Articles

The Drugs at the Heart of Our Pricing Crisis

The US drug pricing system is broken, but not irreparable. For large-molecule biologic drugs, enter: Production Plus Profit Pricing (P-quad, pronounced like Ahab's seagoing vessel).

Authors

Originally published on 03/15/2021 in New York Times

P-quad achieves the policy goal that biosimilar competition aims for

Congress created a system that allowed pharmaceutical companies to charge high prices for their new products. But the pricing protection is only supposed to last a few years. Then Congress depends on knockoff copies competing on price to ensure all drugs eventually become affordable. Generic drugs for decades have been taking on small molecule pills and tablets. For the past decade, biosimilars have tried to take on large molecule biologics. The generic model is working well. The biosimilar one, well, not so much.

Enter P-quad. When a biologic drug's market exclusivity is up, the company would continue selling it in return for a guaranteed profit of 10% to 20% - margins far higher than most commodity producers receive.

Peter Bach and Mark Trusheim lead an in-depth exploration on the current state of the biosimilar market, ethics of human subject trials for costly and lengthy biosimilar drugs, and how to implement P-quad policy. When all is said and done, policymakers could anticipate billions in savings and a restoration of the pricing structure they intended when they passed the 2009 BPCIA law.

Read the full piece here.

Share

Authors

Related Issues

Testifying Before the US Senate Committee on Finance

Read Impact Story

Research & Insights

We conduct non-partisan, independent research, and make our work accessible and informative to policymakers and the general audience alike. Browse our featured research or explore our work by article type.

Biosimilars: Market Changes do not equal policy success
Numerous articles and reports have trumpeted biosimilar market growth, but it's critical we do not lose sight of the sole objective for creating the biosimilar market: to reduce the cost of older biologic drugs for society and taxpayers.
Drug Pricing Lab 03/15/2021
Modeling P-quad
The Drug Pricing Lab engaged Milliman to conduct an independent analysis of the Production Plus Profit Pricing (P-quad) policy proposal. The Milliman analysis estimates the projected spending on U.S. biologic and biosimilar drugs under a referent scenario where there is no biosimilar entry or competition, the existing ‘status quo’ scenario under the current biosimilar environment, and the Drug Pricing Lab’s P-quad policy proposal. 

This report was commissioned by Drug Pricing Lab.
Milliman 03/12/2021
Bottom-Up Pricing Estimate for P-quad
How much would biologic drugs cost under P-quad pricing? Two approaches to estimating fully loaded costs plus a profit (10% and 20% examined) suggest net discounts from current prices would be at least 65% to 75%
Drug Pricing Lab 03/12/2021
Ethics of Clinical Trials to Evaluate Biosimilars
Biosimilars require extensive, expensive, and time-consuming human testing prior to market entry, a process vastly different than generics. So why are we still doing them?
MedRx IV 03/09/2021
Time to Throw in the Towel on Biosimilars
Peter Bach and Mark Trusheim of MIT Sloan School of Management underscore the drawbacks of Washington's preferred solution to introduce competition for biologics, the biosimilar model.
WSJ 08/21/2019
Abandon Biosimilars as Biologics are Natural Monopolies
Biosimilars will not effectively lower the price of biologic drugs after the period of market exclusivity.
HA Blog 04/15/2019
Production Plus Profit Pricing (P-quad) for Biologic Drugs
In 2019, Peter Bach and Mark Trusheim argued that biologics are "natural monopolies". Two years later, they revisit this idea with new data.
HA Blog
Production Plus Profit Pricing (P-quad) FAQ
08/17/2021
What A Waste! The National Academy Of Medicine’s Report On…
Why Congress should not follow the National Academy of Science, Engineering, and Medicine’s recommendation to remove the JW modifier.
Health Affairs Blog 07/09/2021
Medicare Must Study Unproven, Expensive Alzheimer’s Drug
Medicare cannot indiscriminately cover the cost of Aduhelm for the treatment of Alzheimer's disease without first evaluating whether it truly works.
Bloomberg Opinion 06/15/2021
Value-Based Management of Specialty Drugs: Practical Considerations and Implications for…
Not all approaches are suited to meeting policy makers and health plans’ goals of managing specialty drugs based on their value. Researchers conducted a qualitative study with Blue Cross Blue Shield plans interested in implementing value-based specialty pharmacy management to observe the plans’ objectives, strategies, and factors influencing their ability to execute on these strategies.
AJMC 05/13/2021
The Drugs at the Heart of Our Pricing Crisis
The US drug pricing system is broken, but not irreparable. For large-molecule biologic drugs, enter: Production Plus Profit Pricing (P-quad, pronounced like Ahab's seagoing vessel).
NYTimes 03/15/2021
Tutorials

Learn how drug pricing works

Certain aspects of the payment and reimbursement processes in the US may distort incentives and negatively influence drug prices. Learn how through by exploring our tutorials.

Explore Our Tutorials
Newsletter

Stay up to date on our work and news