Reinhardt Op-Ed Recommends Lowering Demand to Lower Drug Costs

Curbing consumer demand for newer and more expensive -- but not necessarily more effective -- medications entering the market can help lower America's high prescription drug costs, Uwe Reinhardt writes in a New York Times opinion piece. In the wake of HHS Secretary Donna Shalala's refusal last week to implement a drug importation bill Congress passed last year -- which Reinhardt calls a "toothless tiger" -- the Princeton economist recommends instead that American health insurers and consumers act as "buyers do in other markets: evaluate products before paying for them." Toward this end, Reinhardt recommends that private insurers and the government fund a $1 billion "private, nonprofit" research institute to study the relative advantages of different medications. He writes that such an institute could be funded with "just 1% of [insurers' and the government's] collective yearly spending on prescription drugs." With a knowledge of different drugs' varying efficacy and value, Reinhardt argues, insurers would be able to "reimburse patients fully only for the relatively low-cost effective drugs, but [would] require consumers who want a higher-priced alternative to pay the price difference." Unless more costly medication can be proven to provide definitive health advantages, Reinhardt recommends that financing for more expensive drugs should rest with consumers and not with the government or insurers. If "drug spending is to be curbed," Reinhardt writes, "patients cannot receive financing for slightly improved medications at whatever cost" (Reinhardt, New York Times, 1/3).