Richard Meyer Cost of healthcare in the U.S., Drug Prices, FDA

Should the FDA ask drug companies about pricing?

The FDA only requires drug companies to provide information about their pricing practices for new drugs and doesn’t approve drugs based on pricing. Still, Congress may give the FDA the authority to decline new drug applications based on set retail prices.

In Europe, several countries decline new drug approvals based on their cost versus the value of currently available drugs. Should that happen here?

The FDA doesn’t have a direct role in drug pricing. Indeed, of the core provisions of the Federal Food, Drug, and Cosmetic Act (FDCA), where such direct pricing authority might logically reside, such authority is starkly absent. For example, section 505(b)(1) of the Act requires that a New Drug Application contain, among other things, full clinical data on the safety and efficacy of the drug, detailed information on its composition and manufacturing processes, and the drug’s proposed labeling, but nowhere does this section require an applicant to provide FDA with the proposed pricing of the drug.

The FDA can adopt systemic policies and processes that may indirectly impact competition (and thus pricing for genericized drugs), and that impact overall drug spending on a system-wide basis. The emphasis on the indirect and system-wide impacts is an important contrast to FDA’s inability to impose any drug-specific price controls or directly impact any specific patient’s out-of-pocket drug costs.

But there are some specific ways that the FDA can ask more drug companies about pricing:

  • The agency can require drug companies to provide more detailed information about their pricing practices, such as their profit margins on different drugs.
  • The FDA can hold public hearings on drug pricing and invite drug companies to testify.
  • The FDA can work with other government agencies, such as the Department of Justice, to investigate possible anti-competitive practices in the pharmaceutical industry.

In addition to asking more drug companies about pricing, the FDA can also do other things to address high drug prices, such as:

  • Promoting the development of generic drugs. Generic drugs are typically much cheaper than brand-name drugs.
  • Expanding access to drug discounts and rebates. Many drug companies offer discounts and rebates to health plans and other organizations. The FDA can help pass these discounts and rebates on to patients.
  • Reforming the patent system. The patent system gives drug companies exclusive rights to sell their drugs for a limited period. This can help to encourage innovation, but it can also lead to high drug prices. The FDA can work with Congress to reform the patent system to balance the need for innovation with the need to keep drug prices affordable.

Congress needs to give the FDA more authority when it comes to pricing. Panels, consisting of physicians, need to evaluate potential list pricing versus the drug’s benefits before deciding on approval. This is especially true when there is only a marginal value of new drugs versus the current drugs on the market.