.Transparency in Drug Prices

The Centers for Medicare & Medicaid Services (CMS) just proposed a rule supposedly designed to improve transparency in Medicaid.

That’s hardly the real objective, however. The proposal is a back-door effort to expand price controls in Medicaid and beyond, a surefire way to derail the next generation of medical breakthroughs.

The CMS rule would require certain drug makers to participate in annual “price verification surveys.” The agency claims the surveys will shed light on why certain drugs are priced the way they are. The kicker is that through this “survey” process, drug companies would have to share proprietary and confidential data with the government.

CMS has offered drug makers an escape route, however—much the way blackmailers and extortionists offer their victims a way out. All a company has to do to excuse itself from these annual audits is agree to set its drug prices at whatever level the government deems fair—or, as an alternative, to hand over larger rebates to Medicaid.

Those who don’t play ball and cut prices “voluntarily” can look forward to selective release or leaks of confidential material that activists will pounce on to apply outside pressure on prices.

The expansion of price controls will immediately reduce the funds research companies have to invest in the development of new medicines. For companies or investors to assume that level of risk, they need to know that they will have the ability to bring their new drug to market at a price that reflects this expensive development process. But when the government gets involved in that conversation, the odds that future drug development efforts will continue with the same fervor drop dramatically.

Everyone is in favor of transparency. But that doesn’t mean the government should use the coercive threat of snooping to further a hidden agenda. The CMS rule is a thinly veiled effort to expand the power of the government to dictate prices, with no regard for the long-term interests of patients.

Peter J. Pitts is a former FDA associate commissioner and president of the Center for Medicine in the Public Interest.

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