Michael Ciarametaro Talks About Balancing Drug Price Reform With Encouraging Innovation

Michael Ciarametaro, MBA, vice president of research at the National Pharmaceutical Council, discusses the balance between lowering drug prices and encouraging innovation in new drug classes for serious diseases.

Transcript

You recently coauthored a paper on the impact of innovative drugs on disease outcomes, which found the introduction of new drug classes in 6 serious diseases improved health outcomes over the last 30 years. While lowering drug prices largely has bipartisan support, how can we avoid the unintended consequences of indiscriminately lowering all drug prices without considering the value individual drugs provide?

Ciamentaro: Great question. This research contributes to an ever-expanding body of evidence that supports drugs being a primary source of improved patient outcomes. The question around price regulation, it's important to take a step back and understand what the primary drivers are in terms of what's driving increased costs. And there are 3 things to understand here. And IQVIA analysis showed that over the last 4 years, net prices flowing to the manufacturers have actually declined relative to general inflation CPI [consumer price index]. Second, you can say, "Well, Michael, that's true but new drug prices are driving up costs." That same analysis shows that over the last 5 years, that savings from loss of exclusivities exceed that from the expenditures from new drugs. And analysis by Berkeley Research Group shows that if you look at $1 of drug spending, more than 50% of that goes to parties outside the manufacturer. That means for every dollar spent on branded drugs, less than $0.50 is going to the developer.

And so, with those things in mind, I think improving and reducing costs requires 2 things. One, it requires increased transparency and reform of the supply chain. The second thing is a lot of the people tend to conflate price regulation with patient affordability issues, and NPC [National Pharmaceutical Council] has done research that shows that price regulation won't actually improve affordability from the patient perspective. Bottom line from the research is that drug price regulation, we looked at what a 15% reduction in total drug expenditure would do and we found no significant changes in benefit design.

Given the widespread use of deductibles, coinsurance, and high outpatient max allotments, what you find is drug regulation in and of itself won't help patients. Rather what is required is direct regulation around benefit designs and updating and reforming those.