A special communication published online this morning in the Journal of the American Medical Association spells out just why prescription drug prices in the United States are far and away the highest in the world.
In the end, it comes down to two words: Pharma lobby. Our nation’s own laws make it easy for the pharmaceutical industry to gorge consumers, and the power of the seemingly bottomless pharma purse makes it difficult to get them changed.
“High drug prices are the result of the approach the United States has taken to granting government-protected monopolies to drug manufacturers, combined with coverage requirements imposed on government-funded drug benefits,” the authors concluded. “The most realistic short-term strategies to address high prices include enforcing more stringent requirements for the award and extension of exclusivity rights; enhancing competition by ensuring timely generic drug availability; providing greater opportunities for meaningful price negotiation by government payers; generating more evidence about comparative cost-effectiveness of therapeutic alternatives (more NIH-funded scientific research on alternative, non-pharma approaches, such as natural therapies, is sorely needed); and more effectively educating patients, prescribers, payers, and policy makers about these choices.”
The paper is an extensive review of research published in peer-reviewed academic journals from 2005 to 2016. The authors are pharmacoepidemiology and pharmacoeconomics professors from Brigham and Women’s Hospital and Harvard Medical School. The paper is one of the most compelling and easy to understand pieces I ever have read on the topic.
I became interested in pharma pricing while working as a reporter for Healthline News. While I do not have HIV or Hepatitis C, those were my primary beats. The once-a-day pill that cures Hepatitis C (Sovaldi by Gilead) came to market while I was at Healthline News at a staggering $84,000 for a 12-week supply. A second-generation pill, Harvoni, came to market shortly thereafter, and costs more than $90,000. Doctors have reported its tolerability to be far superior to even Sovaldi, which was dubbed “game changing” medication and forever changed the health landscape.
The medications still are priced less than the cost of a liver transplant. While the drugs have a tremendous public health benefit and will result in tremendous cost savings over the course of many years, those savings won’t be realized by today’s payers.
Interestingly, Sovaldi came to market just as Baby Boomers have come of age. Hepatitis C, a disease of the liver, is most common among Baby Boomers and injection drug users. It’s common among Baby Boomers because prior to the advent of the HIV epidemic in the U.S., hospital sterilization techniques and the monitoring of the nation’s blood supply were less thorough than they are today. Many Baby Boomers obtained the disease in those settings.
Some argue that many veterans obtained Hepatitis C while in the military due to unsterile vaccination procedures.
The Prilosec problem
The authors of the JAMA paper make several interesting points:
Since the advent of the Medicare drug benefit in 2006, government entities have accounted for 40 percent of the nation’s total drug expenditure.
“Drug prices are higher in the United States than in the rest of the industrialized world because, unlike that in nearly every other advanced nation, the U.S. health care system allows manufacturers to set their own price for a given product. In contrast, in countries with national health insurance systems, a delegated body negotiates drug prices or rejects coverage of products if the price demanded by the manufacturer is excessive in light of the benefit provided: Manufacturers may then decide to offer the drug at a lower price.”
Drug companies receive years-long patents, and then can extend the patents for many more years – decades — through a number of loopholes and legal maneuverings. “In an example of this strategy, the manufacturer of the proton-pump inhibitor omeprazole (Prilosec) received an additional patent on the drug’s s-isomer, despite the absence of any compelling pharmacologic difference,” the authors reported. “This lead to the creation of esomeprazole (Nexium) as a newly branded product that was sold for $4 a pill, a 600 percent markup over the over-the-counter version of omeprazole.”
Essentially, companies are able to tweak products and move patients from one to the next, “sometimes discontinuing production of older version of the drug,” the authors reported.
Backlogs at the FDA office can delay generic applications for years even when a patent does expire and generics come to market. “Some innovator companies have refused to provide the samples of their products needed for the potential generic manufacturers to conduct bioequivalence studies, slowing or blocking the process,” the authors reported.
Contact your legislators and demand change
What does the pharmaceutical industry have to say about all of this? “The pharmaceutical industry has maintained that high drug prices reflect the research and development costs a company incurred to develop the drug, are necessary to pay for future research costs to develop new drugs, or both,” according to the authors. “It is true that industry often makes expensive investments in drug development and commercialization, particularly through the late-stage clinical trials, which can be costly…. Some economic analyses favored by the pharmaceutical industry content that it costs $2.6 billion to develop a new drug that makes it to market. However, the rigor of this widely cited number has been disputed.”
What needs to be done to lower prices? For starters, patent laws need to be changed, or at least the interpretation of those laws, according to the authors. This would allow for much needed competition. “For example, changes in how the U.S. Patient and Trademark Office interprets ‘novelty’ and ‘non-obviousness’ when issuing patents could help avoid new secondary patents based on clinically irrelevant changes to active drug products.”
And existing laws need to be better enforced.
Drug promotion budgets could be limited, resulting in cost savings. The only other high-income nation in the world that allows direct to consumer advertising by pharma is New Zealand. Of course, this opens up a can of worms about our free market economy, and that’s not a discussion I care to get into. Pharma advertising makes websites such as Healthline possible, and even though I no longer write for them, I remain a big fan.
“In theory, the most effective way for a government to reduce drug prices would be for it to set them for the entire marketplace, as central governments do in countries such as Sweden, or to engage in international reference pricing and set prices at levels similar to those of other countries,” the authors wrote. “Taking such a step in the United States would have major marketplace ramifications and is not at present politically feasible, in part because of the power of the pharmaceutical lobby in Washington, D.C. Nonetheless, the U.S. government can still take steps to help control excessive drug prices by reassessing some existing unusual and overly permissive policies.”