By Max Friedman
Senators from both parties, as well as the Obama administration, continue to shine a light on astronomically high drug prices.
Senate Focus on Price Spikes
Last week, the Senate Special Committee on Aging held a hearing that focused on Valeant Pharmaceuticals International, which has come under great scrutiny recently from both the government and Wall Street. Valeant is one of several companies that have bought the licenses to long-existing drugs, and then jacked up their formerly reasonable prices suddenly, to the great detriment of patients, government programs and insurance companies. Called out for this and other bad behavior, Valeant has seen their stock price drop in value by 90 percent since last summer. You can watch the hearing and read testimony here.
The focus of testimony on Thursday was on the cost of Syprine, a drug used to treat the symptoms of Wilson disease, a genetic condition which causes copper to accumulate to toxic levels. One patient testified that her costs went from $700 per year in 2013 to a projected copay of $10,000 in 2014, with her supplemental Medicare insurance paying over $260,000. This is for a drug that has been around for decades, and which Valeant had no hand in developing.
A doctor who leads the Wilson Disease Center of Excellence at the University of Michigan told the committee:
Ethical pharmaceutical companies do support research, which provides new and improved treatments for diseases. Wilson patients have many unmet needs with current treatments. Based on an expectation of reasonable investment returns, companies invest in developing these new treatments…
One should not confuse companies which institute sudden and dramatic price increases on longstanding critical drugs with those which are truly developing new ones. There is an enormous human cost associated with these practices.
The New York Times has examined the math behind these price spikes. For many, the list price of a drug is not the actual price, as insurers are often able to negotiate a lower rate. However, patients with serious illnesses or who require new, brand-name drugs may be required by their insurers to pay the list price, not the negotiated rate, until they hit their annual deductible, which can be in the thousands of dollars. The heaviest burden often falls on those with the least ability to pay, including the uninsured, who do not benefit at all from discounts negotiated by insurance carriers.
Proposed Changes Spark Pushback
Meanwhile, in an attempt to address another piece of the drug cost crisis, the Obama Administration has proposed new rules which would change how Medicare pays for cancer therapies and other treatments that physicians administer directly to patients in outpatient settings.
Under the current arrangement, Medicare reimburses doctors for the price of these drugs and then adds on an extra fee, calculated as a percentage of the list price for the drug. Studies have shown that this incentivizes doctors to prescribe costlier treatments because higher priced drugs mean bigger fees. The proposed rule would substitute a flat fee instead, to encourage use of less expensive treatments when they would be just as effective.
However, members of Congress, under pressure from doctors and drug companies, have pushed back, despite support from the AARP, the Medicare Rights Center, and the American Academy of Family Physicians. While Republican messaging on this tends to be harsher than that of Democrats, the Democrats have not been out front in supporting the President’s efforts, either.
In order to make changes that would actually help consumers, our representatives in Congress are going to have to support real efforts to change the system, not simply hold hearings.