Taxing Drug Price Spikes: Assessing the Potential Impact

How a proposed tax penalty on drugs with price increases exceeding the inflation could impact patients, public insurance programs, and innovation.

from Health Affairs Blog

On March 29, 2017, senior Democrats introduced comprehensive legislation (titled the Improving Access to Affordable Prescription Drugs Act) in the House and Senate aimed at lowering prescription drug costs and improving transparency. The 129-page bill contains several popular provisions that could help drive its passage or could reappear in a future bipartisan attempt to repair or replace the Affordable Care Act. One such provision is section 202, which establishes an excise tax on drugs with price increases exceeding the inflation rate. The amount of the tax penalty would depend on the size of the price increase. It is modeled on similar rebates already in place for Medicaid, the Department of Veterans Affairs (VA), and the Department of Defense.

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