Introduce an advertising tax on all drug makers. Introduce a sales tax for amounts spent on marketing and sales that exceed the amounts spent on R&D. If manufacturers continue to advertise, this will be revenue generating for the federal government. If instead manufacturers choose to reduce marketing spending, they may increase spending on R&D.

Create a bid process or reference-based pricing method for non-life threatening drug therapies. The Centers for Medicare & Medicaid Services (CMS) could run an annual bid process for Medicare Part D beneficiaries through which it selects and covers the cost of the top two or three best-value drugs within a therapy class based on price and efficacy. This process would encourage manufacturers to focus on the direct pricing of competing products rather than on rebates, coupons and other complex schemes that inflate costs.

Vary the length of patent protection by therapy classes. New patents for the treatment of a selected list of lifesaving therapy classes should have longer patent lives than drugs that are mainly lifestyle treatments. For example, a breakthrough drug that reduces the risk of dying from cancer would get a longer patent life than a drug that treats hair loss or seasonal allergies. This would force the industry to focus more on critical illnesses.

Develop a reinsurance purchasing program for high-cost specialty medications that can be used by both insurers and self-funded health plan sponsors. CMS should negotiate pricing on specialty medications and allow private sector payers to purchase specialty drug stop loss insurance coverage secured by the federal government. This would stabilize problematic claim liability for many plan sponsors.