Drug Prices as a Share of Health-Care Costs Have NOT Increased. Instead of Broad Price Controls, Congress Should Promote Affordability and Lower Out-of-Pocket Costs, Says ITIF’s Ezell in Senate Testimony

March 16, 2022

WASHINGTON—Following the Senate Committee on Finance hearing on Wednesday regarding drug price inflation and the need to lower drug prices in Medicare, the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, released the following statement from Stephen Ezell, ITIF Vice President for global innovation policy, who was among the witnesses scheduled to testify:

Drug expenditures for retail prescriptions as a share of America’s total health-care expenditures have been roughly stable for the past two decades, at about 9 percent of total health-care costs, while projections suggest they will remain stable for the rest of this decade. In addition, in the last 15 years, consumers saw a reduction of more than 8 percent in their prescription drug expenditures. Moreover, U.S. pharmaceutical spending as a share of total health expenditures is right-in line with OECD peer nations, with most others’ being higher. Meanwhile, drug innovation is becoming riskier, more expensive, and more difficult.

Instead of applying broad price controls, policymakers should promote affordability and mitigate out-of-pocket costs for individuals. ITIF supports many Medicare Part D cost-control proposals, including implementing a $2,000 cap on beneficiaries’ annual out-of-pocket costs, as well as monthly caps on patient expenses for drugs treating chronic conditions.

In addition, the federal government needs to focus on costs, not just prices. Policymakers should look into increasing R&D and production efficiency, including by boosting NIH funding and investments in public-private partnerships like Manufacturing USA Institutes and working to develop new technologies that decrease the cost of drug discovery, development, and manufacturing.

While there are some issues to address regarding drug pricing, what’s needed is reform, not wholesale transformation.

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Drug Prices as a Share of Health-Care Costs Have NOT Increased. Instead of Broad Price Controls, Congress Should Promote Affordability and Lower Out-of-Pocket Costs,  Says ITIF’s Ezell in Senate Testimony