Republican Efforts to Block Value-Assessment for Medicare Will Result in Outsourcing

October 4, 2022

The US Congressional Budget Office (CBO) has estimated that the new drug pricing reform in the recently-passed Inflation Reduction Act will save $100 billion over 10 years, even with the small number of drugs facing Medicare negotiations. Implementation will require intensive value-assessment, but Republican lawmakers have balked at the idea, claiming it will unduly burden some individuals and stifle innovation. Value-assessment will still be necessary, and an alternative metric is external reference pricing (ERP).

According to Daniel Ollendorf, “ERP is exactly as it sounds—a method of tying prices paid here to those paid in other countries. As has been documented exhaustively, drug prices in the US are routinely 2-3 times higher than those in other, economically-similar settings. This would also produce significant savings for Medicare—in fact, CBO’s scoring of the earlier legislation suggested even greater savings.”

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(Source: Center for Global Development, October 4th, 2022)

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