By Martin Burruano, R.Ph., Vice President, Pharmacy, Independent Health
Prescription drug prices continue to skyrocket. National health expenditure data shows the U.S. spent $333 billion on prescription drugs in 2017, up 40 percent from $236 billion in 2007. Without significant action, that unsustainable trend will continue, with prescription drugs representing an increasingly larger portion of the nation’s overall health spending, negatively impacting employers’ ability to offer affordable employee benefits.
Kaiser Family Foundation research shows one in four Americans report difficulty affording their medications due to costs, and many patients forego prescribed medications altogether, putting their health – and lives – at risk.
The Trump administration has made lowering drugs prices a priority, and both the Democrat-controlled House of Representatives and the Republican-led Senate are holding hearings targeting the pharmaceutical industry over rising costs. We applaud our elected officials for their bi-partisan efforts to put the brakes on what has become a runaway train.
A $375,000 Drug
Big Pharma is focusing much of its attention on extremely high-cost specialty drugs. In fact, most FDA approvals are for drugs to treat complex and uncommon chronic diseases. One example is Firdapse, a drug used for patients with Lambert-Eaton Myasthenic Syndrome (LEMS), a rare autoimmune disorder.
Catalyst Pharmaceuticals, maker of Firdapse, recently defended its decision to charge $375,000 for the drug citing expenses tied to research and development. This cost is not only outrageous, but their R&D claim doesn’t hold water either, as the drug has been approved and available in Europe and other countries for more than five years.
The increased spending on pharmaceuticals is only partially driven by new expensive specialty drugs entering the market. Research demonstrates a majority of the increase is due to older, existing drugs, including generics. Reuters news agency reports drug makers are expected to raise prices on as many as 250 drugs in 2019.
Drug price increases 70% overnight
Egalet, a small pharmaceutical company, raised the list price of its pain reliever and anti-inflammatory drug, Zorvolex, by 70 percent. A 90-pill bottle of Zorvolex now has a price tag of $650, compared with $383 a year ago. The drug does not generate a lot of relative sales, but the move is indicative of the pricing power drug companies still have, especially when drugs change ownership. The 70-percent price hike went into effect Feb. 1, the day after Egalet completed its acquisition of Iroko Pharmaceuticals, the company that previously owned Zorvolex.
What can be done to control costs?
The President’s recent proposal to eliminate rebates would be a step in the right direction, but needs to go further to ensure the lowering of drug prices.
Rebates, when they are attributed to premiums, have shown the potential to lower costs for beneficiaries. However, they have not led to a decrease in list prices, as originally intended.
In fact, a June 2018 HHS report found rebates have actually encouraged higher prices, adding to the need for oversight safeguards and disclosure requirements. If rebates are eliminated, we recommend the establishment of an oversight body with the authority to ensure, or at a minimum to determine, equivalent discounts.
Applying a formulary driven by value, rather than on rebates and revenue, emphasizes the use of therapeutically equivalent generics and/or brand drugs that cost less. This means employers and their employees receive the most clinically effective prescription drug at the most cost-effective price.
At Independent Health, we have our own PBM, Pharmacy Benefit Dimensions, which handles nearly 40 percent of all insured prescription transactions in Western New York. Unlike most national PBMs, Pharmacy Benefit Dimensions utilizes a clinically driven, value-based formulary, determined by a committee comprised of community physicians and pharmacists, which helps ensure formulary decisions are based on clinical effectiveness, safety, need, and value.
Our clinically based formulary and the elimination of the middleman as a result of owning our own PBM has resulted in the ability to lower clients’ pharmacy costs by up to 30 percent the first year.
Greater transparency in drug pricing can shed light on what factors into the cost of drugs and encourage more competition between drug manufacturers including those making generics.
With pharmaceutical companies continuing to arbitrarily increase prices, and most PBMs profiting from this, the cost of prescription drugs has no limits. The need for action to increase transparency on the various levers within the industry is critical.