Drug makers have used lockstep “shadow pricing” to maintain price “parity” and use their competitors’ price increases as justification for their own price increases. Scrutiny should be applied to therapeutic drug markets with the greatest potential for this anti-competitive behavior. Some of the drug companies making the new weight loss drugs, for example, are the very same companies that make insulin – a therapeutic drug class where separate investigations by the Senate Finance Committee and House Oversight and Investigations Committee found that ”shadow pricing” significantly raised prices over many years costing diabetes patients and taxpayers billions of dollars.

Makers of the new weight loss drugs are charging U.S. patients as much as 5.5 times more than patients abroad for the same medications and, while Medicare currently doesn’t cover these drugs, estimates indicate costs to Medicare could be $13.6 billion to $26.8 billion in just a single year. The Congressional Budget Office (CBO) predicted that covering GLP-1 weight loss drugs “at their current prices, would cost the federal government more than it would save from reducing other health care spending.” Newly-approved cell and gene therapies have sky-high prices in the millions of dollars that can break state Medicaid budgets and are projected to cost taxpayers an estimated $300 billion over 15 years. Drug makers must have financial skin in the game for the high-priced therapies and lower costs for patients and payers.

Drug makers should be required to conduct comparative effectiveness studies comparing their new drugs to existing drugs on the market. HHS should issue an annual report on launch prices and launch price trends to systematically monitor their impacts on consumers and taxpayers. The Patient-Centered Outcomes Research Institute (PCORI) and Agency for Healthcare Research and Quality (AHRQ) should be empowered with the resources and authorities necessary to conduct cost-effectiveness work to assess whether launch prices and ongoing price increases, align with actual value to patients.

Medicare should maximize use of drug value assessments from non-partisan, independent organizations like ICER into the drug price negotiation process – so long as those value assessments reflect the rights and needs of all patients and do not discriminate against the disabled, elderly, or terminally ill. Medicare also should be as transparent as possible about its justification for negotiated prices, so that the public knows negotiated prices represent the lowest possible prices that Medicare can obtain. The rebate rule should be permanently rescinded and Part D plans should have more flexibility to manage high-cost drugs.