The Drug Price Iceberg: More Than Meets the Eye

When it comes to the political iceberg of drug prices, there is more than meets the eye. Policies that reduce prices but do not lower consumers’ out-of-pocket costs will not address the main challenge facing most Americans.

Access to affordable prescription drugs is a topic of increasing public concern. In a recent survey, 82% of respondents identified medical costs as their biggest financial challenge. Although prescription spending growth has moderated and drug spending remains a relatively small part of total medical expenditures, a 2018 Kaiser Family Foundation poll showed that a significant majority of Americans think that Congress and the president are not doing enough about the problem.

The fact that a majority of American adults use prescription medications is likely driving the issue of drug affordability as a policy priority. Nearly 3 in 5 American adults take at least 1 prescription drug, which is up markedly since 2000. Notably, the percentage of American adults taking 5 or more prescription drugs nearly doubled between 2000 and 2012 from 8% to 15%. In addition to factors such as obesity and an aging population that influence pharmaceutical usage, prescribing patterns and access to drugs are affected by several other variables, including revised clinical indications, new medication approvals, and loss of patent protection. Moreover, major policy changes such as the implementation of Medicare Part D and the Affordable Care Act provided millions of Americans with prescription coverage for the first time.

There is clear evidence that pharmaceutical innovation has led to improved patient-centered outcomes for those diagnosed with heart disease, diabetes, depression, HIV, hepatitis C virus, and other conditions. However, serious problems such as the overprescribing of antibiotics and the overuse and abuse of prescription painkillers must be acknowledged.

Before policies exclusively aimed at lowering drug prices are implemented, the clinical and financial effects of drugs should be carefully scrutinized relative to available alternatives. Importantly, the value created by a specific drug—preferably determined for a specific clinical indication—should be compared not only with other pharmaceuticals, but also with nondrug services. Price is only part of the value equation. Rigorous assessments of clinical services have concluded that certain expensive drugs are of extremely high value, whereas some commonly used diagnostic tests, procedures, and inexpensive drugs are of no value and are even harmful. Moreover, drug prices change over time in a way unlike prices of other services; the price reductions that occur when a drug loses patent protection are not typically observed for nondrug services. For example, acquisition prices for statins and coronary stents, both first available in the mid-1980s, have moved in opposite directions over the past 3 decades.