How to Reduce Prescription Drug Costs
Three prescription drug bills remain in play in the 2025 General Assembly session: SB 11, HB 6870, and HB 7192.
Together, they have an array of provisions that target lower healthcare costs in general—and drug prices in particular.
Unfortunately, most of the policies these bills put in place, especially the price control provisions, undermine new medicine R&D and innovation, and thereby have the unintended consequence of increasing healthcare costs over time.
Other provisions in the bills, such as pharmacy benefit manager and insurance plan design reform could have a modest impact on drug prices.
What this trifecta of legislation does not address—and can’t address because it is a federal, not state issue—is the main driver of drug prices in the U.S.: the fact that we pay the lion’s share of the world’s new medicine research and development costs.
Who Pays for R&D?
Frustrated consumers and legislators often ask why are drug prices lower in other countries?
The answer lies in how single payer healthcare systems determine what they’ll pay a biopharma company for its drugs.
The formulas and rhetoric vary and are immensely and unnecessarily complicated, but essentially countries like Canada, the UK, Germany, Japan, etc., etc. only pay the manufacturing cost of a drug, plus a small profit (on the cost of manufacturing).
Ostensibly, this might seem fair. But it is profoundly unfair to patients and biopharma companies because it neglects to take into account the cost of R&D, which includes clinical trials.
Most of the cost of pulling together the ingredients of a cholesterol lowering drug, for example, and pressing it into a pill is tiny compared to the cost of the R&D and clinical trials that brought about discovery of the workable recipe for the medicine.
So, it is true that Americans pay the world’s new medicine R&D costs.
The business model of what’s left of a biopharma industry outside the U.S. is based on recouping R&D and clinical trials costs in the U.S. market.
A Question of Fairness
No company or administration has been willing to fight the battle and deny access to a medicine unless the other developed countries contribute their fair share of R&D and clinical trial costs.
One reason for this rests with other countries’ posturing with emotional arguments along the lines of “how could you deny this life saving drug” (without acknowledging that, without the R&D, there would be no new medicines).
Another is that we, in the U.S., have been willing to put up with the unfairness because we still benefit enormously by the value to our healthcare system that new medicines bring.
The menu of healthcare legislation doesn’t address, as to drug costs, where the solution lies.
As expensive as a medicine may seem, the surgeries, hospital care, disability, etc., the medicines bring huge cost savings to the system overall.
As well-meaning as the menu of healthcare legislation before the General Assembly this 2025 session may be, it doesn’t address, as to drug costs, where the solution lies.
For Connecticut—for the U.S.—to see reduced drug prices, the other well-off countries need to pay their fair share of R&D.
Paul Pescatello is the executive director of CBIA’s Bioscience Growth Council and chair of We Work for Health Connecticut. Follow him on X @CTBio
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