The federal Inflation Reduction Act and parallel state efforts comprise a paradigm shift in American health law: rather than accepting high prescription drug prices, government now seeks to rein them in through negotiation and affordability reviews. Yet states are still struggling with high drug costs and adopting draconian measures like denying coverage for all anti-obesity drugs. This Article proposes a better and fairer way forward for states and the federal government: evaluate prescription drugs based on equity-informed valuation metrics, such as cost-effectiveness analysis that explicitly values the mitigation of health disparities. Equity-informed, value-based decision-making will improve on presently used but value-oblivious measures, like development costs or government support. Considering equity and value together also helps forestall blanket coverage denials based purely on cost without attention to value. Contrary to some who criticize valuing medicine as inequitable, valuation of medicine is indispensable to achieving health equity. 

After describing various impediments to valuing medicines raised by pharmaceutical firms and influential interest groups, the Article describes the legal constraints governing the valuation of medicine in the United States. It examines responses to the use of value metrics in state Medicaid plan design, restrictions within the Affordable Care Act (“ACA”), and subsequent efforts to restrict the use of value metrics by state Prescription Drug Affordability Boards and in Inflation Reduction Act price negotiations. The analysis reveals that prevailing restrictions primarily aim to prevent the exacerbation of existing disadvantages. Although some efforts to establish restrictions assert the immeasurability of life and health, or question quantitative evaluation of medicine by positing that drug costs present no tradeoffs for government payers, these critiques serve more as rhetorical tools than as explicit legal precepts.

This Article then explains how innovations in health economics can enable integrating equity into the valuation of medicine. To address concerns about disadvantaging patients with preexisting conditions, the paper suggests modifications to cost-effectiveness analysis. These modifications would consider only those improvements or deteriorations in a patient’s quality of life that are attributable to treatment, filtering out differences attributable to pre-treatment quality of life. Furthermore, the analysis recommends explicitly valuing the reduction of health inequities as an outcome. The Article concludes with a suite of law and policy reforms to enable equitable valuation of medicine. In particular, it advocates for the ACA’s Patient-Centered Outcomes Research Institute to fund research on equitable valuation of medicines, a step it has thus far resisted, and recommends incentives to develop medicines addressing health disparities.