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Reducing Spending on Prescription Drugs with Limited Clinical Evidence

An important conversation is emerging on how public and private insurers pay for prescription drugs with limited clinical evidence. This discussion is focusing on drugs approved under the U.S. Food and Drug Administration’s (FDA) accelerated-approval program, in which drugs can come to market without clearly proving health outcomes. A primary concern is that insurers and government are paying high prices for drugs that have not demonstrated they improve health outcomes for patients. Policymakers are considering options to create financial incentives for manufacturers to more quickly complete confirmatory studies that show drugs can advance health and well-being.

The Medicaid and CHIP Payment and Access Commission (MACPAC) is considering a proposal to recommend increasing rebates to Medicaid on drugs that receive the speedy approvals. This rebate is paid by the manufacturer and lowers the net price of the drug. In addition, regulators at the FDA are taking a second look at drugs approved under the accelerated program after some manufacturers’ long-delayed confirmatory clinical studies failed to demonstrate improvements in health outcomes. These developments are part of a larger discussion on how to address high prescription-drug pricing when there is limited or no clinical evidence to support prices set by manufacturers.

This blog post examines the current accelerated-approval program, along with current recommendations for reform and other policy options for lowering the cost of drugs with limited evidence of clinical benefit. OTHER RECOMMENDATIONS FOR REDUCING SPENDING ON DRUGS WITH LIMITED EVIDENCE

Medicare also spends significant funds on accelerated-approval drugs. To reduce costs, Medicare could consider the following policy options:

Penalize manufacturers that fail to complete confirmatory studies by requiring them to pay a rebate to Medicare for accelerated-approval drugs in Part B that have not completed postmarket studies within five years of FDA approval. The penalty could be structured similar to the MACPAC recommendations.
Require accelerated-approval drugs to be eligible for government price negotiation. The Secretary of Health and Human Services could negotiate the price for Medicare and commercial markets based on the drug’s clinical evidence and prices paid by other countries.
Set Medicare reimbursement for accelerated-approval drugs using drugs approved with the same indication. This proposal would create a reference price using standard approval drugs.
Increase FDA oversight and regulatory tools to ensure manufacturers comply with requirements for postmarket studies in a timely manner.
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Prescription Drugs
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