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The cost of prescription drugs is a significant burden on patients and the healthcare system, especially in countries such as the USA. High drug prices can strain government programs, such as Medicare and Medicaid, and private insurers, which can lead to higher premiums for consumers. Additionally, high drug prices are responsible for increased out-of-pocket expenses for patients, which further lead to medication non-adherence, and thus result in poorer health outcomes. On the other hand, the research and development activities in pharmaceutical industries depend on their profit from sales, and an extremely harsh reduction in drug prices can have adverse consequences in terms of a lack of incentive for innovation in the pharmaceutical industry. (1)

All these factors make responsible and reasonable price negotiation an extremely important process in the market access cycle for drugs. By negotiating drug prices appropriately, the government and payers can help ensure that patients have access to affordable medications while also promoting competition and innovation in the industry. (1)

Price negotiations for drugs in the US are typically done by insurers and government programs, such as Medicare and Medicaid. The negotiation process is complex, involves multiple factors, and largely depends on the payer and the drug; the typical steps and factors considered include formulary placement, rebates and discounts, value-based arrangements, price controls, and competitive bidding. (2) To this effect, evidence on clinical effectiveness becomes extremely important, and it is essential that there is a robust and ethical body of evidence to display that the new innovation is efficacious, safe, and brings about enough value to justify the premium that the patients and payers are asked to pay for accessing the intervention.

The traditional sources for clinical effectiveness evidence for the purpose of price negotiation of drugs are the same as those for marketing approval, and are largely constituted by Randomized Clinical Trials (RCTs), which are often conducted by pharmaceutical companies to demonstrate the safety and efficacy of their drugs. These trials are designed to meet regulatory requirements and are often submitted to the FDA as part of the drug approval process. (3)

However, it is being increasingly realized that evidence in addition to traditional RCTs can play a crucial role in determining the true extent of efficacy, safety, and value of an intervention in a particular therapy area or patient population. Specifically, increasing interest is being shown towards using evidence from systematic literature reviews (SLRs) and real-world evidence (RWE) for informing clinical effectiveness data for drug price negotiations. (3, 4)

SLRs, being comprehensive evaluations of existing research studies, provide a balanced summary of the available evidence on a drug’s safety, efficacy, and cost-effectiveness, and thus can be an invaluable resource for drug price negotiations. However, using SLRs is associated with some challenges pertaining to the varying quality of evidence of studies included in the SLR, publication bias (by which there is an overestimation of a drug’s effectiveness due to non-publication of many studies with negative results), time and resource constraints, conflicts of interest, and lack of generalizability. (4)

RWE coming from the analysis of different sources such as electronic health records, claims data, and patient registries, can provide insights into how drugs are used in actual clinical practice, including their safety and effectiveness over time. By demonstrating the value of a drug in real-world settings, RWE can provide details about the actual usage pattern of an intervention post its marketing, compared to RCTs which offer a view of clinical effectiveness from a restricted population, prior to marketing. However, using RWE is also associated with certain challenges, such as quality of data, reliability, lack of data standardization, data interoperability, privacy concerns, and concerns about the quality of data analysis leading to generation of RWE. (3)

Health authorities worldwide have taken several initiatives to include Systematic Literature Review and RWE as key elements in market authorization and in price and reimbursement negotiations. Of more credit, is the fact that in the USA, the 21st Century Cures Act specified that RWD could be used to support the approval of a new indication for a drug that is already approved or to support or satisfy post-approval study requirements. (5-7)

Interestingly, the Inflation Reduction Act (IRA) is the biggest landmark set by United States federal law to curb inflation by reducing the deficit and lowering prescription drug prices. (5) This Act established a drug price negotiation program within the department of Health and Human Services (HHS), enabling the Secretary to negotiate the prices of certain costly drugs within the Medicare program. The Centres for Medicare & Medicaid Services (CMS), through the U.S. Department of Health and Human Services (HHS), released initial guidance outlining the conditions and limitations of the new Medicare Drug Price Negotiation Program for 2026. The Medicare Drug Pricing Negotiation Program and other provisions in the new drug law will improve Medicare’s capacity to serve those enrolled in the program and future generations of Medicare recipients. (5-8)

SLRs and RWE have an important role to play in generating clinical evidence for drug price negotiations, and the USFDA is in the process of regulating the steps needed for this by drafting the guidance document.  Together with other provisions in the new drug law, the Medicare Drug Price Negotiation Program will increase Medicare’s ability to serve current Medicare beneficiaries as well as future generations. (8)

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References

1. Papanicolas I, Woskie LR, Jha AK. Health care spending in the United States and other high-income countries. Jama. 2018 Mar 13;319(10):1024-39.
2. Gruber J. Delivering public health insurance through private plan choice in the United States. Journal of Economic Perspectives. 2017 Nov 1;31(4):3-22.
3. Pulini AA, Caetano GM, Clautiaux H, et al. Impact of Real-World Data on Market Authorization, Reimbursement Decision & Price Negotiation. Ther Innov Regul Sci. 2021 Jan;55(1):228-238.
4. Tarsilla M. Cochrane handbook for systematic reviews of interventions. Journal of Multidisciplinary Evaluation. 2010;6(14):142-8.
5. Levitt. The Inflation Reduction Act Is a Foot in the Door for Containing Health Care Costs, JAMA Health Forum. 3 (2022) e223575.
6. A Turning Point for U.S. Climate Progress: Assessing the Climate and Clean Energy Provisions in the Inflation Reduction Act | Policy Commons. https://policycommons.net/artifacts/2649285/a-turning-point-for-us-climate-progress_inflation-reduction-act/3672158/
7. Inflation Reduction Act Guidebook | Clean Energy | The White House. https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook
8. Sullivan SD. Medicare Drug Price Negotiation in the United States: Implications and Unanswered Questions. Value Health. 2023 Mar;26(3):394-399.