Reducing Prescription Drug Costs

Research Report

Reducing Prescription Drug Costs

Policy Options for a Public Plan
December 1, 2020


Policymakers at the federal and state levels are considering various approaches to reduce health care costs, including a public health insurance option that would be offered alongside private plans in the nongroup and/or commercial group insurance markets. To meaningfully lower premiums, a public option would likely need to address rising prescription drug spending. In this report, researchers from the Program on Regulation, Therapeutics, and Law (PORTAL) at Brigham and Women’s Hospital and Harvard Medical School examine ways that a public option could reduce prescription drug costs. Section 3 of this report provides a comparative review of drug pricing systems, focusing on the Medicaid and Medicare programs and the US Department of Veterans Affairs. Section 4 summarizes the study methods; details of the model parameters and study drug basket are provided in the appendix. Section 5 evaluates the potential benefits, costs, and other key considerations for three selected drug pricing policy options for a public option. For each policy option, projected prescription drug expenditures after rebates are compared under the selected policy option versus estimated private insurance spending in 2020.

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