Beyond The High Prices Of Prescription Drugs: A Framework To Assess Costs, Resource Allocation, And Public Funding

During the past century, an accumulation of laws, organizations, and policy mechanisms has led to increasing transfers of public funds to private drug manufacturers, straining budgets and enabling industry revenues beyond what markets could ordinarily sustain. Tax benefits and fee waivers subsidize industry research, while public institutions and charities help fund the creation of new products and pay for their use once they are approved. New exclusivities increase prices by delaying competition, and payment programs such as Medicare Part D help guarantee that prices will be paid no matter how high they rise. Members of the public thus pay for pharmaceuticals in more ways than is commonly recognized. This article provides a more comprehensive framework for legislators and scholars to use in assessing the total societal costs of drugs. Greater transparency is needed to clarify individual drug costs, facilitate appropriate resource allocation, and ensure that the amount of public funding is justified by the value of the drugs. Congress should direct the Government Accountability Office to study public contributions underlying the highest-cost drugs and should require periodic reporting by drug manufacturers of the direct and indirect public funding they receive.