Is arbitration an answer for high drug prices?

The U.S. Congress and the Trump administration have considered a range of actions to lower prescription drug prices, but there is one that’s flown under the radar of most policymakers: binding arbitration.

Germany, which like the U.S. has multiple private and public payers, mandates use of binding arbitration to set prices for certain classes of drugs when all other negotiations fail. Disputes are brought to a five-member board, which includes one drugmaker and one insurer representative. The board chair casts the deciding vote in the event of a tie. The decision is binding, although it can be challenged by either party and revisited with new evidence after one year.

The country's binding arbitration process appears to be working without stifling access to new therapies. More than 300 drugs have been assessed over approximately seven years, with fewer than 30 drugs needing to be withdrawn from the German market.