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A recent study published in Health Affairs reached a controversial conclusion, that the United States should adopt socialist price schemes to reduce drug prices.
The study, “Using External Reference Pricing In Medicare Part D To Reduce Drug Price Differentials With Other Countries” argues that by matching prices with those in other countries, the United States can reduce spending in Medicare.
The proposal is not new, but it is dangerous.
In October 2018, the Trump Administration released a similar proposal which would cap the price of certain drugs in Medicare Part B using an average of the price of the drug in sixteen “reference countries,” including many with socialist healthcare systems. The proposal, known as an international price index, drew swift criticism from patients’ groups, as it would restrict access to needed medicines.
The recent Health Affairs study doubles down on the policy, arguing that the U.S. could reduce spending in Medicare by adopting this reference pricing. Unfortunately, it employs questionable assumptions to compare prices in the U.S., Japan, the U.K. and Ontario, masking reduced access for patients and reduced innovation in dubious price estimates, including not adjusting income or currency disparities as well as applying estimated rebate amounts to generate target numbers.
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