China is adopting a free market solution to drug shortages.
China will scrap caps on retail prices for low-cost medicine and is moving toward free-market pricing for pharmaceuticals, after price controls led to drug quality problems and shortages in the country.
The Wall Street Journal reports that Chinese leaders want health care to be more accessible and affordable, but there have been unintended consequences in attempting to ensure the lowest prices on drugs. For instance, many pharmaceutical companies registered to sell the thyroid medication Tapazole have halted production in recent years after pricing restrictions squeezed out profits, experts say, creating a shortage.
The lesson for US lawmakers is clear – artificially low prices are the major cause drug shortages.
Perhaps its time for our lawmakers to revisit the legislative solution proposed in Senator Orrin Hatch’s Patient Access to Drugs in Shortage Act. There are three key codicils:
1. Price Stability
The Hatch bill would change the Medicare reimbursement rate for generic injectable products with 4 or fewer active manufacturers from ASP + 6% to Wholesale Acquisition Cost in order to achieve market price stability.
2. Medicaid/340B Rebate Exemption
The bill exempts generic injectable products with 4 or fewer active manufacturers from Medicaid rebates and 340B discounts in order to achieve market price stability.
3. Extended Exclusivity
Manufacturers who hold an approved application for a drug that would mitigate a shortage can extend by 5 years any period of exclusivity, even if the drug is eventually moved from drug shortage designation.
It’s embarrassing that the world’s leading free market economy (that’s us) hasn’t learned the Econ 101 lessons our friends in China are now implementing to solve the problem of drug shortages.
