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Manhattan Institute

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Out-of-Pocket Caps: The Wrong Way to Tackle High Drug Prices

issue brief

Out-of-Pocket Caps: The Wrong Way to Tackle High Drug Prices

March 10, 2016
Health PolicyDrug Development

Abstract

There is a growing public perception in the United States that drug prices are too high. This sentiment is coupled with demands—from insurers, consumer groups, and some political candidates—for government to increase its role in pharmaceutical markets.

Key Findings

  • The 2016 presidential candidates have proposed various reforms to control drug prices; a number of states have also implemented limits on out-of-pocket (OOP) drug spending for patients.
  • Adopting federal OOP caps would help a small minority of Americans who face enormous drug costs but would do little for the majority of Americans who fret about high drug prices; OOP caps also risk causing harmful knock-on effects to insurance markets that may result in higher premiums.
  • Rather than intervene in insurance markets with blunt tools, such as OOP caps, policymakers should take a multipronged approach that harnesses market forces, treats drug spending as investment, and uses targeted tax credits to help the most burdened.

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