ORLANDO, Fla. — Value-based pricing is a viable cost-saving solution for challenging the current rationale for determining what patients pay for prescription drugs in the U.S. market, according to policy adopted by physicians at the Interim Meeting of the American Medical Association (AMA). The new policy establishes guiding principles for AMA advocacy efforts aimed at changing the fundamentals of prescription drug pricing without compromising patient outcomes and access.

“The new AMA policy acknowledges the carte blanche approach to drug pricing needs to change to align with the health system’s drive for high-quality care based on value,” said AMA President Andrew W. Gurman, M.D. “This transformation should support drug prices based on overall benefit to patients compared to alternatives for treating the same condition. We need to have the full picture to assess a drug’s true value to patients and the health care system.”

The new AMA policy seeks to blunt growing pharmaceutical spending rates by tying drug prices to an optimal balance of benefits and costs. The policy’s adoption adds to the AMA’s long-standing support for market-driven mechanisms to control pharmaceutical costs, while recognizing that improvements need to be made to ensure that the prescription drug market operates efficiently and effectively. In its continued push for transparency in drug prices, the AMA last month launched a grassroots campaign to hear patients’ stories.

Brand name drug prices in the U.S. have spiked 98.2 percent since 2011. The average price of brand-name drugs rose 16.2 percent in 2015, according to Express Scripts. Prescription drug prices have been frequently cited as a main justification for higher health insurance premiums, and growing cost-sharing requirements. For patients with commercial health insurance, out-of-pocket costs for brand prescriptions have increased by more than 25 percent since 2010, according to IMS Institute for Healthcare Informatics. A Kaiser Health Tracking Poll released in October found that Americans rank high prescription drug costs among their top health care priorities.

As public and private payers move forward to tie drug prices to value, the AMA’s support for these programs will be guided by the following principles:

  • Value-based prices of pharmaceuticals should be determined by objective, independent entities;
  • Value-based prices of pharmaceuticals should be evidence-based and be the result of valid and reliable inputs and data that incorporate rigorous scientific methods, including clinical trials, clinical data registries, comparative effectiveness research, and robust outcome measures that capture short- and long-term clinical outcomes;
  • Processes to determine value-based prices of pharmaceuticals must be transparent, easily accessible to physicians and patients, and provide practicing physicians and researchers a central and significant role;
  • Processes to determine value-based prices of pharmaceuticals should limit administrative burdens on physicians and patients;
  • Processes to determine value-based prices of pharmaceuticals should incorporate affordability criteria to help assure patient affordability as well as limit system-wide budgetary impact; and
  • Value-based pricing of pharmaceuticals should allow for patient variation and physician discretion.

“The AMA principles emphasize that efforts to price prescription drugs based on value should ultimately benefit patients and the health care system without stifling innovation in the pharmaceutical industry,” said Dr. Gurman. “These initiatives should aim to ensure patient access to necessary prescription drugs and allow for patient variation and physician discretion. In addition, such initiatives should limit administrative burdens on physician practices and patients, and be evidence-based, transparent, objective and involve the input of practicing physicians and researchers.”

In addition, new AMA policy emphasizes that pharmaceutical pricing mechanisms need to take into account a drug’s public health value. The AMA supports direct purchasing of pharmaceuticals used to treat or cure diseases that pose unique public health threats, including hepatitis C. Direct purchase arrangements will guarantee prices for prescription drugs as well as volume for manufacturers. As such, lower prices can be achieved in exchange for a larger, guaranteed market for a drug.

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About the American Medical Association

The American Medical Association is the physicians’ powerful ally in patient care. As the only medical association that convenes 190+ state and specialty medical societies and other critical stakeholders, the AMA represents physicians with a unified voice to all key players in health care.  The AMA leverages its strength by removing the obstacles that interfere with patient care, leading the charge to prevent chronic disease and confront public health crises and, driving the future of medicine to tackle the biggest challenges in health care.