Should the price of drugs be based on what pharmaceutical companies can get or what people can afford?

The high cost of prescription drugs is an issue that seems to engage most people, including politicians both Democratic and Republican, left and right. The Speaker of the House of Representatives, Nancy Pelosi (D-CA), has proposed a bill (called, in fact, the Lower Drug Costs Now bill) that would control drug prices, at least for essential medication, a proposal endorsed by the Editorial Board of the New York Times. The President of the United States, Donald Trump, who disagrees with Ms. Pelosi on almost everything else (and indeed is in the process of being impeached by the House of Representatives over which she presides) is telling Americans that they will be able to buy their drugs, at lower prices, from abroad. Indeed, the President has gone even further, announcing that he will require health providers to post their actual prices, that is what insurers actually pay, not posted un-discounted prices, on line.

Both of those White House proposals would be terrific. They would not, by a long shot, solve the problems afflicting Americans in the arena of their health and health care – after all, posting the prices is not the same as making them affordable – but it would sure help. I have previously told the story of an outpatient hernia operation I had some years back. I left home at about 6am and was back there in my own bed by noon. Then I received the hospital bill – not including the charges from the doctors, the surgeon and anesthesiologist – for $10,000! I then got a notice from my insurer that I would have to pay $400, they would pay $1600, and the hospital would make a “contractual adjustment” for the rest. That is, the hospital, based on a contract with my insurer, would write off $8000. Whew. I only had to pay $400. But the thing is – the official hospital charge was $10,000. If I didn’t have insurance, I not only wouldn’t have been billed only $400, I wouldn’t have even been billed the $2000 that was the total the hospital collected from me and the insurance company; I would have been billed $10,000! This is absurd, and while requiring hospitals to post the prices they are actually paid by the insurance companies would not necessarily change this, it would bring the flagrant abuse of uninsured people out into the open. If you doubt the significance of this, note the objections of the hospital industry: ‘“This rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations,” the American Hospital Association and three other major hospital groups said in a statement.’ Yup, they hate it so it must be a good thing!

But back to drug prices. They are currently unconscionable. Americans pay a lot more for most drugs that they need than people in other countries. The main reason is that other countries regulate drug prices, and the US doesn’t. Indeed, when the Medicare Drug Plan (Part D) was passed by Congress during the GW Bush administration, it specifically forbade Medicare from using its clout as the nation’s largest insurer to negotiate drug prices. That was a win-win for the drug companies (The government requires every Medicare recipient to buy drug insurance and forbids it from doing anything but pay full price.) So, frankly, the White House proposal to allow American to buy drugs abroad is a minor step – nothing like actually regulating prices for drugs or even allowing Medicare to negotiate those prices for its recipients – but it is something. I support it as far as it goes. I also support Nancy Pelosi’s more extensive intervention.

There is reason, however, to be skeptical of whether the White House will actually implement these changes. Impeachment aside, promising things that he cannot or will not deliver on is the routine modus operandi of President Trump. I hope this is the exception. Pelosi’s Democrats are, I believe more sincere in their desire to limit drug costs, but it is unlikely that a plan of theirs will pass the Senate, and if it should, the President would likely veto it because it is not his plan. And, of course, it might hurt the drug companies; he likes to use them as whipping boys, but they are a big part of the huge corporate complex that has benefited from all of the Republican’s policies, and contribute a lot. They also contribute a lot to Democrats.

Sometimes in discussions about drug prices, similar to discussions about other situations that lead to enormous industry profits, we hear arguments that include the need for research and development on new drugs and the possibility that Americans do better as a result of paying more for their drugs than people in other countries who pay less for the same medicines. We also hear that since insurance companies pay for these drugs, the high cost really doesn’t hurt Americans. All of these arguments are worse than baloney – they are purposely produced propaganda funded by the pharmaceutical industry as part of their marketing budgets, in the interest of maintaining their profits. Luckily most Americans are now seeing through the smokescreen, as indicated by these proposals from both parties.

A recent study by Navindra Persaud and colleagues published in JAMA Internal Medicine[1] found that adherence to treatment was significantly higher among a group that received their drugs free of charge. This should surprise no one, least of all pharmaceutical companies. (The fact that only some disease outcomes improved may have more to do with how well these drugs actually are effective in doing what they are supposed to do.) The idea that lowering prices would inhibit access to medicines is belied by the fact that drug companies make plenty even with lower prices or they wouldn’t sell their drugs abroad.

So reducing drug prices and thus limiting the exorbitant profits made by the pharmaceutical industry is important. The cost of those drugs eats into the ability of Americans to pay for other things – not just luxuries, but also food and rent. And, as always, while it can affect most of us, the impact is greatest on those with the lowest income. It may happen, although the corporate ownership of both the mainstream Democratic as well as Republican parties will be a big obstacle.

But we need more than just lower drug prices, and certainly more than the ability to purchase drugs abroad. We need to have comprehensive health system reform that provides coverage and access for all health care for all people at affordable cost to them. This means cutting the income and profits of not only pharmaceutical companies but insurance companies and – absolutely not to be missed – health systems. After all, a recent article in the Mayo Clinic Proceedings describing the major individuals with an influence on health policy indicated that

there were 1700 persons named from 2002 to 2018, a minority of them women (range over the period, 17% to 28%). Most influencers are top executives from nonprofit health care provider organizations; their proportion has increased from 23% in 2002 to 72% in 2018, with an apparent substantial upward inflection in this trend since 2009. This predominance appears to be at the expense of academics, advocates, and government officials.

 The objection that we cannot take on too much all at once is specious; it is only by taking on everything more-or-less simultaneously (or in quick succession) that we can prevent gaming of the system and actually improve health care for all Americans.

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[1]  Persaud, N, et al.,  Effect on Treatment Adherence of Distributing Essential Medicines at No Charge: The CLEAN Meds Randomized Clinical Trial, JAMA Intern Med. doi:10.1001/jamainternmed.2019.4472

Published online October 7, 2019.

Requiring TV drug ads to post list prices: a good step from HHS -- but not enough!

"What I say to the companies is if you think the cost of your drug will scare people from buying your drugs, then lower your prices."

Terrific quote from the not-always-terrific Health and Human Services Secretary, Alex Azar. The Department of HHS will require TV ads for drugs to disclose the list price for the drugs they advertise. Sure, they will be at the end in the small print along with the side effects (‘nausea, vomiting, headache, baldness, serious infections, death, etc.’), and thus far there are no plans to require it in print ads, but it is a big step forward. There is so much evil being done by the Trump Administration that it is nice, every once in a (long) while to be able to point out something that is good. The #Trumpenik himself tweeted something very similar to Azar’s quote.

This has been one effort by the Administration to try and control drug prices by a very indirect route that, tellingly, does not include actually controlling drug prices. It does not even include allowing Medicare (the nation’s biggest drug purchaser) to negotiate drug prices with pharmaceutical manufacturers (that ban was built into the GW Bush era legislation that created the Medicare drug requirement, Medicare “Part D”). Still, it is something and something that is not insignificant. You can tell this from the reaction of the drug manufacturers, represented by PhRMA (the Pharmaceutical Research and Manufacturers of America), which said “We are concerned that the administration's rule requiring list prices in direct-to-consumer television advertising could be confusing for patients and may discourage them from seeking needed medical care." It takes some chutzpah to say such a thing; what PhRMA wants is for patients to demand these drugs (some of which cost upwards of $30,000 a year. Or, for some, a month!) from their doctors, and then the doctors to put pressure on insurers to cover them.

Yes, often the price paid by the insurance company will be much less than the list price that the new regulations will require them to put on their TV ads. But there will still be those, the poorly insured and uninsured, the most needy, who will have to go without, who, even if they are not discouraged from seeking needed medical care will find out that it is not really available to them. While PhRMA is the trade group for the most profitable industry in the US, their objection to posting list prices is mirrored by health providers, especially health systems, who argue that posting their prices from their “chargemaster” is deceptive because insurance companies often (usually) pay less. Yeah, so? Why not charge less and let them pay the charge? This is how it is in most other industries, and in healthcare in most other countries.

The pharmaceutical industry has a well-deserved reputation as an evil cabal, and it is not only the “outliers”. Yes, we have the fantastic extremes of Heather Bresch’s Mylan and its Epi-Pen®, and Martin Shkreli and colchicine, but we also have the “mainstream” pharmaceutical companies who have unconscionably raised their predatory pricing on key life-saving drugs, like insulin. NBC reports a doubling of the price of insulin from 2012-2016, and stories on people who are affected abound. In 2017, the pharmaceutical companies were accused of fixing the price of insulin. They deny it, but their actions belie that denial; in March, Eli Lilly agreed to sell a “generic” version of its Humalog® for half price and ExpressScripts, a pharmacy benefit manager (PBM, read either facilitator or middleman, but however you read it, it is “moneymaker”) said it would offer to cap insulin costs at $25/month. Interesting for a drug whose discoverers refused to patent it because they wanted it freely available to the public. (And, interestingly, insulin still does not require a prescription, although the needles and syringes do…) The NY Times recently reported that “Lawmakers in Both Parties Vow to Rein In Insulin Costs”, but we shall see.

Of course, while its reputation as evil is well-deserved, the pharmaceutical industry is not alone in making rapacious profits from our health needs. The entire “industry” is not about making people healthier, or even curing the sick, but on making money. This includes, of course, insurers, but also health providers, hospitals, health systems, nursing homes, doctors, etc. Ever try to get a price on any health care you need, besides drugs? Ever try to figure out a bill? Two stories from my own life I have written about before but will re-tell here:

Some years ago I had outpatient hernia surgery. I arrived about 6:30am and was back home in my bed by noon. Later I got the bill from the hospital for its charges (not including the doctors’): $10,000. Then my insurance company told me that I would pay $400, they would pay $1,600, and the hospital would write off the other $8,000 as a contractual adjustment.

Of course, if I had been uninsured, I would have not been billed for the $2,000 the hospital actually received, but for the whole $10,000! This is why they don’t want to list their charges. This obfuscation is motivated by insurance companies looking to show what a good deal they provide their customers (look! We saved you $8,000!). Of course, this is baloney; since the hospital was willing to settle for $2,000, that is what they should have charged, everyone.

And price lists? Time for the other story.

I live an hour from the border, and, with Medicare but no dental coverage, I go to Mexico to get my teeth cleaned. It costs $35; a lot less that in the US and is done quickly and thoroughly by a dentist. It costs everyone $35. If you have dental insurance (they take it), it costs $35. But say you need more – a filling, a crown, implants. Not only is it a lot cheaper than in the US but they can tell you exactly how much it is going to cost! A friend had several implants, and this cost thousands (but a fraction of the US cost); the point is they told her exactly what the cost would be up front. This, it turns out, is actually possible!

The article I cited at the beginning, from the Associated Press (and read by me in the Arizona Star, shout-out), quotes

‘Leigh Purvis, a pharma expert with AARP's research division, [who] said disclosure will help dispel a "cloak of darkness" around prices and encourage more informed discussions between patients and their doctors. But she cautioned against expecting too much.

‘"The overall idea of reducing drug prices is something for which there is no silver bullet," said Purvis. "This is just one step, one tool in what will have to be a very big arsenal."’]

She is right. I said it was a good step, worthy of praise, but it will not alone be enough to bring down drug prices. Or the cost of any of the health care we are regularly ripped off for. While the burden will continue, as always, to fall heaviest on those who can least afford it and have the greatest need, it is impacting everyone. Let’s start with letting Medicare negotiate drug prices. Let’s regulate insurance company profits. Let’s make everyone in the health industry post their prices.

Indeed, let’s have a universal, single-payer health system. #MedicareforAll!

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Breaking News: 

Lawsuit by 44 States Accuses Pharma Giants of 'Multi-Year Conspiracy' to Hike Drug Prices by Over 1,000%

Epi-Pen® and Predatory Pricing: You thought our health system was designed for people’s health?

Martin Shkreli, the former CEO of the drug company Turing, achieved his 15 minutes of fame (or infamy) last year through predatory pricing, raising the price of pyrimethamine, an old drug used to treat a parasitic infection in the brains of immune-compromised (usually HIV-infected) people from $13.50 to $750 a pill (Drug prices and corporate greed: there may be limits to our gullibility, September 27, 2015). Shkreli manage to further alienate people by his testimony before Congress, widely described using adjectives such as “smug” and “condescending”.  The most recent Pharma CEO to hit the news for price gouging, Heather Bresch of Mylan, seems to be trying to avoid Shkreli’s “doubling down” by making an apology, of sorts.

Bresch’s company, unquestionably with her active involvement, raised the price of Epi-Pen®, a self-injectable form of epinephrine that is sold to prevent people from dying from severe allergic (anaphylactic) reactions to a variety of substance, from peanuts to bee stings, from about $100 to $600 for a 2-pack. Two things: first, such pens are lifesavers. As a physician, when I tried to figure out what I needed to pack in an emergency first-aid kit for camping, it was #1. It was the only thing I could think of that actually could keep someone from dying in the woods. Second, epinephrine is an old, cheap drug. As ABC news reported, a doctor in Canada showed how a physician can prescribe a whole vial, plus small syringe and needle, for under $10, and a person can easily inject themselves, just under the skin. The “value” of the Epi-Pen is that it is self-injecting, but hard to even justify the $100. Or the somewhat higher cost of a generic (Mylan, indeed is a generic company.) Bresch, the daughter of a US Senator, was awarded an MBA by West Virginia University despite not finishing the coursework (which led to the resignation of the president). She protested that she wasn’t being predatory like Shkreli, and offered to sell the drug at a 50% discount, only $300! That is still a lot. I have a friend whose daughter is allergic to peanuts; both her day care centers require her to have a 2-pack of Epi-Pen®, with prescription (thus can’t do the epinephrine bottle) – this could cut her outlay from $1200 to $600. Of course, she will spend it to potentially save her daughter’s life, the key point that Mylan and Ms. Bresch understood when they raised the price. At more or less the same time, Ms. Bresch raised her own salary from a paltry less-than-$2 million a year to $18 million. I guess the rise in the price of Epi-Pen® funded that. MAD Magazine® used to do satire but its recent coverage of Epi-Pen® is almost investigative reporting (see picture).

Could it get worse? Sure, why not? Bresch’s father, Senator (and former Governor) Joe Manchin of West Virginia may or may not have been helpful to Mylan (it is, after all, a West Virginia company), but many politicians have been tied to helping drug companies make lots of money. Bill Moyers covers the role of Billy Tauzin, a former Congressman from Louisiana who chaired the House Energy and Commerce Committee when Congress passed the Medicare drug plan (Medicare Part D) under President G. W. Bush. That legislation prohibited Medicare from using its clout to negotiate lower drug prices. Tauzin left Congress in 2005 and became chief lobbyist for the Pharmaceutical Research and Manufacturers of America (PhRMA), converting his well-paid (by campaign donations) service while in Congress to a MUCH better-paid job lobbying his former colleagues. He is credited with having a major impact on the ACA, passed in 2010, ensuring its Pharma-friendly characteristics. And, to be sure, Tauzin, who left PhRMA after 5 years, was scarcely alone in pushing pharmaceutical industry interests in Congress, or in receiving big donations, as the Moyers piece documents. Congress appears to buy the idea that Pharma needs high prices for doing research and development (despite the fact that they spend many times their R&D budgets on marketing, and much of the basic research is done with government funding at universities) and that other countries’ restrictions on the prices of their drugs require them to charge Americans more. Of course, the real reason that pharmaceutical companies charge so much in the US is that they can get it. Whose interests is Congress working in when it does this? Not the American peoples’…

I recently discussed the fact that some large insurers (Aetna, United, Humana)  are leaving the health insurance exchange marketplace in some parts of the country because they are losing money (or, perhaps, just not making enough) because too many sick people and not enough healthy people are signing up, turning the insurance model on its head.  Although the ACA contains an individual mandate, lots of people with less money and/or fewer health needs are not signing up and paying the penalties, which are much less costly (if they are even “caught”). Of course, the ACA did not include a “public option”, which would have been much less costly, specifically to offer these insurers a competition-free field. This is discussed in detail by Princeton health economist Uwe Reinhardt in a JAMA Forum on August 25, 2016 “Why Are Private Health Insurers Losing Money on Obamacare?”. The reason comes down to the same one that has always been true, and that I discussed a number of years ago (October 20, 2009, Red, Blue, and Purple: The Math of Health Care Spending) – a small minority of people account for most health care costs. I have attached a graph from Reinhardt’s piece that makes the same point. And, although he explains the reason insurers lose money, Reinhardt does not excuse it. "If health care costs in the United States were lower, most people would probably agree that ill, low-income citizens should receive the needed health care that is available to better-off individuals. The problem is that our health system is in danger of pricing kindness out of our souls."

So we have both the greed of pharmaceutical companies and the greed of insurers. As discussed in many recent articles in the popular press, the bottom line is that the health benefit to Americans is at best a side effect of complex plans engineered to make profit. This perverted approach, almost unique to the US, has marginalized, bankrupted, and caused illness and death in many. This system doesn’t work for people. A fairly well-off couple caught in the bind of insurance costs is profiled by AP in its “The Big Story: “Without a subsidy, couple faces higher insurance premiums”. The husband notes the failure of our system to ensure that people’s health is a greater priority than corporate profit:  "Ultimately, it's clear that health care is not something that can be efficiently provided by the private sector. The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

Don McCanne, in his Quote of the Day,  provided that link on August 22. And then, on August 23, a profound and direct commentary from the editors of the Des Moines Register, “Editorial: Government should not rely on private insurers”:

“Americans’ access to health insurance should not depend on the profit margins, business dealings, or mergers of for-profit companies. Not in Medicare. Not in Medicaid. And not in exchanges created by health reform law. Instead of funneling tax dollars to private companies, government is better equipped to administer insurance. It is not beholden to stockholders. It does not seek to turn a profit. And it will not abandon the responsibility of providing health coverage to Americans.”

Professor Reinhardt and those editors are right. Our souls are certainly in jeopardy. And so are our pocketbooks. And so is our health.