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What to do about high drug prices?

Written by Diane Archer

A new Commonwealth Fund paper, Getting to the Root of High Drug Prices, offers a plan for what to do about high drug prices.  Unless we can address the root causes, we are on a path to an unsustainable health care system; millions of people will be unable to fill their prescriptions and get needed care. Congress needs to fix current incentives to promote innovation and price competition.

The U.S. is growing larger and older, both of which contribute to overall prescription drug spending. And, people are also taking more drugs. But, the biggest drivers of higher spending between 2010 and 2014 are higher drug prices and shifts in usage to higher-cost drugs.

The authors find a distortion of federal policies intended to balance innovation and price competition. Innovation should not undermine access to medicines, as it too often does today. Prices, in turn, must be fair and affordable to all stakeholders, including patients, government and taxpayers.

And, good information on a drug’s value and comparative effectiveness as well as price should be available. The authors argue that drug corporations should be able to explain and justify drug prices.

The initial price for a new drug has risen astronomically over the last ten years. For example, in the four years between 2010 and 2014, the initial cost of oral cancer drug treatment grew six-fold. And, after introduction, with patent protections granting drug corporations monopoly pricing power, the prices generally keep going up.  In 2015, older adults saw a 15.5 percent increase in the retail price of 268 popular brand name prescription drugs from the prior year—130 times the rate of inflation.

Federal dollars—taxpayer dollars— fund almost half the research and three out of four new drugs are developed with federal funding. But, taxpayers and patients are not seeing the benefits as much as they should in terms of fair prices.

One hundred and eighty-two (182) widely used older drugs that have gone off patent still have no generic drug alternative, allowing drug corporations to keep their prices artificially and excessively high.  Many other drugs that have gone off patent do not have adequate competitors to drive prices down. More than 500 drugs only have one generic on the market.

Why is there so little competition in the prescription drug and biologic drug markets? In Europe, the competition for both is far more robust. In the U.S., however, there are fewer companies manufacturing prescription drugs, in part because of mergers and acquisitions. Unlike in Europe, the U.S. also has not fully developed a regulatory framework for approving biosimilars to compete with biologics.

Some drug manufacturers appear to be taking actions that undermine competition. Some are under investigation for price fixing and bid rigging. Doxycycline went from $20 for 500 pills to $1,849 for 500 pills in six months.  Three drug corporations manufacturing insulin are also being investigated for price fixing insulin treatments and tripling their prices over ten years.

And, some drug corporations pay generic manufacturers not to enter the market, costing taxpayers and patients an estimated $3.5 billion. Or, instead of keeping a patented drug on the market, they change it slightly, create a new patent and take the original drug off the market. Or, they create a “patent cluster”—several patents for a single drug—that keeps competitors away.

We also don’t have a good sense of what different agencies are charging and paying for drugs, and federal law does not require disclosure of this information. Moreover, we too often don’t understand the relative efficacy of drugs.

And, while states can be part of drug purchasing pools, we restrict states in their ability to negotiate drug prices and decide which drugs they’ll cover based on value.

If you want Congress to rein in drug prices, please sign this petition.

Proposed solutions:

  • Shorter patents for new drugs or somehow tying the patent life to the drug corporations’ returns.
  • Create a different way of pricing life-saving drugs for government purchase to protect public health and curb spread of disease.
  • Create ways to generate competition. For example, offer incentives for generic manufacturers to enter the market and drive competition or amend the Hatch Waxman Act so as not to delay the introduction of generics.
  • Prohibit pay for delay and the ability of manufacturers to take patented drugs off the market and replace them with other patented drugs that are not materially different.
  • Invest in comparative effectiveness research.
  • Require manufacturers and PBMs to reveal pricing and price increases and forbid use of coupons that hide pricing.
  • Allow states to operate PBMs so that they have more negotiating power.

Here’s more from Just Care:

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2 Comments

  • The solution to this issue, and to several others, is staring us in the face: we need to catch up with the rest of the developed world and adopt an efficient single-payer system. We need Medicare for all, or the equivalent.

    Otherwise, we’ll continue to sacrifice the people we love on the altar of capitalism. I’ve had enough of that; how about you?

  • We already have an unsustainable health care system, but with the amount of money that lobbyists spend bribing…errr lobbying our elected officials it isn’t likely to change any time soon. The simple answer would be to have a single payer system with the government negotiating drug prices with the drug companies.

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