Dr Michael E. Chernew: The IPI Might Lower Drug Prices, but Could Have Unintended Consequences

While it is likely that the Trump administration's proposed International Pricing Index would lower drug prices in the United States by at least a little, there are a number of potential unintended consequences that aren't clear at this point, said Michael E. Chernew, PhD, the Leonard D. Schaeffer Professor of Health Care Policy; director of the Healthcare Markets and Regulation Lab in the Department of Health Care Policy at Harvard Medical School; and co-editor-in-chief of The American Journal of Managed Care^®.

Transcript

The Trump administration recently announced the International Pricing Index. Is this a policy you believe could successfully reduce drug prices in Medicare?

I’ll answer it first directly and then I’ll talk a little more broad about the policy. It is certainly the case that it’s a policy which could lower drug prices. There’s a question of how much. Usually what happens in policies like that is the high-paying country, in this case the United States, would end up paying somewhat less, but the point here to understand is the low-paying countries would pay somewhat more. The question is: where in the middle would we end up? And then there’s a whole slew of potential unintended consequences, which I think we can enumerate, but we may not be able to quantify.

A good example would be what it does to innovation in pharmaceutical areas? How it influences other types of contracts that are going on in the United States outside of Medicare? As there’s a whole bunch of moving pieces that change in response to any particular policy change. What it does to patient access? What it does to drug shortages? There’s a whole bunch of questions that arise in these types of policies. In fact, there’s even broader ones related to the politics between us and other countries. How do the Europeans react now that there will be upward pressure on their prices if there’s somewhat downward pressure on ours? I think certainly, it could lower our drug prices some extent, but it’s not a simple, quick fix to the problem.

And what we have to understand, I think broadly, is we’re in an era where cost containment has become so important, that one way or another we’re going to control spending. And the challenge is to find the way to do that which is the least deleterious, and I am not sure, in this particular case, how that balance plays out. But we shouldn’t think of this as "might it work" or "might it not," which is obviously a reasonable question, but relative to what? It’s not clear that the status quo is the right alternative. So we’ll see what happens. I wish I could give you something more insightful.