- Email: [email protected]
America’s Health Care System is Broken: What Went Wrong and How We Can Fix It. Part 4: The Pharmaceutical Industry
REVIEW
America’s Health Care System is Broken: What Went Wrong and How We Can Fix It. Part 4: The Pharmaceutical Industry Edward P. Hoffer, MD Harvard Medical School, Boston, Mass; Laboratory of Computer Science, Massachusetts General Hospital, Boston.
ABSTRACT As is true for most aspects of the US health care system, we pay much more for medications than do patients in any other country. Not only are new “breakthrough” products expensive, but existing products see price increases that regularly outstrip general inflation, making the pharmaceutical industry very profitable and resulting in many patients skipping or cutting the doses of such critical medicines as insulin. There is little relation between the effectiveness and the price of many medications. Drug firms like to cite the high cost of research and development but spend more on marketing than on research and development. The firms also spend large sums on lobbying and to influence medical thought leaders to keep their profits high. We are alone in spending billions of dollars on pharmacy benefit managers that add little value. With new gene-based therapies on the horizon, the price of therapeutics may be unsustainable. Ó 2019 Elsevier Inc. All rights reserved. The American Journal of Medicine (2019) 132:1013−1016 KEYWORDS: Cost; Health care system; Pharmaceutical industry
While spending on medication makes up only about 14% of total US health care spending, it is increasing substantially and represents one of the most egregious failures of a “free market system” to be reasonable and fair. A 2018 report from the National Academy of Sciences concluded that “consumer access to effective and affordable medicines is an imperative for public health, social equity and economic development; however, this imperative is not being adequately served by the biopharmaceutical sector today.”1 I do not deny the enormous contributions of the biopharmaceutical and medical device industries to improving health over the past 50 years. Consider that Franklin Delano Roosevelt died in 1945 because there was no effective treatment for hypertension, to see how far we have come. The question is at what cost and whether we are getting a good value.
Funding: None. Conflict of Interest: None. Authorship: I am the sole author and responsible for all content. Requests for reprints should be addressed to Edward P. Hoffer, MD, Laboratory of Computer Science, Massachusetts General Hospital, 50 Staniford Street, Suite 750, Boston, MA 02114. E-mail address: [email protected]
0002-9343/© 2019 Elsevier Inc. All rights reserved. https://doi.org/10.1016/j.amjmed.2019.03.046
US pharmaceutical expenditures last year were $1443 per capita. In Germany the comparable figure was $667 per capita; in the Netherlands it was $656; and in Sweden, $566. Americans do not use more medications than do citizens of comparable countries, but they do pay a lot more for them. The Table gives a few randomly selected examples of the difference in prices paid in the United States and by our next-door neighbors in Canada. Space does not permit detailed discussion, but implanted devices such as prosthetic joints and pacemakers also cost as much as 6 times in the United States what they cost in other countries.2 The price of insulin has been much in the news in the last year. Cost of insulin per patient in the United States doubled between 2012 and 2016.3 While this reflects, in part, a shift from older human insulins to new analogs, the price of older insulins has also increased substantially. Moreover, the benefits of the newer insulins have been oversold, as shown in a study looking at cost savings by encouraging the shift back to human insulin.4 The irony should not be lost that 25% of diabetics underuse insulin because of cost and that news reports of deaths from ketoacidosis due to underuse have made headlines. Insulin was discovered by Canadian doctors Frederick Banting and Charles Best in
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1921, and they sold the patent to the University of Toronto then spend even more money marketing it as better than the for $1, believing that a drug this important and life-saving original. How many angiotensin-converting enzyme inhibifor diabetics should always be available and affordable for tors, angiotensin receptor blockers, or proton pump inhibithose who need it. Drs. Banting and Best would be spinning tors do we really need? Another common product of the in their graves if they knew how Big Pharma was handling industry, whose primary goal is profit, is brand-name comtheir discovery. bination drugs that put 2 cheap A congressional report released in generic medications into a fixedMarch 2018 reported that the prices CLINICAL SIGNIFICANCE dose combination sold at a much 7 of the 20 most commonly prescribed Patients in the United States pay much higher price. You can have your brand-name drugs for seniors had patients take ibuprofen and famotimore for medications (and medical dine for about $15/month or preincreased nearly 10 times more than devices) than do those in other coun- scribe Duexis (Horizon Pharma, general inflation over the past tries. 5 years. Twelve of the 20 drugs saw Lake Forest, Ill), which contains Many firms engage in price gouging for both in a single pill for $1180/ their prices increase by more than single-source drugs. 50% over the 5-year period, and 6 month. 5 Pharmaceutical companies overstate had increases of more than 100%. The drug companies often claim the cost of research and spend more that their prices are justified because Outright price gouging is not a on advertising as well as on political of a widely accepted study, first rare occurrence in the pharmaceutipublished in 1979 and last updated cal industry. Perhaps the bestlobbying. Direct-to-consumer advertising and in 2014, which estimated it took known example was the behavior of Turing Pharmaceuticals under the multiple approaches to influencing 10 years and $2.7 billion to develop a single drug. Critics of the industry leadership of Martin Shkreli. Turing doctors are used to increase demand. bought up the patent for Daraprim Pharmacy benefit managers add little have repeatedly questioned this study, done by Tufts Medical in August 2015, knowing that while value but do increase costs. not a widely used drug, it was man As very high-priced gene therapies School but funded by the pharmadatory to treat severe toxoplasmosis. approach, we do not have a system in ceutical industry, as its underlying data have been kept as a “trade The price was quickly boosted from place to pay for them. $13.50/pill to $750/pill, a 5500% The best diagnostic and therapeutic secret” and have not been made increase. While Mr. Shkreli was interventions are of no use if they are available for analysis. In November called before Congress, the price not available to patients. Our current 2017, researchers used the Securities and Exchange Commission’s was not reduced. Last year Nostrum health insurance system leaves too mandatory filings by start-up comLaboratories raised the price of many Americans without access. panies to study the true cost of new nitrofurantoin from $475 to $2392. drug development. They found that Its chief executive officer defended the actual cost of developing a new drug is about one-fourth the decision, and defended the actions of Turing, by stating of that claimed by the industry-sponsored study!8 A wonthat, in a capitalist system, there was a “moral requirement 6 to sell products at the highest possible price.” In Prescripderful example of the disproportion between development costs and profits is found in the recently approved sofosbution for Bankruptcy, I list multiple other examples of rare vir (brand name Sovaldi; Gilead Sciences, Inc., Foster but critical drugs whose prices were substantially hiked just City, Calif) used to treat hepatitis C. This was developed because the manufacturers knew they could get away with by a start-up biotech firm called Pharmasset, which spent it. In no case was any value added. $315 million on research over 12 years. Gilead Sciences The drug companies try to justify their sky-high prices bought the company and its promising drug in 2011 for based on the need to cover the high costs of research and $11 billion! In the first quarter of 2017 alone, Gilead sold development (R+D). This argument has several holes in it. $2.6 billion worth of sofosbuvir, dwarfing its development The first is that while they do spend considerable money on cost. R+ D, they spend even more on marketing. Over the past Pharmaceutical companies rarely acknowledge the enordecade, pharmaceutical companies spent almost twice as mous amount of public funding that indirectly helps them. much on marketing and administrative costs as on R+ D. If An analysis of the 210 new drugs the US Food and Drug they spent less money on marketing, they would be able to Administration (FDA) approved between 2010 and 2016 shift some of this money to R +D. I could also more easily found that the National Institutes of Health provided fundaccept this argument if all their research went into developing of the basic research for each one. ing innovative medications that solved a problem, but much New cancer drugs now routinely come to market with price of their research goes into developing “me too” drugs. tags over $100,000. Such price tags might be justified for medWhen one company comes out with a truly innovative prodications that represented clinical breakthroughs, but many add uct that gives doctors and patients a better medication, other only marginal, albeit “statistically significant,” benefit over companies then spend their resources tweaking the original existing products. One example is neratinib, approved in molecule so they can sell a similar product, on which they
Hoffer Table
America’s Health Care System is Broken: Pharmaceuticals Drug Price Comparison: U.S. - Canada.
Apixaban (Eliquis) Epinephrine injection (EpiPen) Insulin glargine (Lantus) Rosuvastatin (Crestor) Sitagliptin (Januvia)
US $419 US $608 US $77 US $261 US $430
Canada $101 Canada $189 Canada $20 Canada $55 Canada $96
2017 for patients with early-stage breast cancer. A study showed that it improved invasive-disease-free survival after 2 years of follow-up by 2%— from 92% to 94% (without any published data showing improved overall survival). This was clearly a marginal benefit, at best, from a drug with a cost of $10,500 per month! Not satisfied with exorbitant price hikes, the industry goes to great lengths to increase sales. The United States is one of only 2 countries in the world (the other is New Zealand) to allow direct-to-consumer advertising of prescription drugs. These ads follow a well-tested format in which a sad “patient” is unable to be with their family or do things they enjoy until the targeted drug is begun, at which point the sun comes out and they are now smiling and happy. This followed by the rapid recitation of the many possible side effects of the medication. These ads clearly work, as the Los Angeles Times reported in February 2017 that the drug companies spent more than $5 billion annually on direct-to-consumer ads.16 Most practitioners are very familiar with drug reps, the ubiquitous detail people who come to medical offices bearing lunch and sales pitches. While most of us claim (and may even believe) that we cannot be bought by a free lunch, there are ample data showing that we do respond to these perks. Researchers were able to graph meals received against prescriptions written and showed a direct correlation.9 Conflict of interest is a major problem in 2 areas. Many of the “thought leaders,” academics who sit on guideline panels, lecture at national meetings, and author textbooks, are heavily subsidized by the pharmaceutical industry in the form of speaking fees and research support. In addition, the experts who sit on FDA advisory panels deciding on approval of new drugs, who are supposed to have no financial ties to the products under consideration, have been shown to have numerous such ties.10 Arbitrary expiration dates result in more sales, as perfectly good medications are thrown out despite ample studies showing that they remain fully effective.11,12 Larger pharmaceutical companies pay generic manufacturers to keep competing products off the market. The generic company gets a handsome sum for doing nothing and the original manufacturer keeps higher profits longer. When the generic firms do try to bring a product to market, the brand-name companies can stall its entry by refusing to make samples of their product available for equivalence testing, citing “safety concerns.”13 How likely is all this to change? The industry spends enormous amounts of money on political campaigns and lobbyists to be sure that change is unlikely. In the 2016 election cycle, the pharmaceutical industry gave more than $58 million in campaign contributions to members of
1015 Congress and presidential candidates. In the first quarter of 2017, the pharmaceutical and health products industry spent $78 million on lobbying, far more than did any other sector of the economy. Before the 2018 midterm elections even heated up, drug makers had already poured about $12 million into the campaign coffers of members of Congress. Nearly every week that Congress is in session, the industry holds fundraisers at private clubs and restaurants to help bankroll the re-election campaigns of its supporters.14 Drug prices as set by their manufacturers are bad enough, but consumer gouging happens in other ways. Rarely do medications go directly from manufacturer to patients or doctors. At a minimum, you have the pharmacies that add costs. A good pharmacist will earn this mark-up by checking for interactions with other medicines a patient may be taking, and by answering patient questions. There are other players in this drama, however, who add no value but do earn lots of profits. First, there are now 3 big wholesalers in the United States whose profits last year exceeded that of Starbucks, for adding nothing but some warehouses and trucks. Then there are the “pharmacy benefit managers,” or PBMs, who ultimately decide what patients are going to pay for any prescription, and who add only red tape in return for huge profits. PBMs are primarily responsible for developing and maintaining the formularies that control which medicines are covered, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. They work with commercial health insurers, selfinsured companies, and Medicare Part D programs, and claim to be trying to lower prescriptions costs while maintaining quality. As of 2016, PBMs managed pharmacy benefits for 266 million Americans. There are fewer than 30 companies in this category in the US, and 3 major PBMs (Express Scripts [St. Louis, Mo], CVS Caremark [Woonsocket, RI], and OptumRx [Irvine, Calif]) comprise 68% of the market and cover 180 million enrollees. There have been numerous complaints about conflicts of interest, with the PBMs more interested in maximizing their profits than in lowering costs for the patients. One wonderful example is in the drug co-pay, the amount patients pay after their insurance company pays its share. When your patient goes to pick up a prescription and is told the co-pay is $20, they assume that they are paying $20 while their insurance company is paying the rest. This may be true, but it is not uncommon for the actual cost of the drug to be, say, $6, with the PBM taking the extra $14 as income! Under strictly enforced contracts, the pharmacist is forbidden to tell patients that if they pay cash, the bottle of pills will cost them $6 rather than $20. A study published in 2018 found that approximately 28% of prescriptions filled for generic drugs had this wonderful little bonus for the PBM.15 Pharmacies dare not anger the PBM by letting patients in on this secret or they may find themselves excluded from the PBM network and lose many customers. Because the PBMs are primarily interested in maximizing their profits, they are constantly playing roulette with the
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drugs covered. While they portray themselves as keen negotiators who squeeze the pharmaceutical companies to get better deals that save money for patients and insurance companies, they, in fact, have no loyalty to either insurers or patients. They negotiate ceaselessly with drug manufacturers to get good deals, and in return promise the manufacturers preferred status and more sales. This is the usual reason why the medicine you were told you had to use to get good coverage in December becomes a high co-pay drug in January. In the meantime, the PBMs get huge rebates from the manufacturers, which are entirely hidden from public view. As we enter a new era in therapeutics, with gene therapy offering potential cures for previously incurable or even untreatable diseases, the question must arise as to how we will be able to afford these breakthrough products. In December 2017 the FDA approved LUXTURNA (Spark Therapeutics, Philadelphia, Pa) for the treatment of patients with confirmed biallelic RPE65 mutation-associated retinal dystrophy, which leads to vision loss and may cause complete blindness in certain patients. The condition affects 1000-2000 individuals in the United States, and the price tag was $850,000 ($425,000 per eye). There are now some 300 gene therapies in the pipeline, all of which may carry $1 million-plus price tags. Even as the argument is made that, for example, a million-dollar cure for sickle cell anemia may save money over a lifetime by avoiding multiple hospitalizations and emergency department visits, private insurers may balk. Because the average person with employer-based insurance stays with the same insurer for an average of 4.2 years, the insurer who pays for the $1 million gene therapy will be saving money for other insurers. Paying on an “installment plan,” not now done, may have to be explored. These decisions must be urgently made before the system is overwhelmed.
References 1. Augustine NR, Mudhavan G, Nass SJ, eds. Making Medicines Affordable: A National Imperative. Washington, DC: National Academies Press; 2017. 2. Wenzl M, Mossialos E. Prices for cardiac implant devices may be up to six times higher in the US than in some European countries. Health Aff (Millwood) 2018;37(10):1570-7.
3. Respaut R, Terhune C. U.S. insulin costs per patient nearly doubled from 2012 to 2016: study. Available at: https://www.reuters.com/article/us-usa-healthcare-diabetes-cost/u-s-insulin-costs-per-patient-nearlydoubled-from-2012-to-2016-study-idUSKCN1PG136. Accessed March 8, 2019. 4. Luo J, Khan NF, Manetti T, et al. Implementation of a health plan program for switching from analogue to human insulin and glycemic control among Medicare beneficiaries with type 2 diabetes. JAMA 2019;321(4):374-84. 5. Drash W. Medicare drug prices soar at 10 times rate of inflation, report says. Available at: https://www.cnn.com/2018/03/26/health/ report-medicare-drug-prices-soaring/index.html. Accessed March 8, 2019. 6. Crow D. Pharma chief defends 400% drug price rise as a ‘moral requirement’. Available at: https://www.ft.com/content/48b0ce2cb544-11e8-bbc3-ccd7de085ffe. Accessed March 8, 2019. 7. Sacks CA, Lee CC, Kesselheim AS, Avorn J. Medicare spending on brand-name combination medications vs their generic constituents. JAMA 2018;320(7):650-6. 8. Prasad V, Mailankody S. Research and development spending to bring a single cancer drug to market and revenues after approval. JAMA Intern Med 2017;177(11):1569-75. 9. DeJong C, Aguilar T, Tseng C-W, et al. Pharmaceutical industrysponsored meals and physician prescribing patterns for Medicare beneficiaries. JAMA Intern Med 2016;176(8):1114-22. 10. Piller C, You J. Hidden conflicts? Pharma payments to FDA advisers after drug approvals spark ethical concerns. Available at: https://www.sciencemag.org/news/2018/07/hidden-conflictspharma-payments-fda-advisers-after-drug-approvals-spark-ethical. Accessed March 10, 2019. 11. Pruyn S, Frey J, Baker B, et al. Quality assessment of expired naloxone products from first-responders’ supplies [e-pub ahead of print]. Prehosp Emerg Care. 2018 Dec 30:1-7. https://doi.org/10.1080/ 10903127.2018.1563257. 12. Nawarskas JJ, Koury J, Lauber DA, Felton LA. Open-label study of the stability of sublingual nitroglycerine tablets in simulated real-life conditions. Am J Cardiol 2018;122(12):2151-6. 13. Jones GH, Carrier MA, Silver RT, Kantarjian H. Strategies that delay or prevent the timely availability of affordable generic drugs in the United States. Blood 2016;127:1398-402. 14. Hancock J. The pharma industry spent $57 million lobbying last year. And that’s just the start of its spending. Available at: https://www.statnews.com/2017/12/19/pharma-lobbying-spending/. Accessed March 8, 2019. 15. Sullivan L. Powerful, secretive middlemen affect drug prices. Available at: https://www.dispatch.com/news/20180519/powerful-secretive-middlemen-affect-drug-prices. Accessed March 10, 2019. 16. https://www.latimes.com/business/la-fi-lazarus-drugadvertising20170215-story.html. Accessed today, May 9.
America’s Health Care System is Broken: What Went Wrong and How We Can Fix It. Part 4: The Pharmaceutical Industry Edward P. Hoffer, MD Harvard Medical School, Boston, Mass; Laboratory of Computer Science, Massachusetts General Hospital, Boston.
ABSTRACT As is true for most aspects of the US health care system, we pay much more for medications than do patients in any other country. Not only are new “breakthrough” products expensive, but existing products see price increases that regularly outstrip general inflation, making the pharmaceutical industry very profitable and resulting in many patients skipping or cutting the doses of such critical medicines as insulin. There is little relation between the effectiveness and the price of many medications. Drug firms like to cite the high cost of research and development but spend more on marketing than on research and development. The firms also spend large sums on lobbying and to influence medical thought leaders to keep their profits high. We are alone in spending billions of dollars on pharmacy benefit managers that add little value. With new gene-based therapies on the horizon, the price of therapeutics may be unsustainable. Ó 2019 Elsevier Inc. All rights reserved. The American Journal of Medicine (2019) 132:1013−1016 KEYWORDS: Cost; Health care system; Pharmaceutical industry
While spending on medication makes up only about 14% of total US health care spending, it is increasing substantially and represents one of the most egregious failures of a “free market system” to be reasonable and fair. A 2018 report from the National Academy of Sciences concluded that “consumer access to effective and affordable medicines is an imperative for public health, social equity and economic development; however, this imperative is not being adequately served by the biopharmaceutical sector today.”1 I do not deny the enormous contributions of the biopharmaceutical and medical device industries to improving health over the past 50 years. Consider that Franklin Delano Roosevelt died in 1945 because there was no effective treatment for hypertension, to see how far we have come. The question is at what cost and whether we are getting a good value.
Funding: None. Conflict of Interest: None. Authorship: I am the sole author and responsible for all content. Requests for reprints should be addressed to Edward P. Hoffer, MD, Laboratory of Computer Science, Massachusetts General Hospital, 50 Staniford Street, Suite 750, Boston, MA 02114. E-mail address: [email protected]
0002-9343/© 2019 Elsevier Inc. All rights reserved. https://doi.org/10.1016/j.amjmed.2019.03.046
US pharmaceutical expenditures last year were $1443 per capita. In Germany the comparable figure was $667 per capita; in the Netherlands it was $656; and in Sweden, $566. Americans do not use more medications than do citizens of comparable countries, but they do pay a lot more for them. The Table gives a few randomly selected examples of the difference in prices paid in the United States and by our next-door neighbors in Canada. Space does not permit detailed discussion, but implanted devices such as prosthetic joints and pacemakers also cost as much as 6 times in the United States what they cost in other countries.2 The price of insulin has been much in the news in the last year. Cost of insulin per patient in the United States doubled between 2012 and 2016.3 While this reflects, in part, a shift from older human insulins to new analogs, the price of older insulins has also increased substantially. Moreover, the benefits of the newer insulins have been oversold, as shown in a study looking at cost savings by encouraging the shift back to human insulin.4 The irony should not be lost that 25% of diabetics underuse insulin because of cost and that news reports of deaths from ketoacidosis due to underuse have made headlines. Insulin was discovered by Canadian doctors Frederick Banting and Charles Best in
1014
The American Journal of Medicine, Vol 132, No 9, September 2019
1921, and they sold the patent to the University of Toronto then spend even more money marketing it as better than the for $1, believing that a drug this important and life-saving original. How many angiotensin-converting enzyme inhibifor diabetics should always be available and affordable for tors, angiotensin receptor blockers, or proton pump inhibithose who need it. Drs. Banting and Best would be spinning tors do we really need? Another common product of the in their graves if they knew how Big Pharma was handling industry, whose primary goal is profit, is brand-name comtheir discovery. bination drugs that put 2 cheap A congressional report released in generic medications into a fixedMarch 2018 reported that the prices CLINICAL SIGNIFICANCE dose combination sold at a much 7 of the 20 most commonly prescribed Patients in the United States pay much higher price. You can have your brand-name drugs for seniors had patients take ibuprofen and famotimore for medications (and medical dine for about $15/month or preincreased nearly 10 times more than devices) than do those in other coun- scribe Duexis (Horizon Pharma, general inflation over the past tries. 5 years. Twelve of the 20 drugs saw Lake Forest, Ill), which contains Many firms engage in price gouging for both in a single pill for $1180/ their prices increase by more than single-source drugs. 50% over the 5-year period, and 6 month. 5 Pharmaceutical companies overstate had increases of more than 100%. The drug companies often claim the cost of research and spend more that their prices are justified because Outright price gouging is not a on advertising as well as on political of a widely accepted study, first rare occurrence in the pharmaceutipublished in 1979 and last updated cal industry. Perhaps the bestlobbying. Direct-to-consumer advertising and in 2014, which estimated it took known example was the behavior of Turing Pharmaceuticals under the multiple approaches to influencing 10 years and $2.7 billion to develop a single drug. Critics of the industry leadership of Martin Shkreli. Turing doctors are used to increase demand. bought up the patent for Daraprim Pharmacy benefit managers add little have repeatedly questioned this study, done by Tufts Medical in August 2015, knowing that while value but do increase costs. not a widely used drug, it was man As very high-priced gene therapies School but funded by the pharmadatory to treat severe toxoplasmosis. approach, we do not have a system in ceutical industry, as its underlying data have been kept as a “trade The price was quickly boosted from place to pay for them. $13.50/pill to $750/pill, a 5500% The best diagnostic and therapeutic secret” and have not been made increase. While Mr. Shkreli was interventions are of no use if they are available for analysis. In November called before Congress, the price not available to patients. Our current 2017, researchers used the Securities and Exchange Commission’s was not reduced. Last year Nostrum health insurance system leaves too mandatory filings by start-up comLaboratories raised the price of many Americans without access. panies to study the true cost of new nitrofurantoin from $475 to $2392. drug development. They found that Its chief executive officer defended the actual cost of developing a new drug is about one-fourth the decision, and defended the actions of Turing, by stating of that claimed by the industry-sponsored study!8 A wonthat, in a capitalist system, there was a “moral requirement 6 to sell products at the highest possible price.” In Prescripderful example of the disproportion between development costs and profits is found in the recently approved sofosbution for Bankruptcy, I list multiple other examples of rare vir (brand name Sovaldi; Gilead Sciences, Inc., Foster but critical drugs whose prices were substantially hiked just City, Calif) used to treat hepatitis C. This was developed because the manufacturers knew they could get away with by a start-up biotech firm called Pharmasset, which spent it. In no case was any value added. $315 million on research over 12 years. Gilead Sciences The drug companies try to justify their sky-high prices bought the company and its promising drug in 2011 for based on the need to cover the high costs of research and $11 billion! In the first quarter of 2017 alone, Gilead sold development (R+D). This argument has several holes in it. $2.6 billion worth of sofosbuvir, dwarfing its development The first is that while they do spend considerable money on cost. R+ D, they spend even more on marketing. Over the past Pharmaceutical companies rarely acknowledge the enordecade, pharmaceutical companies spent almost twice as mous amount of public funding that indirectly helps them. much on marketing and administrative costs as on R+ D. If An analysis of the 210 new drugs the US Food and Drug they spent less money on marketing, they would be able to Administration (FDA) approved between 2010 and 2016 shift some of this money to R +D. I could also more easily found that the National Institutes of Health provided fundaccept this argument if all their research went into developing of the basic research for each one. ing innovative medications that solved a problem, but much New cancer drugs now routinely come to market with price of their research goes into developing “me too” drugs. tags over $100,000. Such price tags might be justified for medWhen one company comes out with a truly innovative prodications that represented clinical breakthroughs, but many add uct that gives doctors and patients a better medication, other only marginal, albeit “statistically significant,” benefit over companies then spend their resources tweaking the original existing products. One example is neratinib, approved in molecule so they can sell a similar product, on which they
Hoffer Table
America’s Health Care System is Broken: Pharmaceuticals Drug Price Comparison: U.S. - Canada.
Apixaban (Eliquis) Epinephrine injection (EpiPen) Insulin glargine (Lantus) Rosuvastatin (Crestor) Sitagliptin (Januvia)
US $419 US $608 US $77 US $261 US $430
Canada $101 Canada $189 Canada $20 Canada $55 Canada $96
2017 for patients with early-stage breast cancer. A study showed that it improved invasive-disease-free survival after 2 years of follow-up by 2%— from 92% to 94% (without any published data showing improved overall survival). This was clearly a marginal benefit, at best, from a drug with a cost of $10,500 per month! Not satisfied with exorbitant price hikes, the industry goes to great lengths to increase sales. The United States is one of only 2 countries in the world (the other is New Zealand) to allow direct-to-consumer advertising of prescription drugs. These ads follow a well-tested format in which a sad “patient” is unable to be with their family or do things they enjoy until the targeted drug is begun, at which point the sun comes out and they are now smiling and happy. This followed by the rapid recitation of the many possible side effects of the medication. These ads clearly work, as the Los Angeles Times reported in February 2017 that the drug companies spent more than $5 billion annually on direct-to-consumer ads.16 Most practitioners are very familiar with drug reps, the ubiquitous detail people who come to medical offices bearing lunch and sales pitches. While most of us claim (and may even believe) that we cannot be bought by a free lunch, there are ample data showing that we do respond to these perks. Researchers were able to graph meals received against prescriptions written and showed a direct correlation.9 Conflict of interest is a major problem in 2 areas. Many of the “thought leaders,” academics who sit on guideline panels, lecture at national meetings, and author textbooks, are heavily subsidized by the pharmaceutical industry in the form of speaking fees and research support. In addition, the experts who sit on FDA advisory panels deciding on approval of new drugs, who are supposed to have no financial ties to the products under consideration, have been shown to have numerous such ties.10 Arbitrary expiration dates result in more sales, as perfectly good medications are thrown out despite ample studies showing that they remain fully effective.11,12 Larger pharmaceutical companies pay generic manufacturers to keep competing products off the market. The generic company gets a handsome sum for doing nothing and the original manufacturer keeps higher profits longer. When the generic firms do try to bring a product to market, the brand-name companies can stall its entry by refusing to make samples of their product available for equivalence testing, citing “safety concerns.”13 How likely is all this to change? The industry spends enormous amounts of money on political campaigns and lobbyists to be sure that change is unlikely. In the 2016 election cycle, the pharmaceutical industry gave more than $58 million in campaign contributions to members of
1015 Congress and presidential candidates. In the first quarter of 2017, the pharmaceutical and health products industry spent $78 million on lobbying, far more than did any other sector of the economy. Before the 2018 midterm elections even heated up, drug makers had already poured about $12 million into the campaign coffers of members of Congress. Nearly every week that Congress is in session, the industry holds fundraisers at private clubs and restaurants to help bankroll the re-election campaigns of its supporters.14 Drug prices as set by their manufacturers are bad enough, but consumer gouging happens in other ways. Rarely do medications go directly from manufacturer to patients or doctors. At a minimum, you have the pharmacies that add costs. A good pharmacist will earn this mark-up by checking for interactions with other medicines a patient may be taking, and by answering patient questions. There are other players in this drama, however, who add no value but do earn lots of profits. First, there are now 3 big wholesalers in the United States whose profits last year exceeded that of Starbucks, for adding nothing but some warehouses and trucks. Then there are the “pharmacy benefit managers,” or PBMs, who ultimately decide what patients are going to pay for any prescription, and who add only red tape in return for huge profits. PBMs are primarily responsible for developing and maintaining the formularies that control which medicines are covered, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. They work with commercial health insurers, selfinsured companies, and Medicare Part D programs, and claim to be trying to lower prescriptions costs while maintaining quality. As of 2016, PBMs managed pharmacy benefits for 266 million Americans. There are fewer than 30 companies in this category in the US, and 3 major PBMs (Express Scripts [St. Louis, Mo], CVS Caremark [Woonsocket, RI], and OptumRx [Irvine, Calif]) comprise 68% of the market and cover 180 million enrollees. There have been numerous complaints about conflicts of interest, with the PBMs more interested in maximizing their profits than in lowering costs for the patients. One wonderful example is in the drug co-pay, the amount patients pay after their insurance company pays its share. When your patient goes to pick up a prescription and is told the co-pay is $20, they assume that they are paying $20 while their insurance company is paying the rest. This may be true, but it is not uncommon for the actual cost of the drug to be, say, $6, with the PBM taking the extra $14 as income! Under strictly enforced contracts, the pharmacist is forbidden to tell patients that if they pay cash, the bottle of pills will cost them $6 rather than $20. A study published in 2018 found that approximately 28% of prescriptions filled for generic drugs had this wonderful little bonus for the PBM.15 Pharmacies dare not anger the PBM by letting patients in on this secret or they may find themselves excluded from the PBM network and lose many customers. Because the PBMs are primarily interested in maximizing their profits, they are constantly playing roulette with the
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drugs covered. While they portray themselves as keen negotiators who squeeze the pharmaceutical companies to get better deals that save money for patients and insurance companies, they, in fact, have no loyalty to either insurers or patients. They negotiate ceaselessly with drug manufacturers to get good deals, and in return promise the manufacturers preferred status and more sales. This is the usual reason why the medicine you were told you had to use to get good coverage in December becomes a high co-pay drug in January. In the meantime, the PBMs get huge rebates from the manufacturers, which are entirely hidden from public view. As we enter a new era in therapeutics, with gene therapy offering potential cures for previously incurable or even untreatable diseases, the question must arise as to how we will be able to afford these breakthrough products. In December 2017 the FDA approved LUXTURNA (Spark Therapeutics, Philadelphia, Pa) for the treatment of patients with confirmed biallelic RPE65 mutation-associated retinal dystrophy, which leads to vision loss and may cause complete blindness in certain patients. The condition affects 1000-2000 individuals in the United States, and the price tag was $850,000 ($425,000 per eye). There are now some 300 gene therapies in the pipeline, all of which may carry $1 million-plus price tags. Even as the argument is made that, for example, a million-dollar cure for sickle cell anemia may save money over a lifetime by avoiding multiple hospitalizations and emergency department visits, private insurers may balk. Because the average person with employer-based insurance stays with the same insurer for an average of 4.2 years, the insurer who pays for the $1 million gene therapy will be saving money for other insurers. Paying on an “installment plan,” not now done, may have to be explored. These decisions must be urgently made before the system is overwhelmed.
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3. Respaut R, Terhune C. U.S. insulin costs per patient nearly doubled from 2012 to 2016: study. Available at: https://www.reuters.com/article/us-usa-healthcare-diabetes-cost/u-s-insulin-costs-per-patient-nearlydoubled-from-2012-to-2016-study-idUSKCN1PG136. Accessed March 8, 2019. 4. Luo J, Khan NF, Manetti T, et al. Implementation of a health plan program for switching from analogue to human insulin and glycemic control among Medicare beneficiaries with type 2 diabetes. JAMA 2019;321(4):374-84. 5. Drash W. Medicare drug prices soar at 10 times rate of inflation, report says. Available at: https://www.cnn.com/2018/03/26/health/ report-medicare-drug-prices-soaring/index.html. Accessed March 8, 2019. 6. Crow D. Pharma chief defends 400% drug price rise as a ‘moral requirement’. Available at: https://www.ft.com/content/48b0ce2cb544-11e8-bbc3-ccd7de085ffe. Accessed March 8, 2019. 7. Sacks CA, Lee CC, Kesselheim AS, Avorn J. Medicare spending on brand-name combination medications vs their generic constituents. JAMA 2018;320(7):650-6. 8. Prasad V, Mailankody S. Research and development spending to bring a single cancer drug to market and revenues after approval. JAMA Intern Med 2017;177(11):1569-75. 9. DeJong C, Aguilar T, Tseng C-W, et al. Pharmaceutical industrysponsored meals and physician prescribing patterns for Medicare beneficiaries. JAMA Intern Med 2016;176(8):1114-22. 10. Piller C, You J. Hidden conflicts? Pharma payments to FDA advisers after drug approvals spark ethical concerns. Available at: https://www.sciencemag.org/news/2018/07/hidden-conflictspharma-payments-fda-advisers-after-drug-approvals-spark-ethical. Accessed March 10, 2019. 11. Pruyn S, Frey J, Baker B, et al. Quality assessment of expired naloxone products from first-responders’ supplies [e-pub ahead of print]. Prehosp Emerg Care. 2018 Dec 30:1-7. https://doi.org/10.1080/ 10903127.2018.1563257. 12. Nawarskas JJ, Koury J, Lauber DA, Felton LA. Open-label study of the stability of sublingual nitroglycerine tablets in simulated real-life conditions. Am J Cardiol 2018;122(12):2151-6. 13. Jones GH, Carrier MA, Silver RT, Kantarjian H. Strategies that delay or prevent the timely availability of affordable generic drugs in the United States. Blood 2016;127:1398-402. 14. Hancock J. The pharma industry spent $57 million lobbying last year. And that’s just the start of its spending. Available at: https://www.statnews.com/2017/12/19/pharma-lobbying-spending/. Accessed March 8, 2019. 15. Sullivan L. Powerful, secretive middlemen affect drug prices. Available at: https://www.dispatch.com/news/20180519/powerful-secretive-middlemen-affect-drug-prices. Accessed March 10, 2019. 16. https://www.latimes.com/business/la-fi-lazarus-drugadvertising20170215-story.html. Accessed today, May 9.