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Mason and Harvard professors outline three-step solution to Medicare drug-price negotiation

September 4, 2019

Len Nichols.

George Mason University's Len Nichols and Harvard’s Richard Frank co-authored a perspective piece for the New England Journal of Medicine on Medicare drug price negotiations that appeared in the publication on Sept. 4. 

In “Medicare Drug-Price Negotiation—Why Now… and How,” Nichols and Frank argue that prescription-drug markets suffer from lack of competition, which affects drug spending and price and creates affordability problems. They write that a carefully designed Medicare negotiation approach could help reduce Medicare spending. 

“We wrote this because the analytic case, as opposed to the political case, for why Medicare negotiation over selected drug prices is necessary and feasible had not been fully made,” said Nichols, who serves as the director Mason’s Center for Health Policy Research and Ethics and a professor of health policy. 

“We also thought it was important to explain how it could be implemented while preserving and even enhancing incentives to develop new drugs that actually add considerable clinical value,” said Nichols. “This work is important because a lot of arguments will be advanced against negotiation that simply cannot stand key tests of logic and fact.We tried to add light, not heat, to that debate.”

In this article, Nichols and Frank offer three critical elements for an effective negotiation process. First, Medicare would require the power to refuse to pay unreasonably high prices. Second, upper and lower limits on possible prices would need to be established to protect taxpayers from poor bargaining and help the industry retain incentives to innovate. Lastly, a third-party arbitrator should be available to settle impasses. 

Nichols is an expert in health and insurance market reform and has been involved with health reform debates, policy development and communication for more than 25 years. Richard Frank is an expert in health care competition and reform and a professor of health economics in the Department of Health Care Policy at Harvard Medical School.  

The whole paper can be read here: https://www.nejm.org/doi/full/10.1056/NEJMp1909798

Len Nichols can be reached at 703-993-1978 or lnichol9@gmu.edu

For more information, contact Mary Lee Clark at 703-993-5118 or mclark35@gmu.edu

About George Mason 

George Mason University is Virginia’s largest public research university. Located near Washington, D.C., Mason enrolls 38,000 students from 130 countries and all 50 states. Mason has grown rapidly over the past half-century and is recognized for its innovation and entrepreneurship, remarkable diversity and commitment to accessibility.