1984 sought to encourage research and development in the pharmaceutical industry by

establishing a 14-year patent for reference drugs. After the expiration of a reference drug’s

patent, affordable generic alternatives could be created with the same formula. This resulted in a

significant generic drug market that made medicine more affordable to patients. However, the

pharmaceutical industry has found a variety of ways to game the Hatch-Waxman Act, such as the

excessive patenting of the same general product, effectively blocking or delaying generic price

competition (Waxman, 2020).

Finally, the latest effort to curb rising drug prices has been Representative Pallone’s HR3

bill introduced in 2019. This bill would require the U.S. Department of Human Services (DHS)

to compile an annual list of the 250 most expensive brand-name drugs. From that list, DHS

would be required to negotiate with those manufacturers until prices are no more than 120

percent of the average price across six wealthy industrial countries. Drug manufacturers that

refuse to negotiate could be taxed at a rate starting at 65 percent of their gross sales, escalated

4
every quarter up to 95 percent (Stainton, 2019). This solution utilizes incentives and penalties to

enforce drug prices in the United States.

B. Current Status of Rising Pharmaceutical Prices in the United States

The current status of pharmaceutical drug prices in the United States has been widely

acknowledged and examined. According to a Consumer Reports survey, 30 percent of Americans

have said that their out-of-pocket cost for their prescription drugs has gone up since 2018. Of

those surveyed, 12 percent said that the price of their drugs had gone up by over $100 (Gill,

2019). After Mylan hiked their prices for EpiPens by 500 percent, the Kaiser Family Foundation

surveyed Americans and found that eight in ten Americans believe that prices for prescription

drugs are unreasonable and support ideas to lower those costs, such as reference pricing

(Silverman, 2016). Additionally, a report from AARP Public Policy Institute found that the

prices for 754 commonly used drugs increased faster than inflation every single year from 2006

to 2017. By 2017, the average annual increase in drug prices was 4.2 percent, double the

inflation rate (Jenkins, 2019).

The push to decrease the prices of prescription drugs has been largely bipartisan,

increasing its political feasibility. Both Republican and Democratic lawmakers have been

fighting to cut drug costs, and this issue came to national attention again in July of 2020 when

the Trump Administration announced a plan to import low-cost drugs from Canada. However,

Canada’s health minister responded with measures to stop the export of drugs to the United

States in November of 2020, effectively blocking this effort (Anderson, 2020).

A major factor in rising pharmaceutical drug prices is the fact that the drug manufacturers

Eli Lilly, Novo Nordisk, and Sanofi control 99% of the marketplace, and no true generic

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competitor exists to drive down their prices. When comparing these three manufacturer’s price

increases of insulin side by side, they are seemingly in synch, a pricing mechanism known as

shadow pricing (CSRxP, 2019). This agreement among the “competitors” allows them to

monopolize the market, effectively freeing them to price their insulin however they’d like since

pricing will not result in one manufacturer outperforming another.

Despite rampant shadow pricing, there are currently no regulations governing how drugs

should be priced. Resultantly, pharmaceutical companies select a price based on the drug’s

estimated value. A new drug’s estimated value is typically set by its manufacturer similar to

competitors pricing, and the drug is then bought by the wholesaler. The next step in the process

becomes increasingly convoluted as pharmacy benefit managers (PBMs) negotiate with

manufacturers and insurers to list drugs and set prices. For their work, PBMs charge a fee, often

through rebate payments from the drug manufacturer. PBMs utilize these rebates and discounts

from manufacturers in exchange for getting their drugs onto insurer’s plans. They can also

remove these drugs from those plans altogether, meaning the patient would have to pay the full

list price. When the system works, the rebates and discounts result in savings for the patients;

however, PBMs usually keep the rebates and discounts (Entis, 2019). In other industries, the

money that the PBMs pocket as the middlemen between insurers and manufacturers would be

considered an illegal kickback. However, in the 1990s, the Department of Health and Human

Services wrote an exception for these rebates in federal anti-kickback law. Doing so allowed

manufacturers to use those payments as a tool of negotiation (Stossel, 2016).

The problem of rising pharmaceutical drug prices is largely unique to the United States;

prescription drug prices are currently 2.56 times higher than global averages for generic drugs

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and 3.44 times higher for brand-named drugs (Mulcahy, 2021). This may be due to the fact that,

unlike the United States, the majority of developed nations participate in International Reference

Pricing in which benchmark prices are established in one or several countries in order to set or

negotiate the lowest possible price for pharmaceutical drugs for all participating countries

(WHO, 2013).

C. Importance of the Problem of Rising Pharmaceutical Prices

There are two primary market failures that highlight the importance of the problem of

rising pharmaceutical drug prices. Firstly, monopolization has allowed leading drug

manufacturers to manipulate the market through shadow pricing mechanisms in order to

simultaneously raise drug prices. This has been exacerbated by the 14-year patent protections

provided by the Hatch-Waxman Act (Waxman, 2020). Secondly, information asymmetry, in

which drug manufacturers have more information than consumers and the government has

contributed to rising drug prices. Through these market failures, the government’s role in

prescription drug pricing has become increasingly obscured.

This importance of this issue came to light most prominently around 2016, when Mylan

raised the list price of its life saving EpiPen by 500 percent, from under $100 to more than $600

(Entis, 2019). The issue of drug pricing returned again in 2018 when the cost of insulin, a

life-saving medication for those with type 1 diabetes, skyrocketed by 700 percent because of

manufacturers Eli Lilly, Sanofi, and Novo Nordisk. This price increase has resulted in

insulin-rationing, and those that have not been able to afford their insulin have died (Right Care,

2019).

Americans are faced with the additional crisis of COVID-19 which has significantly

stressed healthcare systems and resulted in the loss of jobs for many Americans, meaning less

7
spendable income for prescription drugs as well as the potential loss of private health coverage.

For this reason, the current status of rising drug prices and price mechanisms should be

addressed by the federal government. By addressing the issue of rising drug prices, Americans

will have more resources and income to invest in other areas of the economy, and the

government will also see resources freed up to spend in other municipal areas.

III. Problem Definition

A. Statement of the Problem

Prescription drug prices have skyrocketed in the United States. According to a recent

Gallup poll, an estimated 58 million Americans reported not being able to afford their

prescription medications, or one out of every five Americans (Witters, 2019). Because of how

many Americans are affected, rising pharmaceutical drug prices have become a bipartisan issue

which both Democratic and Republican policymakers have attempted to address. The problem is

also largely unique to the United States; prescription drug prices are currently 2.56 times higher

than global averages for generic drugs and 3.44 times higher for brand-named drugs (Mulcahy,

2021). Existing literature acknowledges that the problem is largely caused by market

manipulation due to drug manufacturers, pharmacy benefit managers, and insurers engaging in

monopolization and shadow pricing mechanisms.

B. Statement of Methodology Used in Analysis

A Qualitative Content Analysis was used in considering the inputs necessary for any

given alternative. Through this review of literature, several common units of analysis were

recognized. The majority of the literature referred to brand-named prescription drug prices and

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generic prescription drug prices as the major units of analysis, in which brand-named

prescription drug prices were higher due to market failures such as monopolization and shadow

pricing.

C. Identification of Actors Involved

There are many conflicting actors and stakeholders involved in this market issue.

Consumers are a major actor, however their political power is limited without the support of their

representatives and legislators. As addressed above, consumers have demonstrated a clear

position that prescription drug prices are too high. Another major actor is the government,

specifically policymakers such as representatives and legislators. Policymakers, both Republican

and Democrat, have acknowledged the issue of rising prescription drug prices and have

attempted to pass various legislation addressing the issue. Alternatively, there are actors who

oppose and actively lobby against legislation seeking to curb rising prescription drug prices,

such as pharmaceutical companies (particularly insulin manufacturers Eli Lily, Novo Nordisk,

and Sanofi), pharmacy benefit managers, and health insurers.

D. Impact of the Problem

Research shows that prescription drug prices are expected to increase another 3.59

percent through June 2021, a clear indication that this issue is in no way abating during the

COVID-19 pandemic (Boliver, 2020). In addition, the Centers for Medicare and Medicaid

Services projects that the growth rate for drug spending will catch up to the growth rate for

overall healthcare spending, signaling that there will be a projected increase in demand for

pharmaceutical drugs, that the pharmaceutical drug prices will be rising faster than before, and

that there will be a reduction in rebate and discount offers (Sullivan, 2020). Prescription drug

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prices are already a pressing issue for a majority of Americans, and if alternative policy solutions

aren’t considered, prices are expected to continue to increase at a faster rate than before.

IV. Alternatives and Solutions

A. Policy Alternatives Considered

There are a total of four proposed policy alternatives as outlined in Table 2: Alternatives

Matrix found in the appendices. These four alternatives include maintaining conditions that

allow for rising drug prices (status quo), federal participation in International Reference

Pricing, creating shadow pricing regulations, and removing PBM’s protections in federal

anti-kickback law. This list of alternatives was chosen based on the criteria of efficiency, political

feasibility, cost to consumers, and fairness.

B. Comparison of Alternatives

1. Participation in International Reference Pricing

Prices for therapeutically similar drugs varies widely, which has prompted public insurers

to direct patients toward lower-priced options when available. If the United States chose to

participate in International Reference Pricing (a concept floated by the Trump Administration),

the federal government would limit its reimbursement for drugs based on the prices paid in other

countries. Because the United States has some of the highest drug costs in the world,

participating in International Reference Pricing would likely result in lowered prices. It’s

important to note that reference pricing is not a form of price regulation, which some lawmakers

are opposed to. Instead, reference pricing makes use of the existence of equivalent drugs and sets

a reimbursement tariff for those drugs which are considered “interchangeable” (Lotven, 2017).

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2. Removal of Pharmaceutical Benefit Managers Protections

Pharmacy beneficial managers (PBMs), the middlemen between insurers and drug

manufacturers, hold a high degree of control over what patients pay for drugs. They make their

profit by pocketing rebate payments provided by drug manufacturers who want PBMs to add

their drug to insurance plans. As detailed in the review of literature, in any other industry, this

would be considered an illegal kickback, but is authorized through a Congressional exception in

federal anti-kickback laws. If this exception was removed from federal law, any rebates offered

to PBMs as an incentive for insurance plan placement would be considered illegal. This would

be no small grab – rebate payments and other discounts have doubled since 2013, jumping from

$83 billion in 2013 to $166 billion in 2018 (Gill, 2019).

3. Regulate Shadow Pricing

As mentioned in the review of literature, drug manufacturers have coalesced in a number

of ways to push drug prices up instead of abiding by market-inclusive measures of price

competition. The Hatch-Waxman Act of 1984 sought to encourage research and development in

the pharmaceutical industry by establishing a 14-year patent for reference drugs. After the

expiration of a reference drug’s patent, affordable generic alternatives could be created with the

same formula. This resulted in a significant generic drug market that made medicine more

affordable to patients. However, the pharmaceutical industry has found a variety of ways to game

the Hatch-Waxman Act, such as the excessive patenting of the same general product, effectively

blocking or delaying generic price competition. To combat patent abuse, the federal government

should require automatic reviews of secondary patents, prevent patents from being approved for

changes based on common experimentation, raise patent standards, and require manufacturers to

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keep original formulations of the brand drugs on the market past the date of generic entry to

ensure market shares can move to the generic product ( Waxman, 2020).

4. Status Quo

As mentioned in section D of the Problem Definition, allowing market failures to

continue at the expense of consumers is a highly unfavorable option and is the least politically

feasible. Americans are currently faced with the additional crisis of COVID-19 which has

significantly stressed healthcare systems and resulted in the loss of jobs for many Americans,

meaning less spendable income for prescription drugs as well as the potential loss of private

health coverage. For this reason, the current state of rising drug prices and price mechanisms

must be addressed by the federal government in some form.

C. Constraints on Alternatives

1. Participation in International Reference Pricing

Participation in IRP ranks lowest in constraints, as pricing mechanisms and global

standards are already well-established. However, administrative adjustments will need to be

made in order to ensure that major drug manufacturers comply, and it is expected that these

manufacturers will lobby against this effort. This option ranks highly in efficiency, as global

pricing standards are already established. It ranks as highly politically feasible, as it is not a form

of price regulation, which some lawmakers are opposed to. It ranks medium in cost to consumers

- initial administrative costs involved in making initial transition could mean prices remain high,

but are then expected to decrease sharply. Finally, this option ranks high in terms of fairness, as

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most countries already participate in International Reference Pricing, allowing for global

participation within a system with prices considered fair across the globe.

2. Removal of Pharmaceutical Benefit Managers Protections

Removal of PBM protections ranks relatively highly in constraints. This option also ranks

highly in efficiency because removing unique, line-item regulatory protections will simplify

existing legislation. It ranks medium for political feasibility, because consumers will likely

support this measure due to negative perceptions of kickbacks, however PBMs, drug

manufacturers, and insurers will likely lobby against this measure. This option ranks medium for

cost to consumers, as well, as costs won’t decrease for some time as previous PBM costs are

recouped. Finally, it ranks highly in fairness, because removing special privileges for PBMs will

make federal anti-kickback law more equitable.

3. Shadow Pricing Regulation

This option ranks lowest in efficiency due to the potential for regulations to slow down

administrative and legislative processes. It ranks low for political feasibility, as both consumers

and lawmakers have unfavorable opinions of government regulation and intervention in the

private market. The cost ranks medium, since administrative costs will be accrued. Finally, this

option ranks highly in fairness, as government intervention in market inefficiencies (especially

monopolization and shadow pricing mechanisms) promote fairness among competitors.

4. Status Quo

This option ranks medium in efficiency, as minimum government involvement in

establishing regulations is a lengthy process that requires many resources. However, current

government involvement is disjointed and irregular. It ranks low for political feasibility, as

surveys show most American consumers are aware of and opposed to rising prices. This option

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ranks the highest in cost to consumers, as prices continue to increase for consumers, distributors,

and the government. Finally, it ranks the lowest in fairness for competitors attempting to enter

the market, in which market inefficiencies have created unfair conditions for generic

competition. It ranks lowest in fairness for consumers in that rising prices negatively impact

nearly every American.

V. Recommendation

A. Description of Policy Recommendation(s)

Given its high rankings in the criteria of efficiency, political feasibility, cost to

consumers, and fairness, the policy most recommended for implementation is federal

participation in International Reference Pricing. This policy alternative would allow the federal

government to join the global transition from consumption-based pricing to new outcome-based

models, a rising trend in progressive international markets championing equitable outcomes for

consumers (Lotven, 2017).

B. Rationale for Recommendation(s)

For all of the reasons listed above, participation in International Reference Pricing would

require the least administrative effort, as international reference pricing is already

well-established and well-utilized across the globe. In addition, this policy recommendation has

been gaining increased attention since President Donald Trump considered an Executive Order

mandating drug manufacturers to abide by International Reference Pricing limitations

(Kirschenbaum, 2020). Since then, this potential policy alternative has received positive

responses from both Republicans and Democrats.

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 C. Plan for Implementation

The Secretary of the Department of Health and Human Services is directly responsible

for implementing a rulemaking plan allowing entrance and participation into International

Reference Pricing. This power can be granted through Executive Order or through Congressional

legislation, but it is recommended that the Department of Health and Human Services drafts the

Executive Order for presentation to the executive branch. These actions can be pursued through

permission of section 42 U.S.C. 1315a(b) within the Affordable Care Act of 2010

(Kirschenbaum, 2020).

D. Provisions for Monitoring/Evaluation

After implementation, the Secretary of the Department of Health and Human Services

should immediately test a payment model to ensure that patients are paying no

more than the lowest price offered by International Reference Pricing. A monitoring mechanism

should also be established to ensure that prescription drug prices from major drug manufacturers

do not exceed prices in countries with similar rates of per-capita gross domestic product. Overall,

impact should be evaluated based on the prices consumers pay for both brand-named and generic

pharmaceutical drugs both before and after the implementation of International Reference

Pricing. An unintended potential consequence could occur if major drug manufacturers opt out

of supplying to the United States. If this happens, then patent protections should be revoked to

allow for generic competition to enter the market more freely.

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 VI. End Material

A. References:

1. Marsh, T. (2020). Prices for Prescription Drugs Rise Faster Than Prices for Any Other
medical Good or Service.GoodRx Data and Insights Research. Retrieved from:
https://www.goodrx.com/blog/prescription-drugs-rise-faster-than-medical-goods-or-services/

2. Waxman, H., Martin, K., Duong, S., Corr, B. (2017). Getting to the Root of High Prescription
Drug Prices. The Commonwealth Fund. Retrieved from:
https://www.commonwealthfund.org/publications/issue-briefs/2017/jul/getting-root-high-prescript
ion-drug-prices

3. Stossel, T. (2016). Prescription Drug Pricing: Scam or Scapegoat? American Enterprise

Institute. doi:10.2307/resrep24592
https://www.jstor.org/stable/resrep24592

4. Durkin, E. (2015). House Dems Form Drug Pricing Task Force, Demand GOP Action.
InsideHealthPolicy.com's FDA Week, 21(44), 1-5. doi:10.2307/26700258

5. Anderson, M. (2020). Canada bans export of some drugs to US. Becker’s Hospital Review.
Retrieved from:
https://www.beckershospitalreview.com/pharmacy/canada-bans-export-of-some-drugs-to-us.html

6. Lotven, A. (2017). Reference Pricing Eyed By Some As Rx Pricing Answer.

InsideHealthPolicy.com's FDA Week, 23(7), 17-18. doi:10.2307/26701926

7. Gill, L. (2019). The shocking rise of prescription drug prices. Consumer Reports. Retrieved
from https://www.consumerreports.org/drug-prices/the-shocking-rise-of-prescription-drug-prices/

8. Buck, I. D. (2020). The Drug (Pricing) Wars: States, Preemption, and Unsustainable Prices.
North Carolina Law Review, 99(1), 167–221. Retrieved from
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9. Mattingly, J. (2012). Understanding drug pricing. U.S. Pharmacist. Retrieved from

https://www.uspharmacist.com/article/understanding-drug-pricing

10. Matthews, M. (2020). A guide to understanding prescription drug pricing. Institute for Policy
Innovation. Retrieved from
https://www.ipi.org/ipi_issues/article_detail.asp?name=a-guide-to-understanding-prescription-dru
g-pricing

11. Entis, L. (2019). Why does medicine cost so much? Here's how drug prices are set. TIME
Magazine. Retrieved from https://time.com/5564547/drug-prices-medicine/

12. Rauhala, E. (2019). As price of insulin soars, Americans caravan to Canada for lifesaving
medicine. The Washington Post. Retrieved from:

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https://www.washingtonpost.com/world/the_americas/as-price-of-insulin-soars-americans-carava
n-to-canada-for-lifesaving-medicine/2019/06/14/0a272fb6-8217-11e9-9a67-a687ca99fb3d_story.
html

13. CSRXP (2019). Big Pharma Needs to be Held Accountable for Lead Role in Rising Insulin
Prices. The campaign for Sustainable Rx Pricing: News & Updates. Retrieved from:
https://www.csrxp.org/big-pharma-needs-to-be-held-accountable-for-lead-role-in-rising-insulin-pr
ices/

14. Right Care (2019). High insulin costs are killing Americans. Right Care Alliance. Retrieved
from: https://rightcarealliance.org/actions/insulin/

15. Waxman, H. (2020). Getting to Lower Prescription Drug Prices: The Key Drivers of Costs
and What Policymakers Can Do to Address Them. The Commonwealth Fund Reports. Retrieved
from:
https://www.commonwealthfund.org/publications/fund-reports/2020/oct/getting-lower-prescriptio
n-drug-prices-key-drivers-costs

16. Jenkins, J. (2019). Soaring Drug Prices Affect Nearly Every American. AARP Foundation.
Retrieved from:
https://www.aarp.org/politics-society/advocacy/info-2019/jenkins-soaring-drug-prices.html

17. Milligan, C. (2019). New Report Shows Impact of Rising Drug Prices and Drug Shortages on
Patients and Hospitals. American Hospital Association, Federation of American Hospitals,
American Society of Health-System Pharmacists. Retrieved from:
https://www.aha.org/press-releases/2019-01-15-new-report-shows-impact-rising-drug-prices-and-
drug-shortages-patients#

18. Silverman, E. (2016). Most Americans believe prescription drug prices are unreasonable. Stat
News. Retrieved from:
https://www.statnews.com/pharmalot/2016/09/29/americans-believe-drug-prices-unreasonable/

19. Lakdawalla, D. (2018). Economics of the Pharmaceutical Industry. Journal of Economic

Literature. Retrieved from https://www.jstor.org/stable/26494193

20. Stainton, L. (2019). Capping U.S. Drug Prices by Factoring in What Other Countries Pay.
New Jersey Health Care News. Retrieved from:
https://www.njspotlight.com/2019/10/capping-u-s-drug-prices-by-factoring-in-what-other-countri
es-pay/

21. Witters, D. (2019). Millions in U.S. Lost Someone Who Couldn’t Afford Treatment. Gallup
News. Retrieved from:
https://news.gallup.com/poll/268094/millions-lost-someone-couldn-afford-treatment.aspx

22. Bolivar, A. (2020). New Vizient Drug Price Forecast Estimates 3.59% Increase for
2020-2021. Vizient, Inc. Retrieved from:
https://newsroom.vizientinc.com/new-vizient-drug-price-forecast-estimates-359-increase-for-202
0-2021.htm

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23. Sullivan, T. (2020). CMC Releases Latest Outlook for Future Drug Spending. Rockpointe
Publications: Policy & Medicine. Retrieved from:
https://www.policymed.com/2020/05/cms-releases-latest-outlook-for-future-drug-spending.html

24. World Health Organization (2013). Evidence Summary 4 - Use of External Reference Pricing.
WHO Guideline on Country Pharmaceutical Pricing. World Health Organization. Retrieved from:
https://www.ncbi.nlm.nih.gov/books/NBK258618/

25. Kirschenbaum, A. (2020). Trump Embraces International Reference Pricing in Executive

Order. Federal Drug Administration Law Blog. Retrieved from:
https://www.fdalawblog.net/2020/09/trump-embraces-international-reference-pricing-in-executiv
e-order/

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B. Appendices

Table 1 (Buck, 2020)

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 Table 2: Alternatives Matrix. Rik Horoky

Problem: Rising Prescription Drug Prices

Criteria > Maintain Federal Regulate Remove PBM's

Alternatives v conditions* that participation in shadow protections in federal
allow for rising International pricing anti-kickback law
drug prices Reference
Pricing

Medium. Minimum High. Global pricing Low. Increasing High. Removing unique,
Efficiency
government standards are already regulation may line-item regulatory
involvement in established. slow down protections will simplify
establishing regulations administrative and legislation.
or entering new legislative
agreements is efficient. processes.
However, current
government
involvement is
disjointed and irregular.

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 Low. Surveys show High - this is not a Low. Public & Medium. Public likely to have
Political
most American form of price lawmakers have a positive opinion due to
Feasibility consumers are aware of regulation, which unfavorable negative perceptions of
and opposed to rising many lawmakers are opinion of kickbacks. Likely to have
prices. opposed to. government negative opinion among
regulations and PBMs, drug manufacturers,
interventions in and insurers.
the private market

High. Costs continue to Medium. Medium. Medium. Initial administrative

Cost to
increase for consumers, Administrative costs Administrative and legislative costs to
Consumers distributors, and involved in making costs involved in remove federal protections,
government initial transition to creating shadow however costs expected to
IRP, then expected to pricing decrease over time as
decline. regulations. previous PBM costs are
recouped

Low for competitors: High. Most countries High. High. Removing special
Fairness
market inefficiencies already participate in Government privileges for PBMs will
create unfair conditions IRP - this will allow intervention in make federal anti-kick back
for generic for global participation market laws more fair
competition. Low for and prices are inefficiencies
consumers: rising considered fair across promotes fairness
prices negatively affect the globe. among
nearly every American. competitors.

* * Maintain status quo

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