It Is Time to Consider More Price Regulation in Health Care.

This JAMA Forum discusses the promise and pitfalls of regulating prices in the US health care system.

Investing in Long-Term Health.

This JAMA Forum discusses treatment and health care delivery, innovative use of risk analytics, and spending and coverage priorities in the US health insurance system.

Medicare price negotiation and pharmaceutical innovation following the Inflation Reduction Act.

The Inflation Reduction Act (IRA) requires Medicare to negotiate lower prices for some medicines with high Medicare spending. Using historical data from public and proprietary sources to apply the IRA's negotiation criteria retrospectively, we identify all drugs that met the eligibility criteria from 2012 to 2021 to classify drugs that would have had a negotiated price in effect in 2022 and to calculate associated decreases in industry revenues. Our results suggest that the IRA's reduction in overall industry revenue will be modest, will not affect most top-selling drugs and will not likely result in large-scale defunding of research and development. Changes in the net present value of drug-development projects will be concentrated in medicines where Medicare is a notable purchaser and where the ratio between expected revenue and development costs was only marginally positive before the IRA. Policymakers considering narrowing or expanding the scope of Medicare negotiation should carefully consider the tradeoffs across medicines with diverse characteristics.

Cost of Exempting Sole Orphan Drugs From Medicare Negotiation.

Importance: The Inflation Reduction Act (IRA) requires Medicare to negotiate prices for some high-spending drugs but exempts drugs approved solely for the treatment of a single rare disease. Objective: To estimate Medicare spending and global revenues for drugs that might have been exempt from negotiation from 2012 to 2021. Design, Setting, and Participants: This cross-sectional study analyzed drugs that met the IRA threshold for price negotiation (Medicare spending >$200 million/y) in any year from 2012 to 2021 and had an Orphan Drug Act designation. We stratified drugs into 4 mutually exclusive categories: approved for a single rare disease (sole orphan), approved for multiple rare diseases (multiorphan), initially approved for a rare disease and subsequently approved for a nonrare disease (orphan first), and initially approved for a nonrare disease and subsequently approved for a rare disease (non-orphan first). Outcomes: The primary outcomes were the number of sole orphan drugs, estimated Medicare spending on those drugs from 2012 to 2021, and global revenue since launch. Results: Among 282 drugs, 95 (34%) were approved to treat at least 1 rare disease, including 25 sole orphan drugs (26%), 20 multiorphan drugs (21%), 13 orphan first drugs (14%), and 37 non-orphan first drugs (39%). From 2012 to 2021, Medicare spending on sole orphan drugs increased from $3.4 billion to $10.0 billion. Each year, a median (IQR) of $2.5 ($1.9-$2.6) billion in Medicare spending would have been excluded from price negotiation because of the sole orphan exemption. The cumulative global revenue of the median (IQR) sole orphan drug was $11 ($6.6-$19.2) billion. Conclusions and Relevance: The sole orphan exemption will exclude billions of dollars of Medicare drug spending from price negotiation. The high level of global revenues achieved by these drugs, however, suggests that special exemption is unnecessary for them to achieve financial success. Congress could consider removing the sole orphan exemption to obtain additional savings for patients and taxpayers and to eliminate any potential disincentive for developing additional indications for these drugs.

A Different Framework to Achieve Universal Coverage in the US.

This JAMA Forum discusses alternative ways to achieve universal coverage in the US such as administrative simplification in the Affordable Care Act plans to increase enrollment, having a basic policy that would be available to everyone, and options for supplemental coverage.

Availability of New Medicines in the US and Germany From 2004 to 2018.

Importance: Germany's unique approach to coverage determination and pricing has ensured that effective medicines remain on the market, often at prices reduced through negotiation. However, less is known about trade-offs of this approach with regard to initial availability of medicines. Objective: To examine differences in the timing and scope of new medicines available in Germany and the US. Design, Setting, and Participants: This retrospective cohort study analyzed initial availability of new medicines approved by regulatory agencies in Germany and the US between January 1, 2004, and December 31, 2018, and followed up through December 31, 2019. Data analysis was conducted from January 1, 2020, to July 1, 2022. A total of 599 novel approvals were reviewed. Generic, biosimilar, vaccine, and combination medicines were excluded. Exposures: US Food and Drug Administration approvals were reviewed for therapies categorized as new molecular entities or new active ingredients. German approvals were reviewed from secondary administrative data of authorized medicines that determine availability in Germany, including data presented by the European Medicines Agency. Main Outcomes and Measures: Approvals were analyzed to determine the percentage of medicines approved and available in the US, Germany, or both countries and compare the times to reach the market. Results: Analysis of 599 new medicines demonstrated that fewer were available in Germany compared with the US (80% vs 92% of all potential therapies) and that the median difference in time to market was 4 months (95% CI, -44.40 to 44.76 months). Forty-nine medicines were approved in Germany but not in the US, 75% of which were rejected by the US Food and Drug Administration, were withdrawn, or had US equivalent agents. Conclusions and Relevance: In this cohort study, fewer new medicines were available in Germany compared with the US between 2004 and 2018. In addition, drugs entered the German market later than in the US.

The Contribution of Price Growth to Pharmaceutical Revenue Growth in the United States: Evidence from Medicines Sold in Retail Pharmacies.

CONTEXT: To what extent does pharmaceutical revenue growth depend on new medicines versus increasing prices for existing medicines? Moreover, does using list prices, as is commonly done, instead of prices net of confidential rebates offered by manufacturers, which are harder to observe, change the relative importance of the sources of revenue growth? METHODS: This study uses data from SSR Health LLC to address these research questions using decomposition methods that analyze list prices, prices net of rebates, and sales for branded pharmaceutical products sold primarily through retail pharmacies. FINDINGS: From 2009 to 2019, retail pharmaceutical revenue growth was primarily driven by new products rather than by price increases on existing products. Failing to account for confidential rebates creates a more prominent role for price increases in explaining revenue growth, because list price inflation during this period was 10.9%, whereas net price inflation was 3.3%. CONCLUSIONS: Policies that restrict price growth on existing medicines likely need to be coupled with policies that reduce launch prices to have a meaningful long-term impact on pharmaceutical revenue growth. Using pharmaceutical list prices is often an inadequate approximation for net prices because the role of rebates has increased and varies by drug class.

Coverage of New Drugs in Medicare Part D.

Policy Points Only a small minority of new drugs in "nonprotected" classes are widely covered by Part D plans nationwide in the year after US Food and Drug Administration (FDA) approval. Part D plans frequently apply utilization management restrictions such as prior authorizations to newly approved drugs in both protected and nonprotected classes. Drug price influences both formulary inclusion (in nonprotected classes) and coverage restrictions (in both protected and nonprotected classes), while other drug characteristics such as therapeutic benefits are not consistently associated with formulary design. Plans do not seem to favor the minority of drugs that are determined to offer added therapeutic benefit over existing alternatives. CONTEXT: Medicare Part D is an outpatient prescription drug benefit for older Americans covering more than 46 million beneficiaries. Except for mandatory coverage for essentially all drugs in six protected classes, plans have substantial flexibility in how they design their formularies: which drugs are covered, which drugs are subject to restrictions, and what factors determine formulary placement. Our objective in this paper was to document the extent to which Part D plans limit coverage of newly approved drugs. METHODS: We examined the formulary design of 4,582 Part D plans from 2014 through 2018 and measured (1) the decision to cover newly approved drugs in nonprotected classes, (2) use of utilization management tools in protected and nonprotected classes, and (3) the association between plan design and drug-level characteristics such as 30-day cost, therapeutic benefit, and the US Food and Drug Administration (FDA) expedited regulatory pathway. FINDINGS: The FDA approved 109 new drugs predominantly used in outpatient settings between 2013 and 2017. Of these, 75 fell outside of the six protected drug classes. One-fifth of drugs in nonprotected classes (15 out of 75) were covered by more than half of plans during the first year after approval. Coverage was often conditional on utilization management strategies in both protected and nonprotected classes: only seven drugs (6%) were covered without prior authorization requirements in more than half of plans. Higher 30-day drug costs were associated with more widespread coverage in nonprotected classes: drugs that cost less than $150 for a 30-day course were covered by fewer than 20% of plans while those that cost more than $30,000 per 30 days were covered by more than 50% of plans. Plans were also more likely to implement utilization management tools on high-cost drugs in both protected and nonprotected classes. A higher proportion of plans implemented utilization management strategies on covered drugs with first-in-class status than drugs that were not first in class. Other drug characteristics, including availability of added therapeutic benefit and inclusion in FDA expedited regulatory approval, were not consistently associated with plan coverage or formulary restrictions. CONCLUSIONS: Newly approved drugs are frequently subject to formulary exclusions and restrictions in Medicare Part D. Ensuring that formulary design in Part D is linked closely to the therapeutic value of newly approved drugs would improve patients' welfare.

IDENTIFYING SOURCES OF INEFFICIENCY IN HEALTHCARE.

In medicine, the reasons for variation in treatment rates across hospitals serving similar patients are not well understood. Some interpret this variation as unwarranted, and push standardization of care as a way of reducing allocative inefficiency. An alternative interpretation is that hospitals with greater expertise in a treatment use it more because of their comparative advantage, suggesting that standardization is misguided. A simple economic model provides an empirical framework to separate these explanations. Estimating this model with data for heart attack patients, we find evidence of substantial variation across hospitals in both allocative inefficiency and comparative advantage, with most hospitals overusing treatment in part because of incorrect beliefs about their comparative advantage. A stylized welfare-calculation suggests that eliminating allocative inefficiency would increase the total benefits from the treatment that we study by 44%.

Cardiac intervention rates for older patients with acute myocardial infarction in the United States and Ontario, 2003-2013: a retrospective cohort study.

BACKGROUND: Previous work showed lower cardiac intervention rates for patients with acute myocardial infarction (AMI) in Ontario than in the United States. We assessed whether Ontario's efforts to improve access to rapid percutaneous coronary intervention (PCI) for AMI were associated with improved timeliness of care and whether this closed the gap between the 2 jurisdictions. METHODS: In this retrospective cohort study, we followed adults aged 66-99 years in the US and Ontario for 30 days after admission for incident AMI between 2003 and 2013 using health administrative data from both countries. We calculated the proportion of patients who received cardiac catheterization, PCI and coronary artery bypass grafting on the day of and within 30 days of admission overall and according to AMI type (ST-segment elevation AMI [STEMI] v. non-STEMI) and risk group (low, medium or high predicted risk of 30-d mortality). RESULTS: We followed 414 216 patients in the US and 112 484 in Ontario. The large disparities in cardiac intervention rates observed in 2003 mostly disappeared over time. By 2013, the proportion of patients who received same-day PCI was only slightly higher in the US than in Ontario (22.3% v. 19.2%), whereas the converse was true for 30-day PCI (44.0% v. 41.3%). In 2013, patients with STEMI in the US and Ontario received PCI at nearly identical rates on the day of admission (66.3% v. 63.8%); however, more patients at high risk with STEMI in the US than in Ontario received PCI, both on the day of admission (55.5% v. 44.7%) and by 30 days (60.5% v. 55.0%). INTERPRETATION: Despite differences in resources and organization of delivery systems, by 2013, timely receipt of PCI by Ontario patients with AMI lagged only slightly behind that by US patients. A higher supply of PCI centres in the US may have facilitated earlier intervention among patients at high risk with STEMI.