Health Care

International Reference Pricing Would Have Saved the U.S. $83.5 Billion in 2020

Policies to lower prescription drug spending may be under serious consideration as Congress crafts budget reconciliation legislation, especially if those proposals offer federal savings. Prescription drug prices, particularly for brand-name drugs, tend to be higher in the U.S. compared to other high-income countries, most of which regulate drug prices. One proposal, the Elijah E. Cummings Lower Drug Costs Now Act (H.R. 3), would allow the Secretary of Health and Human Services to negotiate prices for insulins and single-source, brand-name drugs up to a cap of 120% of prices in six reference countries.

A new study from researchers at the RAND Corporation estimated potential savings on U.S. drug spending under these conditions and found that implementing international reference pricing along the lines of H.R. 3 would have lowered U.S. spending on certain prescription drugs by 52.3 percent, or $83.5 billion, in 2020. These savings are on top of rebates already negotiated between drug manufacturers and insurers.

Savings across therapeutic class vary. For example, spending on oncology drugs would have been 53.7% lower, while spending on insulins would have been reduced by 44.4%. The analysis does not reflect several components of H.R. 3 including price negotiation, and researchers cautioned that the estimated savings are likely conservative. Researchers also acknowledged there are other important considerations around drug price regulation, including incentives for research and development.

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