National Press Club

National Academies call for Congressional and Federal agency action to reduce drug costs

November 30, 2017 | By Lorna Aldrich |

Photo/Image: Noel St. John

The National Academies of Sciences, Engineering and Medicine released a report at a National Press Club Headliners event Thursday, entitled “Making Medicines Affordable,” calling for congressional and federal agency steps to lower drug costs.

The report seeks to “address the market failures that currently permeate the pharmaceutical sector,” according to an introduction written by Norman Augustine, chairman of the committee that wrote the report and former chairman of the National Academy of Engineering, who spoke first at the event.

The report makes eight recommendations and recommends 27 actions, which are not prioritized, according to Augustine. However, when asked for their views, he and the other three members of the committee appearing at the event -- Michelle Mello of Stanford Law School, Eliseo Perez-Stable of the National Institutes of Health and Charles Phelps of the University of Rochester -- mentioned legislation to allow the Department of Health and Human Services to negotiate with producers and suppliers of medicine.

This recommendation includes negotiating prices, formulary design (lists of approved medications) and drug valuation methods.

Phelps called price negotiation “increasingly urgent” under widespread insurance coverage because an insured market with no price controls could send prices “sky high.”

Augustine referred to “repair or replace” as the options for a system that is not working, implying that if the recommendations in the report would not work, the alternative could be a single-payer system.

Phelps explicitly supported a recommendation that the Department of Justice and the Federal Trade Commission curb a practice called “pay for delay,” in which a firm holding an expired patent for a drug pays others not to introduce generic copies, in order to maintain its monopoly. Such as procedure in any other industry would be “patently illegal,” he said.

Among other recommendations, the report called for a cap on out-of-pocket costs for enrollees in Medicare Part D, an assurance of greater transparency of “financial flows and profit margins in the biopharmaceutical supply chain” and discouraging direct-to-consumer advertising of prescription drugs as well as discontinuing the tax deduction for such advertising as a business expense.

Perez-Stable advocated separating industry from practitioners. The report’s recommendation for codes of conduct restricting companies’ direct visits to clinicians, free drug samples and other inducements is important, he said.

Augustine emphasized that the pharmaceutical industry is both risky and complex. Mello pointed out that nine of 10 efforts to bring a drug to market fail.

She also pointed out that there is a surge in innovation, which should not be discouraged. She and Augustine noted that there is a division of labor in which government provides most basic research and industry innovates with it to develop products. In the past there were more industry institutes doing basic research, Augustine said.