úterý 25. června 2019

Drug discount regulation

This is a reaction to The insulin racket: why a drug made free 100 years ago is recently expensive.

The problem that my proposal aims to fix:
The difference between the "official list price" (which has gone up) and the "price actually paid by large providers" (which has gone down).

The proposal:
The proposal calls for the same cost of a drug for everyone (in the US) regardless of whether the subject is an uninsured person or a large insurance company.

Sure enough, some order-quantity discounts would be permissible but only up to a capped rate. E.g.: 10% discount for ordering a million pills is ok. But 99% discount is not ok.

Comparison to alternatives:
"Pre-restitution" could solve the issue as well. But it is politically hardly acceptable (the last time when a pharmaceutical company was nationalized in the US was, I think, during the second world war). Discount regulation, on the other end, preserves the ownership.

Cap on the cost could work as well. But it is tough to set a fair price, particularly for new drugs. While discount regulation does not eliminate the risk of bad pricing, it shifts the responsibility of the good pricing to drug manufacturers. Hence, discount regulation is less risky for lawmakers than the price cap. And the drug manufacturers are better positioned to quickly adjust a bad price, as the price itself remains unregulated.

Single-payer healthcare could work as well. The issue is that it is a big change. And big changes are risky. Sure enough, the discount cap is a big change as well. But it is going to negatively impact just "pharmacy benefit managers". While single-payer healthcare would negatively
impact both, pharmacy benefit managers and insurance companies.

Additional advantages of the discount regulation:
  1. In principle, the proposal is item agnostic. While it makes sense to initially limit the scope of the bill to a few troublesome drugs in order to limit the impact of unexpected consequences, there is no evident reason why the bill should not, in the end, apply to all treatments.
  2. It eliminates a lot of "unproductive" hassle associated with the price negotiation. Essentially, it could reduce industry of pharmacy benefit managers (they would still exist - medical care is not just about the cost of treatments but also about cost-benefit analysis, which will remain a valuable tool in presence of multiple treatments).

What it does not attempt to solve:
The proposal aims to lower the gap between the price of the drug for an uninsured person and the price for an insurance company. But it does not attempt to decrease the price of the drug for the insurance company. I.e.: a drug that is already too expensive for an insurance company will remain to be too expensive. But that is politically acceptable because the drug will remain expensive for _everyone_.

Corner scenarios:
People are extremely creative in avoiding the law. Hence, the law would have to strike the balance between the generality of the formulation and enforceability.
Examples that should be illegal:
  1. The manufacturer decides to stick with the high price. But in order to compensate it for the insurance company, they will provide some drugs "that are close to expiration" for free.
  2. The manufacturer decides to stick with the high price. But time-to-time it decreases the price just for a moment until it signs a contract with the insurance company.
  3. The manufacturer decides to stick with the high price, but only for the US. Hence, the insurance companies will simply import the drug for a much lower price.
As I am not skilled in law-speak, I do not provide a suggested law formulation. Nevertheless, it is reasonable to assume that the amount of the text necessary to describe the discount cap is going to be lower than in the case of the cost cap (as the cost cap has to provide a unique cap for each drug).


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