Taxing Drug Price Spikes: Assessing The Potential Impact

On March 29, 2017, senior Democrats introduced comprehensive legislation (titled the Improving Access to Affordable Prescription Drugs Act) in the House and Senate aimed at lowering prescription drug costs and improving transparency. The 129-page bill contains several popular provisions that could help drive its passage or could reappear in a future bipartisan attempt to repair or replace the Affordable Care Act. One such provision is section 202, which establishes an excise tax on drugs with price increases exceeding the inflation rate. The amount of the tax penalty would depend on the size of the price increase. It is modeled on similar rebates already in place for Medicaid, the Department of Veterans Affairs (VA), and the Department of Defense. We estimate that the proposal could generate several billion dollars annually just from sales through the Medicare Part D program. In this post, we examine how this proposal is structured and evaluate the implications of the proposal for patients, public insurance programs, and innovation. Proposed Tax On Drug Price Spikes The bill defines a “price spike” as an increase in the average manufacturer price—on a calendar year-over-year basis—exceeding inflation (the medical care component of the Consumer Price Index for All Urban Consumers [CPI-U]). Section 202 would tax US revenues earned by manufacturers from a price spike for any prescription drug covered by a federal health care program. Revenues arising from an annu...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Costs and Spending Drugs and Medical Innovation Insurance and Coverage Medicaid and CHIP Medicare Payment Policy Association of the British Pharmaceutical Industry drug price spikes excise tax on drugs Improving Access to Affordable Pres Source Type: blogs