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Tag: Orphan Drug Act

  • GAO: Drug prices continue to skyrocket

    GAO: Drug prices continue to skyrocket

    At the request of Senator Bernie Sanders and Congressman Elijah Cummings, the Government Accountability Office recently issued a report on pharmaceutical company profits and drug prices. The GAO found that drug spending has nearly doubled since the 1990s mostly because drug prices continue to skyrocket and because of increased use of costly drugs. It shows that research and development costs do not explain or justify high drug prices.

    Why are drug prices so high? Drug patents are responsible in significant part for high drug prices, affording drug companies monopoly pricing power. Consolidation in the drug industry and lack of adequate competition in the generic drug market are also to blame.

    The GAO analyzed pharmaceutical company revenue, profit margins, and merger and acquisition deals worldwide between 2006 and 2015. It found a 45 percent increase in drug and biotech sales revenue in that period, from $534 billion to $775 billion in 2015 dollars.

    Two out of three drug companies also increased their annual average profit margins, with the largest 25 companies, seeing annual profits of between 15 and 20 percent. These margins are two to five times higher than the annual average profit margin of the largest 500 non-drug companies, which was between 4 and 9 percent.

    There is concerning industry consolidation. Ten pharmaceutical companies generated 38 percent of sales. But, within certain therapeutic classes, fewer companies controlled even more of the market. And, market pressure is leading large drug companies to acquire smaller ones to drive greater profits. Lack of competition in the drug industry, particularly for generics, fueled higher drug prices. Based on the data, the GAO also found a link between industry mergers and lack of innovation.

    While drug company profits have increased dramatically, research and development spending has not, rising just over eight percent to $89 billion from $82 billion between 2008 and 2014. The U.S. government spends about $28 billion a year on research. Tax benefits to drug companies for research and development of orphan drugs helped foster their investments.

    The FDA approved between 179 and 263 drugs each year. Between 23 and 35 of these drugs were treatments for unmet medical needs or to “help advance patient care.” The GAO does not explain this term, which may mean simply new ways of dispensing old drugs and nothing innovative from a treatment perspective.

    The GAO explains that insured consumers are often less price conscious with prescription drugs than they are with products for which they have to pay in full and that can promote price inflation and drive up spending. In addition, doctors may not be aware of low-cost alternatives they could prescribe or they simply may be inclined to prescribe the most expensive drug, which can further drive up spending. And, Medicare is often required to pay for even the expensive drugs that may offer no added value, which drives up spending further still.

    The GAO does not discuss incentives of health insurers and pharmacy benefit managers to promote high-priced drugs over lower-cost alternatives. But, there’s every reason to believe that fees to PBMs to promote high-priced drugs on insurer formularies over lower-cost alternatives are also in some way responsible for driving up drug spending.  Insurers are likely benefiting from this arrangement or they would be doing something to stop that practice.

    Senator Sanders and Congressman Cummings sent a letter to President Trump alerting him to the GAO report and urging him to make good on his promise to the American people to address skyrocketing prescription drug costs.

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

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  • Higher drug prices for rural hospitals keep them from providing critical care

    Higher drug prices for rural hospitals keep them from providing critical care

    Sarah Tribble reports for Kaiser Health News that particularly high drug prices for rural hospitals can keep them from providing critical care. For no clear reason, the ACA prevents rural hospitals from negotiating prescription drug discounts for many expensive drugs, as larger hospitals can do. Instead, rural hospitals must pay full price for “orphan drugs” that treat rare diseases and also may treat many common conditions.

    The ACA prevents rural hospitals from participating in a federal drug discount program–the 340B program–intended to ensure that low-income patients receive needed hospital care. Instead, rural hospitals are often forced to pay many times more for a costly medication than other hospitals.

    Many blockbuster drugs can be designated as orphan drugs, under the Orphan Drug Act, so long as they also treat rare diseases. So, rural hospitals are struggling to pay for the high-cost drugs that treat patients with rare diseases as well as patients with their common conditions. There are literally thousands of drugs designated as orphan drugs.

    Without the benefit of a discount, rural hospitals are hard-pressed to stock orphan drugs, leaving patients with urgent and emergency stroke, cancer and other needs without needed care. For example, a single dose of the stroke medication, Activase, cost one rural hospital $8,010 and the larger hospital $1,600. 340B program discounts are often significant, according to a GAO report.

    In fact, having to pay high prices for orphan drugs is forcing some rural hospitals to close entire hospital units. Consequently, patients needing these drugs must travel far from home to get needed care that their local hospital should be able to provide.

    No one is taking responsibility for the ACA exclusion of orphan drugs from the 340B program for rural hospitals. The provision was never even discussed in Congress but somehow slipped into the legislation. That said, Pharma invested heavily in ensuring that rural hospitals were denied drug discounts for rare disease drugs after the ACA was passed.

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  • Reining in drug costs remains public’s top priority

    Reining in drug costs remains public’s top priority

    A new Harvard-Politico poll shows that reining in drug costs remains the public’s top priority. More than anything else, Americans want Congress to bring down prescription drug costs.

    The public opinion poll found that four in ten Americans believe that Congress needs to take action on drug costs. To be sure, a far larger percentage of  Democrats than Republicans supported this priority–more than half v. three in ten. But, Americans are far less sure about how to resolve the issue of high drug prices.

    While there has been a lot of public attention on high drug prices, at both the state and federal levels, policymakers and advocates are promoting a wide range of solutions, virtually all of which involve either helping one subpopulation–e.g., people in Maryland, people needing the Hepatitis C vaccine, people with Medicare–or, addressing one piece of the problem–e.g., lack of generic drug competition, Orphan Drug Act.

    Until there is agreement that Congress needs to rein in prescription drug prices across the board–a recognition that access to life-improving and life-saving drugs is a basic human right–Pharma will continue to spend tens of millions of dollars raising fear among different populations over how the proposal will jeopardize their access to drugs.

    Not surprisingly, almost 90 percent of people support Medicare drug price negotiation in theory. But, fewer than 40 percent support the policy once they hear that  it could mean people with Medicare lose access to certain drugs.

    Many people also support drug importation as a way to drive competition and bring down prices. More than half of Americans support importation of drugs that the FDA has not yet approved. After all, we import food with very few safety risks. Why not drugs?

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

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  • Orphan drug act delivers big profits to drug companies

    Orphan drug act delivers big profits to drug companies

    More than 30 years ago, to foster drug innovation for rare diseases, Congress passed the Orphan Drug Act. The law helps drug companies make big profits on drugs that treat rare diseases–orphan drugs–which affect fewer than 200,000 people. As it turns out, the Orphan Drug Act also enables drug companies to drive up drug prices, along with profits, whenever they can show that their mass-market drugs treat rare diseases.

    One in ten Americans has a rare disease, and there are more than 7,000 rare diseases. But, until 1983, drug companies had no profit motive to develop drugs to treat these diseases. The Orphan Drug Act gives drug companies substantial tax credits and seven more years of monopoly pricing power for drugs classified as orphan drugs after their patents expire. In 2016 alone, according to a Kaiser Health News Investigation, the drug companies received $1.76 billion in tax credits for their development and almost $50 billion in tax credits are projected between 2016 and 2025.

    While the law has led to drug innovations to treat rare diseases, it also has led to a number of mass-market drugs being reclassified as orphan drugs, with all accompanying financial benefits. The Orphan Drug Act legally entitles them to these benefits as many times as they can show the FDA that a drug treats a rare disease. For example, Gleevec, a cancer treatment, has nine orphan drug approvals, even though it was originally intended to treat far more than 200,000 people. Novartis, its manufacturer, has successfully sliced up the population into small special needs groups and found ways to show that Gleevec meets their unmet needs.

    To date, pharmaceutical companies have “developed” 450 new orphan drugs with billions of taxpayer dollars. Of those drugs, the FDA has classified more than 70 mass-market drugs, including seven of the top ten best-selling drugs, as orphan drugs. Crestor, which helps lower cholesterol, Abilify, which treats schizophrenia and depression, and Humira, which treats rheumatoid arthritis, are all now classified as orphan drugs. It’s no wonder that orphan drug sales are expected to account for more than 20 percent of all brand-name drug sales.

    The prices for these orphan drugs are astronomical. The Kaiser Health News investigation reveals that in 2014, the yearly cost of an orphan drug was $111,820 instead of $23,331 for other drugs. Express Scripts, a drug benefits manager, told Kaiser Health News that it currently has four orphan drugs on its formulary with $70,000 price tags for a 30-day supply–$840,000 annually. Twenty-nine more orphan drugs have price tags of $28,000 for a 30-day supply–$336,000 annually. And sales of orphan drugs are growing rapidly, at a projected rate of 12 percent a year.

    If you’re wondering why the FDA approves so many-mass market drugs as orphan drugs, the answer appears to be that it has no choice. The Orphan Drug Act gives the drug companies the right to have mass-market drugs reclassified. So, if the FDA denies approval of an orphan drug, its manufacturer is likely to sue the FDA and win.

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

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