That is the title of my new Health Affairs Forefront piece out today with Lou Garrison and Richard Xie. An excerpt from the article is below:
United States policy makers increasingly argue that Americans pay too much for prescription drugs. In a recent report, the Senate Health, Education, Labor, and Pensions (HELP) Committee minority staff contended that executive branch efforts have failed to curb drug prices, which continue to “skyrocket.” Senator Bernie Sanders (I-VT) has championed legislation to tie US prices to foreign benchmarks. At the same time, pharmaceutical companies are warning European governments that their prices are too low and are considering withdrawing their products from lower-price markets. The question of what constitutes the “right” price remains unresolved.
In addition to proposed legislation, a series of initiatives by the Centers for Medicare and Medicaid Services—including the most favored nation (MFN) Global Benchmark for Efficient Drug Pricing (GLOBE) proposal for Medicare Part B, the Guarding US Medicare Against Rising Drug Costs (GUARD) proposal, and the GENErating cost Reductions fOr US Medicaid (GENEROUS) model—seek to bypass this debate by linking US prices directly to those negotiated in other wealthy nations. A recent Council of Economic Advisors report claims that MFN will save billions. The appeal is obvious: If Germany, France, and the United Kingdom pay less, why shouldn’t Medicare?
But this framing obscures a critical economic point. These policies do not simply import lower prices; they import the valuations those systems produce—including their explicit or implicit willingness-to-pay (WTP) thresholds for health gains. As a result, MFN-style policies risk transplanting valuation levels that may not align with US economic conditions or policy objectives.
Since foreign reference pricing de facto imports foreign pricing and valuation frameworks, this article examines five key differences in how the US and other countries have historically valued medical innovation, specifically:
Level of willingness to pay for health gains,Value of early access to new treatments,Scope of treatment value—holistic patient outcomes versus health gains alone,Prioritization of treatments for severe and rare diseases, andInclusion of treatment choice as providing additional value per se
You can read the full article here which outlines these five key differences as well as proposes alternative solutions to reference pricing.
