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Excited to share new work @NEJM:
Drug prices are a major concern for Americans. We describe the many levers policymakers have—beyond price negotiation—to reduce the cost burden on patients, while maintaining incentives for the innovation society needs.https://www.nejm.org/doi/full/10.1056/NEJMhpr1911004?query=TOC …
We explore the 3 stage journey every drug makes during its life—and how adjusting the rewards & costs for drugmakers during each period can influence the overall reward for innovation. (The Interactive Graphic lets readers see how each policy influences this reward system.)pic.twitter.com/guF1Vkr9sm
In the Innovation Period, drugs are developed & tested. Process is risky but there are many ways to reduce risk & cost without allowing companies to charge exorbitant prices. Question for policymakers is: What is allowed into the market and how much should it cost to get there?
If/when a drug is approved, the Monopoly Period begins. This is where the majority of the reward for successful innovation is earned. Policymakers can influence incentives by deciding how long and how thoroughly new drugs should be protected from competition.
Finally, the Competitive Period starts when other companies are allowed to introduce products to compete with the innovator drug. Again, policymakers determine when & how generics can compete—which profoundly influences drug company profits, as patents & exclusivities expire.
The central insight is that America's drug market is anything but a traditional free market. Lawmakers have constructed every aspect of the system—and thus have many options, beyond price negotiation, to change the calculus for drug innovation & the costs to patients.
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