US drug-pricing plan could reshape medicine costs worldwide

A new US drug-pricing policy could substantially reduce what Medicare spends on costly medicines, but it may also have consequences far beyond the United States, according to a modelling study published in The Lancet.

Medicare is the US government health insurance programme for around 68 million older and disabled people. Under new “most-favoured-nation” pricing models, Medicare would link the prices it pays for certain brand-name medicines to lower prices charged in 19 other high-income countries.

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The researchers analysed 195 medicines accounting for US$87.9 billion in annual Medicare spending. They estimated that the policy could reduce spending by US$5.2 billion for medicines given in hospitals and clinics, and by US$6.4 billion for medicines bought at pharmacies.

However, the policy could also change how pharmaceutical companies price and launch medicines elsewhere. For about 73 percent of medicines studied, the estimated Medicare savings would exceed the medicine’s entire annual sales in the country used to set the reference price.

This could encourage companies to raise prices in lower-priced countries, delay launches, or use other strategies to avoid becoming the benchmark for US prices. The authors stress that these are modelled estimates, not predictions of what companies will definitely do.

Source: The Lancet