Drug Licenses: A New Model for Pharmaceutical Pricing

Dana P. Goldman, RAND Corporation and NBER
Anupam B. Jena, Bing Center Fellow
Tomas Philipson, University of Chicago
Eric Sun, Bing Center Fellow

Abstract

High drug prices are a major barrier to patients’ access to drugs and compliance with treatment. Yet low drug prices are often argued to provide inadequate incentives for innovation. We propose a drug-licensing model for health care, which has the promise of increasing drug use without altering patients’ out-of-pocket spending, health plans’ costs, or drug companies’ profits. In such a model, people would purchase annual drug licenses that would guarantee unfettered access to a clinically optimal number of prescriptions over the course of a year. Using the example of statins, we illustrate how such a model could be implemented.