Looking Abroad for Methods to Cut Rx Spending Growth

The rate of U.S. prescription-drug spending growth reached a historic low in 2010, but there are still methods to consider to reduce spending even more, particularly tools that have found success in other countries.

The rate of U.S. prescription-drug spending growth reached a historic low in 2010, but there are still methods to consider to reduce spending even more, according to the National Institute for Health Care Reform (NIHCR).

The cause of the recent slowed spending growth is the fact that many patents on commonly prescribed drugs are expiring now. So NIHCR expects the rate of spending growth will accelerate again as new drugs enter the market.

“In an era when the United States is keenly focused on iden­tifying effective means of controlling health costs without an adverse impact on patients, new ideas for managing drug costs should be highly welcome,” the authors wrote in the report.

Click to enlarge

Using approaches from Australia, the United Kingdom and other countries, could slow prescription-drug spending in the U.S., according to the NIHCR’s policy analysis, “Adapting Tools from Other Nations to Slow U.S. Prescription Drug Spending.”

One tool that is used in other countries, but only infrequently in the U.S., is reference pricing. The concept is that a payment for a group of similar drugs is set based on a benchmark. The benchmark can be set using a variety of methods, such as the price of the lowest-cost drug in the group or by average price. The health plan or health system pays for the benchmark and the patient pays any difference between the benchmark and the price of the drug.

The U.K. and other countries use comparative effectiveness, cost effectiveness and value pricing. Through this approach, the countries use formulary and cost-sharing tiers on the clinical value of drugs.

In the U.S., using comparative effectiveness and cost effectiveness has been debated recently. The authors of the policy analysis wrote:

“Most recently, the 2010 Patient Protection and Affordable Care Act (PPACA) allocated considerable new funding for comparative-effectiveness research and created an independent entity — the Patient-Centered Outcomes Research Institute (PCORI) — outside the government to oversee this research. The law, while funding new comparative-effective­ness research, explicitly forbids the federal government from using cost-effectiveness estimates in the new research or as the basis for establishing what type of health care is recom­mended.”