Prescription Drug Affordability and Innovation: Addressing Challenges in Today’s Market

As you may recall, we have in the past, written urging a combination of catastrophic insurance, health savings accounts (Archer) and medical lines of credit, which is a bit more liquid version of a flexible spending account, with all accessed by one card with costs allocated based on account balances and income levels. Poor people would have minimum or even no copays, but would always have credit access. As income rises, so would copays and available balances, as well as catastrophic deductibles.

This plan would offer little incentive for the poor to shop for cheaper drugs, however wealthier patients could be made to feel the pain of drug prices a bit more, but only if they were denied comprehensive insurance. Good Luck passing that, it may be what cost Senator McCain the White House in 2008. Additionally, the Archer accounts and lines of credit are designed to assure universal access to care and drugs with little pain. It only helps the well wo can redirect funds to asset accumulation (thus causing asset inflation, speaking of 2008).

Single Payer and negotiation by government payers, state or federal price controls or taxing away excess profits would all control prices, which are monopolistically high. Unless an economist is far out on the rightward fringe, there is no doubt about the equity of stopping monopoly prices. The only question is how.

While some favor restricting patent rights, I would argue in favor of having every drug approval disclose all government supported research used to develop the product, giving the sponsoring agency the right to both share in the profits and have a say in the pricing. This both keeps the research dollars flowing and limits cost.

The last possibility is through our proposed Net Business Receipts Tax/Subtraction Value Added Tax. It would replace corporate income taxes and proprietary and pass through taxes and treat all business income the same. It would provide for the health insurance exclusion or fund single payer insurance. Companies who hire their own doctors and pharmacists and buy their own drugs would get a tax exclusion from single payer (third party insurance would be discouraged), and would negotiate with drug makers for lower prices, although this would leave small firms at a distinct disadvantage and would discourage such practices as franchising and 1099 employment. Still, on the whole, it would decrease cost while not discouraging innovation.

Short of that, an NBRT subsidized Public Option would allow sicker, poorer and older people to enroll for lower rates, allowing some measure of exclusion to private insurers and therefore lower costs. Drug prices would als0 decrease if the Public Option is allowed to negotiate with drug companies. Of course, the profit motive will ultimately make the patient exclusion pool grow until private insurance would not be justified, leading-again to Single Payer if the race to cut customers leads to no one left in private insurance who is actually sick.