Biden Executive Order to Lower Drug Prices May Have Outsized Impact

November 28, 2022

An executive order issued last month by the Biden Administration could have far-reaching consequences on drug pricing efforts, according to a new article in MedCity News. The order commands officials to explore value-based payment models. These methods may help reduce drug prices by tying payouts to patient health outcomes.

According to Girisha Fernando, “Adopting value-based contracting is the only way we can see sustainable long-term lower consumer drug prices. Such a model, hopefully pushed into fruition by this executive order, will mean that the Inflation Reduction Act will usher in not an era of government price setting, but an era when drugs are equal in value to their price. If Medicare is encouraged to adopt this model, it would not only save the government money, but inspire all payers, whether public or private, to reassess how they pay for drugs. Even those payers, including private health insurance providers, who have long negotiated prices with drug companies, could be inspired to trade in the current model —where discounts are often based on purchase volumes— for a new model that looks at the outcomes of drugs.”

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(Source: MedCity News, November 27th. 2022)

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