A Call for Fairness in Drug Prices

In my family medicine practice, there is never a day without at least one complaint from a patient about the cost of his or her medications. This problem of drug cost is not a new one, but I do think that it is a larger problem now than it was in years past. It’s a multifaceted problem, with many forces that affect not only the cost of medications, but also their availability. According to a US News and World Report article, total spending on prescription medicine in the U.S. has reached its highest level in 13 years. It is projected that drug spending will soon reach $305 billion per year, and will continue to increase.³ Prices for all medicines, both name-brand and generic, are increasing. Some generics now actually cost more than they did when they were being sold as name-brand products. In contrast to past years, new medications are now entering the market at prices equal to or above similar drugs in their classes. These prices seem to have more to do with what price the market will bear than with the actual cost of the medication.

What are some of the influences on the pharmaceutical cost? How significant is it that the U.S. government is unable to negotiate prices for Medicare drug plans? Why are we physicians so frequently being called upon to change our patients’ medications after their insurance company renegotiates prices with pharmaceutical companies? How are these drug prices reached? How much influence does the pharmaceutical industry have on patient advocate groups? These are just some of the questions facing us as we try to improve patient care and control costs. At times I feel that my hands are tied when I try to treat a patient while working around the ever-increasing cost of medication.

You have probably read about the prohibitive costs of certain cancer treatments. Consider that one out of three Americans will develop cancer in her or her lifetime, and that the average price of cancer drugs is increasing by about $8,500 a year, while the average household income is down 8% from a decade ago. This means that many of us run the risk of not being able to afford these potentially life-saving treatments. The price of cancer drugs in 2000 was between $5,000 and $10,000 per year, and is now greater than $120,000 per year. Even with insurance, the out-of- pocket expense is around 20–25% of that total. For a family of four with an annual income of $52,000, a single cancer drug could eat up 50% of their income. The high price of cancer drugs may be shortening the lives of those who cannot afford expensive treatments, or do not qualify for financial aid, and destroy the financial stability of others who are able to pay, but impoverish themselves in the process. It’s a real injustice for cancer treatment to be so strongly based upon a patient’s ability to pay.¹²

Drug treatment for hepatitis C has also made headlines. Two drugs, Sovaldi and Harvoni, exemplify the problem. Sovaldi costs $84,000 and Harvoni $95,000 for a typical 12-week course of treatment. These drugs are undeniably beneficial, offering a possible cure of Hepatits C. The overall benefit is hard to quantify when you consider treatment could prevent liver cancer, liver failure, need for transplant and prevention of further spread of the disease. This is not a trivial disease, with about 20,000 deaths attributable to hepatitis C in 2013. As with the cancer drugs mentioned above, patients who cannot afford this treatment, or do not qualify for discounts, are facing an agonizing dilemma.¹

A story that demonstrated the seemingly arbitrary way that certain drugs are priced came to light recently with the case of Martin Shkreli, the former CEO of Turing Pharmaceuticals. Shkreli’s firm acquired a drug called Daraprim, which treats toxoplasmosis, and quickly raised the price from $13.50 a pill to $750 a pill. He was nicknamed “Pharma Bro,” and became an internet villain overnight. He has since been arrested for unrelated securities fraud charges.²

A similar, though less dramatic, situation that hits close to home for me, is the cost of an old generic drug, doxycycline. This drug used to cost pennies a dose but now costs at least a dollar a pill. It has been dropped from some drug plans or moved to a third tier, presumably due to its cost, despite it being one of the few oral antibiotics available that can effectively treat Methicillin-resistant Staphylococcus Aureus, a common and frequently devastating infection.

In all these situations, one has to wonder how the pharmaceutical firms in question came up with the prices for the drugs. According to a recent New York Times article, drug companies are coming under pressure to disclose the development costs and profits of their medicines and the rationale for charging what they do. “The price charged for an individual drug is not a reflection of developmental cost,” says Ken Kaitlin, director of the Tufts Center for the Study of Drug Development. “Pricing strategies are based on therapeutic value, market size, usage, patent life, competition, and other factors.”⁴ At least six state legislatures in the past year have introduced legislation calling for pharmaceutical cost transparency. However, according to the journal Mayo Clinic Proceedings, there appears to be no relief in sight, because drug companies continue to challenge the market with even higher prices. Are the drugs priced based on reasonable expectation of return on investment or is it what the market can bear? Former President Bill Clinton spoke to pharmaceutical executives last year and said it would be in the industry’s best interest to say more about cost and pricing.” Explain, explain, explain, and disclose, disclose, disclose.”⁵ Time will tell if they heed his advice.

The pharmaceutical industry has already changed some of its practices. As many of you know, they are required to report payments that they make to doctors for research, consulting and giving promotional speeches, and this includes the cost of meals and entertainment. They have also started to disclose more of their clinical trial results and raw data. Whether this is a beginning of a trend toward more transparency on cost and pricing remains to be seen. Cost transparency bills have been introduced in New York, California, Massachusetts, North Carolina, Oregon, and Pennsylvania. At this writing, none of these bills has made much progress, presumably because of the huge political influence pharmaceutical companies exert at both the state and national level.⁵

Interestingly, pharmaceutical companies also have a huge influence on patient advocacy groups. An article in the January 22 issue of USA Today revealed some interesting facts on how the industry influences these national groups. For example, the Leukemia and Lymphoma Society received $50 million a year from drug makers, which is about 16 percent of their funding. The National Patient Advocate Foundation received 60 percent of its $2 million budget from the pharmaceutical industry. Several other groups get up to 20 percent of their revenue from drug companies. This influence may be stifling key voices in the policy debate over soaring drug prices, especially those concerning cancer. One of the reasons for the apparent lack of interest in the soaring drug costs by these patient groups is their focus on funding research to develop drugs to cure their respective diseases. Patients and patient advocates seem to care less about the cost of individual drugs, and more about curing disease, regardless of the cost.¹³

Is there a simple solution to this problem of skyrocketing drug costs? Obviously not. I believe that improved transparency on the part of pharmaceutical manufacturers will be an important part of the solution. The mysterious ways that medications are priced leads to mistrust of the industry, and begs for more rules and regulations. How can we accept the argument that the cost is reflective of the research and development of the drug when we know that the pharmaceutical industry is spends more on marketing medicines than they do on basic research?⁶ Direct-to-consumer advertising doesn’t improve patient care, but does improve the bottom line for drug companies, and I’m convinced that it raises the cost of treatment.

According to the Wall Street Journal’s Pharmalot publication, recent studies show that the federal government could save between $15.2 billion and $16 billion annually if it negotiated with drug makers for Medicare part D medicines, to obtain the same prices that are paid by Medicaid and the Veterans Health Administration. Medicare has been banned from negotiating prices for their Medicare part D program, while Medicaid is able to negotiate prices, as is the Veterans Health Administration. The pharmacy industry’s argument is that Medicare part D medicines includes rebates that are negotiated by private plan sponsors.⁷ Why did we need to develop a system that includes insurance companies acting as middlemen in the delivery of medicines when Medicare part D was adopted? The state of Missouri has about 50 of these “middleman,” companies, which I believe could be eliminated if Medicare were to negotiate directly for drugs.

Another costs-saving idea would be for the current system of drug approval by the FDA, especially for generics, to be improved. Currently there is a backlog of about 4,000 applications, with a wait time of 27 months, for generics. It’s possible that speeding up the approval process would stimulate the market and drive prices down.¹⁰

The AMA voted at their 2015 interim meeting to convene a task force and launch an advocacy campaign to drive solutions and help make prescription drugs more affordable. Actions called for in this new task force include:

• supporting legislation to shorten the exclusivity period for biologics;

• encouraging federal regulators to limit anti-competitive behavior by pharmaceutical companies;

• encouraging prescription drug price and cost transparency among pharmaceutical companies;

• monitoring pharmaceutical company mergers and acquisitions;¹⁴

• supporting a balance between incentives for innovation and efforts to reduce regulatory and statutory barriers to competition as the patent system is evaluated.

While I realize that I have not offered any definitive solutions to this complex problem, I do hope I have piqued your interest.

Biography

John O. Stanley, MD, MSMA 2015–2016 President and member since 1993, is a Family Physician from North Kansas City, Missouri.

Contact: johnostanley@yahoo.com