In this report, the Congressional Budget Office discusses the factors underlying prescription drug prices and considers a range of policy approaches aimed at lowering those prices. The agency is evaluating how each approach, if implemented in 2025, would impact average drug prices for U.S. purchasers in 2031. Inclusion or exclusion of an approach does not imply approval or rejection by the CBO.
Some of the approaches considered by CBO aim to lower prescription drug prices by capping them or limiting their growth. Some companies lower prices by promoting price competition or by influencing the flow of information.
One approach being considered could reduce prices by more than 5 percent, and in some cases significantly more. This approach would result in a maximum allowable price based on non-US prices.
Approaches to expanding the Medicare drug price negotiation program would result in small (1% to 3%) or very small (less than 1%) reductions in average prices. An approach that requires manufacturers to pay an inflation rebate for sales in the commercial market would lead to modest price reductions.
The four approaches lead to negligible price reductions, no reductions, or price increases. Those approaches are:
- Allows commercial import of prescription drugs distributed outside the United States.
- Eliminate or limit advertising of prescription drugs sold directly to consumers.
- Facilitate the early market entry of generic and biosimilar medicines (medicines that are similar to generic medicines but made from living organisms); or
- Increase price transparency for branded drugs.
Lowering drug prices saves patients and payers money, but reducing the returns manufacturers expect from drugs that are not yet on the market makes investments in drug research and development less profitable and less profitable. As a result, fewer new drugs are developed and introduced. A large reduction in expected revenue will have a greater impact than a smaller reduction.
Some approaches may have a smaller impact on the prices of drugs released after the approach is implemented than they have on the prices of drugs that were on the market before. Additionally, some approaches may disrupt the availability of medicines in other countries, increase foreign drug prices, or both.
