Frequently Asked Questions About Prescription Drug Pricing and Policy

Summary

Prescription drugs play an important role in the U.S. health care system. Innovative, breakthrough drugs are providing cures for diseases such as hepatitis C and helping individuals with chronic conditions lead fuller lives. Studies show that prescription drug therapy can produce health care savings by reducing the number of hospitalizations and other costly medical procedures.

Congress has attempted to ensure that Americans have access to pharmaceuticals by enacting the Medicare Part D prescription drug benefit as part of the Medicare Modernization and Prescription Drug Act of 2003 (MMA; P.L. 108-173) and expanding drug coverage under the 2010 Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended). Congress also has enacted laws to encourage manufacturing of lower-cost generic drugs, as well as cutting-edge biologics and biosimilars.

Americans are using more prescription drugs, and for longer periods of time, than in past decades. Still, access to prescription drugs remains a real issue for a number of consumers, particularly those without insurance; those prescribed expensive specialty drugs for treating serious or rare diseases; or those enrolled in private insurance or public health plans with high cost-sharing requirements, such as drug deductibles and coinsurance.

Prescription drug affordability has gained renewed attention during the past few years as retail drug spending has risen at the fastest pace in more than a decade—growing 12.4% in 2014 and 9% in 2015 before slowing to an estimated 5% increase in 2016. There are several reasons for the increase in drug spending. Manufacturers have been introducing new drugs at a record rate, while raising prices for many existing brand-name products. At the same time, fewer brand-name drugs have lost patent protection than in previous years, paving the way for lower-cost generic substitutes. The Centers for Medicare & Medicaid Services (CMS) forecasts that retail drug spending could average 6.3% annual growth from 2016 to 2025. Although that growth rate would be a reduction from recent more rapid levels, CMS expects retail drug spending to increase faster than many other areas of medical spending in this 10-year period.

This report will address frequently asked questions about government and private-sector policies that affect drug prices and availability. Among the prescription drug topics covered are federally funded research and development, regulation of direct-to-consumer advertising, legal restrictions on reimportation, and federal price negotiation. The report provides a broad overview of the issues as well as references to more in-depth CRS products. The appendixes provide references to relevant congressional hearings and documents (see Appendix A) and a directory of CRS prescription drug experts (see Appendix B).