Friday, September 20, 2019

Understanding the impact of the newly proposed Senate drug pricing legislation on manufacturers’ investment decisions

The Medicare Part D prescription drug program has been rightly criticized for its benefit design. The framework includes problematic incentives that both raise costs to the federal government and leaves beneficiaries’ with potentially significant out-of-pocket spending. With this in mind, the Prescription Drug Pricing Reduction Act (PDPRA) that was recently reported out of the Senate Finance Committee includes a substantial reform of the Part D benefit design which would simplify the Part D structure and afford more financial protection to beneficiaries. The proposal would alter liabilities facing insurers, drug manufacturers, and beneficiaries alike. In this piece, we consider how the new benefit design could change the incentives facing drug manufacturers, and in turn, the direction of their investment decisions.

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