High Drug Costs are a Major Health Threat

By SAM URETSKY

The first clinical use of penicillin was in 1942, on a patient who suffered from streptococcal septicemia. In 1945 the Nobel Prize in Medicine was awarded to Fleming, for his discovery of penicillin, and to Florey and Chain for their research into the proper way to administer the new drug. The discovery and development of penicillin was the start of a new era in medical care, as herbalism gave way to chemistry.

While pharmaceutical science made tremendous progress in the decades after the end of World War II, it was matched by marketing advances and industry growth. In December 1959, the Senate Judiciary Antitrust and Monopoly Subcommittee, headed by Sen. Estes Kefauver (D-Tenn.), began an investigation of administered prices in the drug industry.

There are a number of different definitions of “administered prices,” but in this context, they were prices set without regard to supply and demand by a few large companies holding a large share of a market. The basis for these investigations was a 1957 report indicating that state and federal agencies throughout the country were receiving an improbable number of identical bids for polio vaccine, without evident regard for the number of doses ordered or the expected laws of supply and demand. Kefauver made the point that the drug industry is unique, because the physician decides what product to buy, but has no direct concern about price, while the patient had no choice in what to buy.

The Congressional hearings didn’t lead to much in the way of legislation, but subsequent reports on pricing led to state by state laws calling for generic dispensing and Medicaid formularies. According to a study conducted by Pew Research for the National Conference of State Legislatures, more than half of Americans use prescription drugs, which represent 10% of US healthcare spending. Although 86% of prescriptions filled now are generics, branded products account for 66% of spending.

The states have worked together to keep costs down, including requiring generic dispensing, multi-state purchasing plans, drug utilization reviews, state formularies, and fixed fees for pharmacists – but these economies only apply to Medicaid. When Congress passed the Medicare Part D legislation, which accounts for 29% of retail prescription drug sales, the government was prohibited from negotiating directly with drug manufacturers on behalf of Medicare Part D enrollees.

Allowing the federal government to negotiate drug prices for Medicare beneficiaries is supported by 92% of the public, including Democrats (96%), Republicans (92%), and Independents (92%).

The past methods of cost control no longer apply, in part because of costly new drugs that are patent protected, such as the treatment for hepatitis C. Hepatitis C can be fatal, but newer drug combinations can cure. But, the two-drug combination, Harvoni® costs $95,500. Since the Centers for Disease Control (CDC) estimates that 3.5 million Americans have hepatitis C, treatment with Harvoni® would cost $331billion, which is more than the nation’s total drug spending in 2013.

Another factor in drug price control is that generic dispensing relies on competition to keep prices down. Since low prices cut into profitability, some generic manufacturers withdrew from the market. These were the circumstances which allowed Martin Shkreli to gain control of pyrimethamine (Daraprim®) and raise the price from $13.50 to $750 per tablet.

While the price increase was grounds for outrage, the increase was completely legal, and is still the price of the drug. Mr. Shkreli was convicted of stock fraud, unrelated to his price gouging.

Populist Trump, running for President, promised to lower drug costs by negotiating with the drug manufacturers – although, as noted, this is prohibited by Congress. During the campaign he said that anyone who opposed this plan was in the pockets of the drug companies. This appears to be true. When he announced his plan, it excluded both negotiating prices and having the government set prices as many other nations do. The web site Drugwatch reported that drug prices outside the United States were, on the average, 56% lower than in the United States.

It’s not clear what steps the Trump administration will take to reduce costs, although, from the rise in drug company stock prices, it appears that there are no plans to put the business up for bids. The best anybody seems to guess is that the president will ask the pharma corporations to raise their prices to other nations so that they would have some extra cash to cut prices to the United States. Meanwhile, the pharma corporations have explained that they charge higher prices in the United States because it’s the only nation that allows them to set the prices, and the only nation rich enough to pay their prices.

The fact is drug costs are a problem in the US, and a crisis through most of the world. A Commonwealth Fund study reported “In a 2016 international survey of adults, 14% of insured Americans reported that, in the past year, they did not fill a prescription or skipped doses of medicine because of the cost, compared with 2% in the UK and 10% in Canada, the nation with the highest rate after the US. Among Americans without continuous insurance coverage over the past year … one-third reported they did not fill a prescription for medicine, or skipped doses of medicine, because of the cost.”

Dave Ricks, the CEO of Eli Lilly, said “There needs to be real changes…There’s no reason why consumers should be paying much more for their medications than they do other health products because medications are the most efficient part of the system, in our eyes. We’d like to see real change there.” A centralized health insurance plan might be the best answer. What we need is an affordable care act.

Sam Uretsky is a writer and pharmacist living in New York. Email sdu01@outlook.com.

From The Progressive Populist, June 15, 2018

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