28 July 2016 - In a May article in Health Affairs, we proposed that the federal government consider using an existing law to negotiate or compel lower drug prices in the United States for certain important drugs with excessive prices.

We’ve been gratified at the interest the proposal has generated on Health Affairs Blog and elsewhere. We believe it illuminates a significant opportunity to improve access to important medicines, and also to more efficiently allocate our health care dollars.

A recent commentary on this blog by Henry Grabowski, however, expresses concern about the impact of our proposal on future drug innovation. As we will explain, we believe that the impact on innovation in fact would be minimal, and the results for society highly positive.

As we described in our original article, 28 U.S.C. Section 1498 permits the federal government to “use” patents that currently cover new drugs or other patented inventions. Patents are intended to create incentives for private investment in innovation, but in the current marketplace, they also allow pharmaceutical manufacturers to command exorbitant prices because they preclude generic competition. The price differentials between the US markets and other settings can be staggering — for example, a 12-week course of sofosbuvir (Sovaldi) to treat hepatitis C infection has a list price of $84,000 in the US, but can be obtained for under $500 dollars from generic suppliers in India.

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