The issue of drug pricing has become a staple of the news cycle, with fresh headlines every few weeks spotlighting either the high cost of new breakthrough drugs like Sovaldi, or jaw-dropping price hikes for existing, popular products like the EpiPen. While these examples represent two very different sets of issues, in the minds of consumers, they boil down to the same thing: drugs cost too much, and drug companies are to blame. And the only framework for a rational discussion of the subject rests on a transparent, data-based value case for the product in question.

Much of the public sensitivity to drug pricing is a function of growing consumer exposure to healthcare costs. Payers and employers are shifting more of the financial burden onto patients in the form of higher deductibles, copays, and premiums. Consumers don’t need to be hospitalized to experience drug price increases; they feel it every time they fill a prescription.

So the focus on drug pricing is not likely to go away. Congress is conducting its own investigation, and there are rumbles of more regulation and even price controls. Legislation has been proposed at state and federal levels, such as California Prop 61 (limiting state reimbursement to the discounted rate paid by the VA, which failed to pass) and the bipartisan “FAIR Drug Pricing Act of 2016,”1 which would require pharmaceutical companies to document price increases of more than 10% in a given year (which is still in process).

But what payers, patients and policymakers really want to know is the answer to one question – why does the drug cost this much?

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