Promoting Competition To Address Pharmaceutical Prices image

Health Affairs, March 15, 2018
Jonathan Darrow (Student Fellow Alumnus), Aaron S. Kesselheim


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Under ideal market conditions, competition among producers of a commercial good can drive down prices. The market for pharmaceuticals, however, is inefficient in many ways, leading to rapid price increases in recent years, even for some drugs without patent protection. This brief surveys the two principal types of pharmaceutical competition—inter-brand and brand/generic—and examines the reasons they may fail to produce lower prices for patients, including the absence of information on comparative efficacy, lack of federal agency authority to consider drugs’ value, narrow drug substitution laws, and laws that prohibit formulary exclusion. The brief then reviews the policy interventions that could help address these shortcomings. Such proposals include increasing the efficiency of generic drug approval, allowing temporary importation of drugs during domestic shortages or price fluctuations, and discouraging the improper use of patent exclusivities. 

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