November 14, 2023
STAT recently published an article written by James Rebitzer, Professor in Markets, Public Policy and Law, discussing the storm of debate that has erupted after the Center for Medicare and Medicaid Services announced that ten drugs will be subject to price negotiations under the Inflation Adjustment Act.
Most observers believe that the negotiations will reduce spending for both consumers and taxpayers. A real dispute exists over whether price negotiations will reduce future innovation by reducing expected profits for patented drugs. The central question in this debate is whether the patent system delivers value in health care.
Currently, patents are imperfect tools for stimulating innovation in health care. Monopoly pricing is the primary motivator for innovation and discovery. In light of the current dispute over drug prices, it is a good time to consider alternatives to the patent system that could better align innovation incentives with patient needs.
“Great change is often impossible until, suddenly, it is not. With the advent of this new era of drug price negotiation, now is the time to think about the changes needed to keep the engines of innovation in health care running far into the future,” Rebitzer concluded.