In focus – U.S. drug prices

The stories have been in the U.S. media over and over in the past few years – the cost of a life-saving or maintenance drug suddenly jumps by as much as 1 000 percent, leaving patients and their advocates angry and bewildered.

Less dramatic are the ongoing reports of Americans, especially the elderly, struggling to afford the cost of their drugs as the prices continue to inch up, often forcing them to cut back on their medications or choose between their prescriptions and food or other necessities.

Advocacy groups and citizens continue to lobby for prescription price relief, calling for measures such as price caps, increased access to generic medications and regulations on manufacturers. But while the federal government and the U.S. Congress recently have taken steps to address drug pricing, some consumer groups say the actions don’t go far enough.

“It is such a broad issue [drug prices], you can’t pass one law and solve this problem,” said Will Holley, the communications director for the Campaign for Sustainable Rx Prices (CSRxP), a nonprofit and nonpartisan organization working to reduce the cost of prescription drugs in the U.S.

According to the campaign, in 2015 prescription drug prices posted the highest increase in 24 years.

An unregulated market

While the sudden surges in certain drug prices have been challenged in some cases, the potential for these spikes to occur at any time remains, largely because of the unregulated nature of the vast U.S. pharmaceutical market. Prices generally are higher than in the European Union and other nations.

Carl Wadell, an analyst at the Swedish Agency for Growth Policy Analysis, who prepared a report in 2016 comparing prices in other countries to the U.S., including Sweden, cited the size and complexity of the U.S. drug market and lack of regulation as the top reasons for the high prices.

“In Europe, the drug market is regulated,” Wadell said. “The government is negotiating prices with drug companies and the government has strong purchasing power and can get lower prices.”

Drug Short

Several high-profile incidents in 2015 showed just how unregulated the U.S. drug market is. This year’s Netflix documentary “Drug Short,” an installment in a series called Dirty Money, described how in 2015 the drugmaker Valeant Pharmaceuticals International, Inc., which changed its name to Bausch Health Companies Inc. in July, began buying and merging with pharmaceutical companies with patents for specialized drugs – and then drastically raised the prices of some of the drugs it acquired. At the time Bausch Health Companies also cut the amount of money it spent on research and development to three percent, a much smaller rate than most drug companies invest, according to the documentary.

Valeants former CEO

Syprine, for example, a drug for Wilson’s disease, cost about $652 annually in 2010. Bausch acquired Syprine as part of its acquisition of Aton Pharmaceuticals in 2010. Syprine’s cost rose to $21,267 in four years, the documentary maintained. At the time the documentary was recorded, the price was $289,000 per year. Wilson’s disease causes copper to accumulate in a person’s body and without medication, the patient can die. In many cases the cost of the medication was paid by patients’ insurance companies, but some were struggling to afford the annual cost.

According to a 2015 FiercePharma article, Syprine was just one of many drugs for which then-Valeant hiked prices that year; prices increased on 54 other medications by an average of 65.6 percent, notes a Deutsche Bank analysis.

The company’s Zegerid price increased by 529.9 percent and Cuprimine’s by 330 percent. Cuprimine is another medication for Wilson’s disease. Prices for two heart medications – Isuprel and Nitropress – grew by 536.7 percent and 236.6 percent, the article noted.

Valeant’s actions led to U.S. Justice Department and congressional investigations. After a short seller exposed Valeant, its stocks plummeted, its CEO resigned and the company was forced to regroup.

Also in 2015, Turing Pharmaceuticals’ CEO Martin Shkreli jacked up the price of lifesaving drug Daraprim by more than 5000 percent, raising the cost of the drug from $13.50 per pill to $750 per pill. Daraprim is used to treat toxoplasmosis, a serious parasitic invention.

While Shkreli was sentenced recently to seven years in prison and a $75,000 fine for defrauding his investors last year, the price of Daraprim remains the same.

A comment from Bausch Health Companies

According to Lainie Keller, vice president of corporate communications for Bausch Health Companies, though, events depicted in the documentary do not reflect how the company operates today. She added that she could not confirm the drug price increases cited by FiercePharma and in “Drug Short.”

To ensure patients can afford its products, Bausch established the Patient Access and Pricing Committee (PAPC) in May 2016, Keller said. The PAPC meets several times per quarter. “It thoroughly reviews how all pricing decisions may impact patients and customers and ensures that the company’s pricing, contracting, compliance and reimbursement strategies are consistent and compliant with all relevant laws, regulations and guidance, as well as the company’s position on patient-affordable access to medicines,” she noted.

Since creating the PAPC, Bausch Health Companies has offered significant discounts and rebates for many medicines, including Syprine and Cuprimine, Keller said. Through a company assistance program, patients can get Syprine for a $5 co-pay or for free.

Chaired by the CEO, the PAPC includes a multi-disciplinary team of employees, including doctors, scientists and other executives, Keller continued. “In reviewing product pricing, the PAPC, considers overall market dynamics along with the impact of any pricing decision on patients, doctors and our health care industry partners.”

Additionally, the company also has pledged to keep the average annual price increase for its branded prescription pharmaceutical products within single digits.

Bausch Health headquarters

The patient perspective

While the marketplace works to control costs for the health care system, it doesn’t do the same for patients, admitted Holly Campbell, spokeswoman for the trade group the Pharmaceutical Research and Manufacturers of America (PRMA). “Patients with a deductible have seen their out-of-pocket costs for brand medicines increase 50 percent since 2014,” Campbell said. “And new data show patients’ out-of-pocket costs are rising faster than their insurers’ costs.”

This is despite the fact that medicine spending and prices are growing less than overall inflation while rebates continue to increase, Campbell continued.  Growth in medicine spending last year was just 0.6 percent and prices for brand-name medicines increased just 1.9 percent after discounts and rebates, according to recent data from IQVIA – a provider of biopharmaceutical development and commercial outsourcing services, she said. Both cost and price growth for medicines were below the rate of inflation in 2017, while rebates and discounts went up. “As a result of negotiations, our companies rebate on average 40 percent of the list price of a medicine to elements of the supply chain,” Campbell said. “These rebates and discounts totaled $130 billion dollars last year alone.”

Relief to consumers

One way to give consumers relief is to make certain insurers and Pharmacy Benefit Managers (PBMs) – intermediaries between consumers and drug companies who negotiate drug prices and create lists of preferred drugs – pass on negotiated discounts to patients, Campbell noted, and that already is starting to happen. “Recently, UnitedHealth and Aetna announced they will start sharing some of the rebates they negotiate,” she said. “We believe this is a step in the right direction and sharing the savings with patients is an idea we support in the commercial market and in Medicare Part D.” Medicare Part D is an optional federal program to help Medicare beneficiaries pay for prescription drugs using insurance.

The group also recommends simplifying the pricing system for drugs. “We need to move away from a convoluted system of list prices, net prices and rebates to one that that measures value through the eyes of the patient and enables the private sector to develop new and better ways to pay for medicines,” Campbell said. Their members also are advocating for policies that prohibit PBMs and other entities in the supply chain from receiving a fee based on the list price of a medicine and instead be paid a fee based on the value their services provide.

Four challenges

Some action also is coming from the federal level. In May, U.S. President Donald J. Trump released a 44-page plan through the Department of Health and Human Services (HHS) to address the problem of high drug costs called, “American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.” Many of the recommendations related to aspects of Medicare, the U.S. health insurance program for senior citizens and the current rebate system. PBMs often negotiate rebates on behalf of insurers and employers.

The HHS cited four challenges to American consumers:  High list prices for drugs, senior citizens and government programs overpaying for drugs because they lack the latest negotiation tools, high and rising out-of-pocket costs for consumers and foreign governments taking advantage of “American investment in innovation” by appropriating drugs after their development by U.S. companies.

Proposals for lowering list prices include reforms to the current rebate system, efforts to make price increases and generic competition more transparent and allowing pharmacists to tell Medicare patients when they could pay less out-of-pocket by not using insurance. Also suggested is improving the Medicare Part D Explanation of Benefits statement by including information about drug price increases and lower cost alternatives. The HHS did not respond to a request for an interview.

Access to generic drugs

While the CSRxP called the blueprint a step in the right direction in a prepared statement, it also encouraged the administration to take a closer look at the whole system: “CSRxP urges HHS to implement policies that go further in addressing the root cause of the problem: the out-of-control list and launch prices set by brand-name drug manufacturers and the inevitable price hikes that follow.”

Greater accessibility to generic drugs also is cited as a way to reduce patient costs, but advocates brand-name manufacturers are constantly putting up barriers.

“Brand name drugs are more expensive,” noted Holley. “Manufacturers can set prices where they like. Their only competition is from generics, so they go to great lengths to thwart them.”

Ability to challenge patents

Michael Brzica, vice president of federal affairs for the Association for Accessible Medicines (AAM), a trade association representing manufacturers of generic medications and biosimilars, said its members have been struggling against big pharmaceutical manufacturers’ obstacles for decades. “They have clever and interesting patent strategies to prevent competition,” Brzica said. “Patients are impacted by huge drug price increases; as they increase in price, access is in jeopardy. The way to address that is to increase the supply of generics and similar medications so access is not in peril.”

In the case of the 15-year-old drug Humira, for example, the best-selling drug in the world, which is used to treat diseases such as rheumatoid arthritis and psoriasis, the patents should have expired allowing new versions to be developed. But manufacturer AbbieVie, Inc. has issued more than 100 patents to prevent companies from developing a generic version, according to published reports. Calls to AbbieVie for comment were not returned.

“Our industry supports policies so that we have a robust ability to challenge patents,” Brzica said. “We want to find ways to end the gamesmanship; the use of FDA safety regulations to block generics.”
But that could be changing. The CREATES Act of 2017, a bipartisan bill in the U.S. Congress would make it easier for generic companies to gain access to the information they need to produce drugs and make it harder for large companies to abuse safety regulations to block new medications. Generic companies also would be able to sue large drug companies to gain access to the information they need.
Brzica called the bill a “Narrow remedy to a very prevalent problem and a well-documented problem,” but is encouraged that the measure has broad support from both Republicans and Democrats. “It should provide patients some relief at the pharmacy counter.  It is narrowly crafted to prevent the abuses critics have said it may lead to.”

Advocates stressed that while they do not want to hinder research by large drug companies, the cost of research does not explain some of the medication prices and increases.

“We want to preserve our ability to ensure true and legitimate innovation,” Brzica said. “We want to crack down on obstructionist practices, make sure we have fair and reasonable reimbursement policies and want to make sure we have a robust market that will ensure a lot of competition.”

And as the CSRxP noted, “Prescription drug costs will continue to grow at unsustainable rates unless serious actions are taken to thwart the pricing practices of the brand industry. Without addressing the root cause of the problem, many American patients, particularly those on limited incomes, will continue facing choices they should never have to make between buying groceries for their families or purchasing the medications they need to get well and stay healthy.”

Fahmi Quadir, the short seller who called Valeants bluff. Photo: Moneywise.com