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Eliminating drug price differentials across government programmes in the USA

Published online by Cambridge University Press:  04 February 2010

Kalipso Chalkidou ,
Gerard F Anderson  and
Ruth Faden
Kalipso Chalkidou*
Affiliation:
Director, NICE International, National Institute for Health and Clinical Excellence, London, UK and Visiting Faculty, Johns Hopkins Berman Institute of Bioethics, Baltimore, USA
Gerard F Anderson
Affiliation:
Professor of Health Policy, and Director, Center for Hospital Finance and Management, Johns Hopkins Bloomberg School of Public Health, USA
Ruth Faden
Affiliation:
Wagley Professor of Biomedical Ethics and Director, Johns Hopkins Berman Institute of Bioethics, USA
*
Correspondence to: Dr Kalipso Chalkidou, Director, NICE International, National Institute for Health and Clinical Excellence, 71 High Holborn, London WC1 V 6NA, UK. Email: kalipso.chalkidou@nice.org.uk
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Abstract

Federal agencies in the USA pay significantly different prices for the same prescription drugs because each agency uses a different approach to derive the payment rate. Because we do not identify any economic rationale or socially accepted moral reasoning that would justify the current level of price variation, we suggest that the federal government should pay a uniform price for each drug. Laws and regulations that give certain federal agencies the ability to earn rebates, use formularies, or permit other special arrangements would need to be eliminated in order to have a single payment rate. This could make some government agencies worse off than others; however, a uniform payment rate would not need to affect beneficiaries’ current financial contributions, access to drugs, benefits or overall public expenditures. At the same time, having a single rate would permit the government to adopt a more effective approach to purchasing drugs and send a consistent message to pharmaceutical companies concerning which types of drugs the government wants them to develop for government beneficiaries. How this single price would be derived and how it would compare with the lowest or highest prices currently achieved by government agencies would depend on a variety of policy issues including the government’s desire to encourage pharmaceutical research and development and the need to control health care spending.

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Type
Articles
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Health Economics, Policy and Law , Volume 6 , Issue 1 , 26 January 2011 , pp. 43 - 64
Copyright
Copyright © Cambridge University Press 2010

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