In the U.S. today, we spend far too much on prescription drugs when compared to other industrialized nations. According to National Health Expenditure data, we spent $333 billion in 2017, up from $236 billion in 2007 (an increase of more than 40 percent).
In the last year, drug prices for many prescription drugs have increased significantly. These increases have resulted in many patients forgoing medication, putting millions of lives at risk. For example, insulin, which is needed by Type 1 diabetics for survival, has nearly quadrupled in price, leaving many patients with difficult choices. The price of Lantus, a brand-name insulin that’s a mainstay of treatment as a long-acting drug that helps diabetics stay under good control, saw a 54 percent price increase in 2014 alone even though it’s been on the market for decades.
Many patients are foregoing prescribed doses and medications due to the rising costs and lack of affordability. In the last several months, the Attorney General of Minnesota filed a federal lawsuit against the makers of Insulin — Eli lilly, Sanofi and Novo Nordisk — after the death of a young man with diabetes who was rationing his insulin due to rising costs. Drug prices are currently far exceeding inflation rates, and without government oversight and regulation and expanded consumer awareness, there appears to be no end in sight.
[See: 8 Questions to Ask Your Pharmacist.]
According to the U.S. Drug Accountability Office, prescription pharmaceutical sales increased from roughly $500 billion to $700 billion between 2005 and 2015. And their profits have risen almost 18 percent over the same time period. There has been no significant increase in research and development spending over the same time period. In fact, worldwide R&D spending has only slightly increased from $82 billion to $89 billion over the same time period.
A new study, published in Health Affairs in January 2019, examined the list prices of drugs (both brand name and generic) in a large pharmacy database from 2005 to 2016. Researchers found that newly developed drugs accounted for most of the higher costs but that older brand-name drugs had the largest price increases. In fact, year over year, older name brand drugs increased around 9 percent per annum, far exceeding inflation rates. The study showed that specialty drugs also had price increases between 13 and 21 percent — but unlike the rest of the analysis, newer drugs in this category accounted for the bulk of the price increases. Even prices for generic drugs were found to have risen by between 4 and 7 percent in the analysis. This research ultimately demonstrates that the majority of drug pricing increases is attributable to existing drugs rather than new drugs entering the market. Reuters reports that drug makers are raising prices on 250 drugs in 2019, and this has many patients and doctors very concerned.
The increased spend on pharmaceuticals in the U.S. seems to be only partially driven by new, expensive brand-name drugs. Prices on older drugs and generics have also increased.
[See: 10 Lessons From Empowered Patients.]
So why are drug prices continuing to rise? Here are a few reasons:
1. No competition. Many name-brand medications are protected against generic competitors due to patents, and even when the patents expire, some generics are expensive to develop. In the case of insulin, the three name-brand makers actually filed a lawsuit to halt the development of generic bioequivalents. This all occured under the watchful eye of Congress and our government regulators. In addition, our current Medicare laws do not allow Medicare to negotiate drug prices — allowing drug companies to demand nearly any price point that they think they can achieve.
2. No way for patients to fully understand what drugs really cost. Lack of transparency has been a point of contention for a long time. Insurance companies often negotiate fixed-cost copays for patients and pharmacy benefit managers. Under the guise of providing “rebates” to patients, PBMs in effect push the cost of drugs higher in order to garner larger commissions. It is important to remember that in addition to PBMs, these “rebates” benefit both insurance companies and drug makers by allowing them to charge even higher prices — leaving the patients and taxpayers to ultimately to foot the bill. Patients never really know what drugs actually cost and cannot negotiate price or treatment choice due to this lack of transparency in pricing.
3. Mergers and acquisitions in the pharmaceutical industry. When drug makers combine efforts and expand their drug portfolios, they have more bargaining power with PBMs and can set prices higher. There is no transparency to these negotiations, and ultimately the costs are passed on to government, insurance payors, taxpayers and sadly — patients.
What Is Being Done? What Can Be Done?
The Food and Drug Administration is working toward a low-cost approval process for generic bioequivalent drugs in an effort to spur competition and the development of cheaper alternatives. However, many manufacturers are still raising prices of generics and older drugs in an effort to drive profits.
The newly Democrat-controlled House of Representatives has announced plans for the House Oversight and Reform committee to hold hearings to examine drug price increases, and Chairman Elijah Cummings has hinted that he will likely expect pharmaceutical executives to be asked to testify before the committee. In addition, there have been three new bills proposed to allow for the legal importation of cheaper drugs from Canada, and to allow Medicare to negotiate drug prices and apply penalties to drug companies whose U.S. prices far exceed the prices in other developed countries.
These legislative discussions and potential actions are a step in the right direction. In addition, Congress must focus on the elimination of middlemen such as pharmacy benefit managers and remove the “rebate” system from the drug pricing equation. I believe that we must extensively reform the way in which drugs are priced in the U.S. in order to begin capping the rate of price inflation in an effort to protect patients and ensure that all who require treatment are able to afford life-saving medication.
[See: How to Help Aging Parents Manage Medications.]
As consumers, patients must demand transparency in pricing, and we must all hold lawmakers, insurance companies and pharmaceutical companies accountable for their actions.
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Why Are Prescription Drug Prices Rising? originally appeared on usnews.com
