July 24, 2023
STAT recently published an article coauthored by Keith Ericson, Professor of Markets, Public Policy, and Law, and Tal Gross, Associate Professor of Markets, Public Policy, and Law, discussing insurer’s effects on drug pricing.
Patients want three things from insurers: access to new drugs, low out-of-pocket costs, and low drug prices, what the authors call the “impossible trinity.” Due to the fact that insurers need to negotiate down costs by raising copayments or imposing restrictions on prior authorizations, patients can never get all three. The impossible trinity is not unique to American health care; the National Health Service of the United Kingdom does not impose high out-of-pocket costs on British beneficiaries, but instead limits access to new drugs. The United States makes effective treatments available to insured Americans as soon as they are developed. Without exclusions, American insurers must rely on making patients pay more out-of-pocket to deter use or simply pay higher and increase prices.
According to the Congressional Budget Office, drug companies will develop fewer drugs as a result of lower prices. The authors state, “in the end, there is no escape from the impossibly trinity. High drug prices, restrictions on access, or copayments – pick two.”