Half of all Americans in a recent Gallup Poll had a somewhat negative or very negative view of the pharmaceutical industry.¹ With the actions of executives like Martin Shkreli (the founder of Turing Pharmaceuticals who drew heavy criticism for instituting large prince increases on Daraprim), drug shortages ranging from atropine to vecuronium, and the unacceptably high prices of older medications such as colchicine, who can blame them?² Large majorities of Americans agree that the pharmaceutical industry’s prices are too high, that their profits are too large, and that there are many ways to curb these costs.³

Some of these broader solutions that are supported by a majority of Americans include allowing the federal government to negotiate pharmaceutical prices for Medicare Part D beneficiaries, making it easier for generics to enter the market, allowing importation of less-expensive drugs from Canada, and eliminating some pharmaceutical advertising, such as the direct-to-consumer ads, which arguably increase patient demand for medications they may not even need.

Even though pharmaceuticals make up only about 10 percent of overall health care costs, they represent one of the most rapidly rising sectors for health care cost growth. Thus, it is imperative that we act now before drug costs swallow the remaining slices of the health care pie. Unlike physician Medicare costs, which arbitrarily could come crashing down due to price controls via sequestration rules and/or payment reform, there is no immediate check to the rise of pharmaceutical prices. Historically, drug companies have only been subject to what the market will bear.

A recent article on the Emergency Medicine Residents’ Association website, reprinted below with permission, discusses why pharmaceutical prices are so high and offers solutions that even the clinician at the bedside can undertake to fight the war on drug prices.

Dr. Dark is assistant professor of emergency medicine at Baylor College of Medicine in Houston and executive editor of PolicyRx.

References

1. Healthcare system. Gallup website. Accessed May 23, 2018.
2. Current drug shortages. American Society of Health-System Pharmacists website. Accessed May 23, 2018.
3. Public opinion on prescription drugs and their prices. Kaiser Family Foundation website. Accessed May 23, 2018.

Physicians Can Take Steps to Limit Pharma Price-Gouging

The cost of prescription drugs in the United States is constantly in the news, with the public becoming aware of increasing prices for off-patent drugs from the obscure Daraprim (up almost 5500 percent overnight from $13.50 to $700 per capsule) to the universally known epinephrine (up almost 550 percent from $94 in 2007 to $609 in 2016 for a set of two EpiPens).^1,2

A recent study in JAMA reviewed medical and health policy literature to uncover the reasons prescription drug prices in the United States are so much higher than in other highly developed nations, and discussed possible solutions.³

The main reasons for higher prices in the United States are a permissive patent system that extends patents for minor changes in a drug’s formulation with no improved outcome and the inability of one of our nation’s largest health care systems to negotiate drug prices with pharmaceutical companies.

Drug patents give pharmaceutical companies time to recoup the cost of their investment in a new drug by being a monopoly provider, usually for six to eight years after U.S Food and Drug Administration (FDA) approval of the drug. However, pharmaceutical companies have extended their period of exclusive coverage by many maneuvers, such as by getting a new patent on a stereoisomer of their drug and then withdrawing their original drug before it becomes generic or by refusing to provide samples of their drug to potential generic manufacturers to delay their competitors’ FDA bioequivalence approval studies.⁴

Medicare, which accounted for 29 percent of national retail prescription drug spending in 2014, is prohibited by federal law from using its market power to negotiate lower drug prices while being required to cover all FDA-approved drugs.⁵ Essentially, manufacturers are allowed to name their price in America.

By contrast, in England and Wales, the National Institute for Health and Care Excellence considers whether a new drug passes a cost-utility threshold before recommending it for coverage by the National Health Service. If a drug is rejected, the manufacturer might decide to offer it at a lower price. The authors propose reforms that individual physicians can do, such as educating themselves about drug costs and efficacy, limiting dispense-as-written prescriptions, and not using samples of branded products that ultimately increase demand.

Editor’s note: The U.S. Department of Health and Human Services recently released a blueprint for reducing drug costs. It includes a number of proposals, including increasing Medicare’s ability to negotiate drug prices, supporting the development and approval of generics and biosimilars, value-based purchasing, increasing drug price transparency, and reforms of drug rebate and discount programs.

Mr. Munoz is a medical student at SUNY Upstate Medical University in Syracuse, New York.

References

1. Hopkins JS. Controversial ‘pharma bro’ Shkreli says ‘of course’ he’d raise drug price again. Chicago Tribune. Accessed May 23, 2018.
2. Popken B. Cigna changes to cheaper generic EpiPen, CVS cuts rival‘s prices. NBC News website. Accessed May 23, 2018.
3. Kesselheim AS, Avorn J, Sarpatwari A. The high cost of prescription drugs in the United States: origins and prospects for reform. JAMA. 2016;316(8):858-871.
4. Tribble SJ, Lupkin S. Drugs for rare diseases have become uncommonly rich monopolies. NPR website. Accessed May 23, 2018.
5. Lee TT, Gluck AR, Curfman G. The politics of Medicare and drug-price negotiation. Health Affairs website. Accessed May 23, 2018.