After an eventful 2019, it’s fair to say the drug pricing debate has taken a backseat in 2020 as the health industry has collectively focused its efforts to overcome a devastating pandemic. But to suggest consumers have forgotten about the issue is inaccurate. In fact, a number of recent surveys show that drug pricing is very much a prominent issue in the minds of many.
West Health Institute, a family of nonprofit organizations focused on seniors and lowering health care costs, found that 9 in 10 U.S. adults are “very” (55 percent) or “somewhat” (33 percent) concerned that the pharmaceutical industry will leverage the COVID-19 pandemic to raise drug prices. Another survey from Commonwealth Fund found that more than 90 percent of adults 18 and older said COVID-19 testing and treatment should be available to all Americans free of charge. A survey from Data for Progress found that over 70 percent of voters prefer a candidate who supports making COVID-19 treatments and vaccines free to everybody.
“When we look at our survey results during the pandemic, the level of concern from the populous where prices are now, what that means in terms of their ability to access care, and the further potential for this situation to deteriorate, it’s all polled in a way that suggests there are very real concerns. There have been before, but the concern has increased substantially since COVID,” says Tim Lash, chief strategy officer at West Health.
The price has gone up
It should be no surprise to health care CEOs that this remains top of mind for the American consumer. According to a study published in JAMA earlier this year, the net cost of prescription drugs — meaning sticker price minus manufacturer discounts — rose over three times faster than the rate of inflation over the course of a decade. Inmaculada Hernandez, PharmD, assistant professor of pharmacy at the University of Pittsburgh School of Pharmacy, was a lead author on the study. She says one of the main takeaways from this research is drug prices are going up because of a lack of competition. “Insulin has increased 10 percent year over year, sometimes more, and that doesn’t mean that it’s 10 percent more effective. It’s just means the market doesn’t have many other options,” she says.
A major factor in the cost of drugs, experts say, are the middlemen. Pharmacy benefit managers (PBMs), which operate as a third party in the process of bringing drugs to market, are often at the center of policy scorn. “When you understand who is in between the source of the drug and where it gets dispensed, there are a number of hands in the cookie jar that are basically building the price up to where it is today,” says Thomas Borzilleri, CEO of InteliSys Health, which offers a “real-time” prescription transparency platform.
Thomas Goetz, Chief of Research for GoodRx, a website that helps patients get discounts on drugs, says the company did research and found the price of drugs has increased more than any other commodity or service. They also have done research on insurance coverage of drugs. “What we found is the volume of drugs covered has shrunk from about 75 percent of drugs listed to about 50 percent drugs listed by a typical Medicare plan,” he says.
The issue has been at the forefront of policy discussion thanks in part to the White House and federal government. Not only was lowering drug pricing a campaign promise of President Trump, but it’s one area that he’s aimed to take on, albeit without any bipartisan legislation.
A few weeks ago, Trump signed three executive orders and announced a fourth one that were meant to lower the cost of prescription drugs. In a previous article, Health Evolution talked to a number of drug pricing experts who said shared skepticism about three of the rules, although they said the fourth one could ultimately be effective.
H.R.3 and other proposals
The good news is there have been a number of legislative proposals to lower the costs of prescription drugs. The bad news is none of them have passed and it’s unlikely that anything will advance to the President’s desk in an election year.
Most notably, the House passed the Elijah E. Cummings Lower Drug Costs Now Act (H.R.3), which was introduced and championed by prominent Democratic Congressmen, including Speaker of the House Nancy Pelosi (D-California). While the act stalled in the Republican-controlled Senate, many drug pricing experts have advocated for some of its policies, including the provision that would enable Medicare to negotiate the price of the top 250 drugs that have little competition. Research from Kaiser Family Foundation found that Medicare accounts for 30% of prescription drug pricing.
“Considering 50 percent of people are on some kind of government-based insurance in a COVID scenario, that’s a lot of negotiating power that’s not being brought to bear,” Goetz says. Lash adds that there needs to be a natural negotiation between the manufacturer and the payer to arrive on the value of the therapeutic. “Everyone is entitled to a fair profit but not necessarily to disproportionate returns on the backs of Americans,” he says.
The state-level action of drug pricing might be the best marker of how drug pricing can be aggressive, experts say. For instance, a bill in Kentucky passed that would require Department for Medicaid Services to directly administer PBMs. There was a similar bill that passed in Ohio. Some experts say the 340B Drug Pricing Program and Medicaid Drug Rebate Rule needs to be reformed to cut back on how much PBMs take in profit, whereas others say that doing so would increase insurance premiums.
One popular proposal is the creation of either a domestic or international (which Trump proposed in one of his executive orders) reference pricing index that can help determine the cost of both established and new treatments, compared to the cost of similar drugs at home and overseas.
Hernandez, who says that H.R.3. has some interesting concepts and could be effective, is also an advocate for the international reference pricing. She says it’s been used effectively in Europe, but she and others are skeptical anything will get done here in America because of the power of the pharmaceutical lobby. Borzilleri agrees and says it goes even further.
“There could be a legislative remedy but what kind of pushback would you get at the end day? You’ve got lobbyists that represent pharmacies. You’ve got lobbyists that represent drug manufacturer companies. You’ve got lobbyists that represent insurance companies. You’ve got all these lobbyists and they’re all jockeying for position and you can’t address the entire market at one time,” Borzilleri says.
