Pharmaceutical Policy Action Plan
Pharmaceutical Policy Action Plan
Joshua Rutledge
NUR 420
Dr. Lewis
October 8, 2020
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Pharmaceutical Policy Action Plan
Currently pharmaceutical drug prices in the United States of America has become a
national problem. Largely playing a role in this issue is the absurdly high price for insulin,
insulin is a biosimilar drug produced by genetically modified bacteria which synthesis this
crucial live saving drug. Currently the President of the United States has issued an executive
order to combat this national medication crisis. This is a problem not only effecting diabetics but
everyone paying absurd prices for drugs that cost manufacturers pennies to produce. Currently
the United States is the worst country effected with high drug prices this is largely due to our
capitalist-based society. It is a huge problem Americans are unable to afford medications and
have decreased accessibility to medicine due to high prices. The obvious solution would be to
impose federal regulations to limit the price of drugs problem solved right? Wrong, it’s not that
simple a lot of the times these companies spend hundreds of millions of dollars to research and
produce these medications to only profit on average $45 million over 20 years for a new product
launch if the drug does well (Francis, 2018). Inadvertently by cutting prices you cut research
projects for potentially huge drugs such as clonidine or Viagra, drugs with dual purpose
therapeutic effects that were discovered through research. So, the real question is how can we
increase drug consumer accessibility without cutting funding for research and development?
Current Legislature
One major issue in the pharmaceutical industry is the prospect of limiting costs for
pharmaceutical drugs with the aim to lower costs for the public consumer. Largely the reason for
high price pharmaceutical drugs is due to monopolization of the free market system, there’s no
competition. Patent law, Title 35 of the United States Code protects these companies’ rights and
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allows for them to monopolize drug markets (Hickey, 2019). Patent law gives the rights of
exclusivity for an invention for 20 years at the patent owner’s discretion. “Currently the three
largest manufacturers of insulins account for 96% of the global market volume” (Torres, 2020).
This year Elijah E. Cummings proposed the Lower Drug Costs Now Act (H.R.3) which aims to
place federal policy constricting the prices on insulin and some 75 select single-source drugs that
attribute to the list of 125 drugs that account for the greatest national spending This Act currently
being voted on in the House of Representatives would implement negotiated price thresholds on
these 75 selected current drugs, all new launch drugs, and insulin to not exceed 120% of the
global average price or 85% of the current US average price (Pallone, 2020). The problem here is
government overreach and constraining the free market system which could bankrupt companies
Solutions
Now that the problem has been identified what exactly are some solutions? Well
currently H.R.3 is a great solution for the people but not the rights of the business owner,
inventor, or entrepreneur. Trying to formulate a solution for both big pharma and drug
consumers is no easy task but there are some areas that can be modified to reach a comfortable
compromise for both parties. One solution would be to modify patent laws currently in place to
expand on the Hatch-Waxman Act of 1984 (Hickey, 2019). This Act gave pharmaceutical
companies the opportunity to approach patent holding pharmaceutical companies and negotiate
generic drug deals to create generics under the discretion of the patent owner. My solution would
be to use this list of 125 high spending drugs established under the Lower Drug Costs Now Act
and enforce a policy for drugs on this list to open up patents to competitor companies for a
government controlled profit percentage. This is similar to what the Supreme Court will do in
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cases of patent infringement so for instance Smith and Wesson copied the design of the Glock
handgun, Supreme Court ruled in favor of Glock now for every Smith and Wesson sale for that
specific handgun a portion of the proceeds goes to the Glock Company. This allows for
competitive pricing lowering costs, the competitor companies would be able to profit, and the
patent owning company would remain profitable from the competitor subsides.
Another solution would be for the government to implement price cost ratio policy. So, the idea
behind this would be if the cost of insulin is 1$ per bottle, I’m currently selling it for 150$, I just
profited 149$. The government could propose policy, capping the price in which a
pharmaceutical drug is marketed at, in relation to the cost to manufacture the drug. The nice
thing about this idea is that even if they allow for large wiggle room such as a 20:1 ratio that
bottle of insulin is now 20$ instead of 150$ and these companies are still profitable 20:1.
Implementation
My plan for implementing some of these solutions would be to approach and lobby local,
state, and national stakeholders to assist me and sponsor for these policy changes into federal
government. Stakeholders for these policy changes would be both government and corporate
officials that have the connections necessary to implement bills into the legislative process. Local
Current governor John Carney is a great example for a local stakeholder, he has political
connections, held a chair on the committee of finance during his tenure as U.S. Representative,
and was a huge supporter of the Affordable Care Act due to its financial benefits, which seems
like a similar viewpoint to my own policies. My plan to approach him about my policies is by
mail or community petition. For a State level stakeholder Delaware’s U.S. Representative Lisa
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Blunt Rochester would prove to be useful resource, she has a direct connection to the House of
Representatives and is co-chair to 2020 presidential candidate Joe Biden. Similarly, I would mail
would be U.S. Senator Tom Carper who is a huge proponent of public feedback I would use
Talking points
If I were to ever meet our state officials to propose my topic, I would start off by defining
the current problem with the pharmaceutical free market system and identify the demographic of
people affected greatly by this system. Next, I would start my talking points the first point being
the linear correlation between pharmaceutical profits and research and development. On average
pharmaceutical companies profit $45 million for a new product launch over the extent of a 20-
year patent (Francis, 2018). Secondly, I would identify the core of the issue which is the abuse
of Patent Law, Novo Nordisk, Eli Lilly and Company, and Sanofi - control 99% of the $21bn
(£16bn) global insulin market in terms of value and 96% in terms of volume (Torres, 2020). This
is largely since these companies currently hold the patents for non-animal derived insulin and
continuously modify the drug make up to extend the life of current patents (Amin, 2018).
Thirdly I would discuss the benefits of revising pharmaceutical patent law and the potential for
increased revenue both for competitors and patent holding companies along with the consumer.
A prime example of this can be seen with the Influenzas vaccine the World Health Organization
(WHO) convenes world experts twice a year to add emerging flu strains to update flu vaccines
(Rizvi, 2020). If government owned drugs/biosimilars must be openly shared for research, why
are drugs like insulin which are instrumental to survival allowed to be privately protected? I
would continue talking point in support of my policy plan using the argument for federally
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implemented price-cost ratio constraints. In a market research study on price restraints alone they
found it more efficacious to address the cause by changing the background conditions that foster
the monopoly, to provide incentives that promote more competition (Leonard, 2004). Finally, I
would finish my point with the effects of price reduction on the Medicare system and the
decrease in consumer costs relating to pharmaceutical medications. Costs in United States per
vial of insulin was on average $320, while in Canada the same medication under a different
name was 30$ (Torres, 2020). Currently Medicare will absorb 80% of the cost for insulin and
insulin related products which according to the previous statistic that Medicare pays 256$ for
Conclusion
Pharmaceutical companies have always had very close ties with politics. This is partially
due to the large government regulation on pharmaceutical drugs enforced by the Food and Drug
Administration (FDA) and the large amounts of money that changes hands in the pharmaceutical
market. It is the job of the federal government to break up monopolies in the free market
capitalist system and through the abuse of patent law many pharmaceutical companies are taking
advantage of the United States free market system. My future goal for this policy plan are to
increase the competition in the pharmaceutical market, lower drug costs to the consumer, retain
One instance of this abuse of patent law can be evidenced by insulin and the price
inflation for a monopolized drug in the free market. To combat this many politicians are in
support of the Lower Drug Costs Now act (H.R.3) currently under vote in the house of
representatives. This law bill proposes to combat the problem of pharmaceutical monopoly by
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putting price restrictions on select drugs. This solves the surface level problem by lowering drug
prices for consumers but does not combat the larger issue at hand which is abuse of patent law.
I have proposed a policy plan to implement in conjunction with this new law bill that
more effectively combats not just the high prices but this abuse of patent law and help break up
modification of current patent law to open up brand name drugs for generic sale with percentages
of proceeds going to patent owners, along with the implementation of producer cost-consumer
price ratio constraints. This would more accurately fix loop-holes in the current system and not
only facilitate the lowering of drug costs for consumers but also for Medicare recipients along
with increase the accessibility of these medications by allowing for other producers to
manufacture and sell generic forms of these medications. This policy plan utilizes local, state,
and national stakeholders to enact a plan of action and properly address these problems going
from an individual scale (myself) to a national bill proposal in the U.S. House of
Representatives.
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References
Hickey, K. (2019, May). Drug Pricing and the Law: Pharmaceutical Patent Disputes.
https://fas.org/sgp/crs/misc/IF11214.pdf.
Torres, K. (2020, January). Insulin prices: How much does insulin cost? The Checkup.
https://www.singlecare.com/blog/insulin-prices/#:~:text=A%202018%20study
%20estimated%20that,133%20per%20patient%20per%20year.
Amin, T. (2018, December 6). Patent abuse is driving up drug prices. Just look at Lantus.
STAT. https://www.statnews.com/2018/12/07/patent-abuse-rising-drug-prices-lantus/.
Hatch, O. G. (1984, August 10). S.2748 - 98th Congress (1983-1984): Drug Price Competition
https://www.congress.gov/bill/98th-congress/senate-bill/2748?s=1.
http://www.princeton.edu/~tleonard/papers/iswrong.pdf.
Abbott, T. A., & Vernon, J. A. (2007). The cost of US pharmaceutical price regulation: a
financial simulation model of R&D decisions. Managerial and Decision Economics, 28(4-
congress/house-bill/3.
Rizvi, H. (2020, July 13). What if...drug patents were scrapped? New Internationalist.
https://newint.org/features/2020/06/11/what-if-drug-patents-were-scrapped.
Medicare. (2020). Diabetes Supplies, Services, & Prevention Programs. Centers for Medicare
Coverage.pdf.