Len Nichols of George Mason University explores policy options for changing the way drugs are priced in the United States. According to Nichols, there has been a rise in aggressive pricing by pharmaceutical companies, and industry participants are increasingly justifying their pricing decisions based on the value created relative to alternative treatments. Nichols names some potential policy responses to high pricing, including doing nothing, imposing controls, letting Medicare negotiate with drug makers, and replacing private capital with public capital. He argues that federal policy should be to make the exclusivity grants contingent on pricing, with short exclusivity granted for more aggressively priced drugs and longer exclusivity granted for less aggressively priced drugs.
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