No End in Sight – Soaring Drug Prices Continue to Burden Consumers

It’s a well-publicized issue in an election year, so it’s no surprise that lawmakers — including several presidential candidates — have been teeing off on soaring drug prices.
“Americans pay, by far, the highest prices for prescription drugs in the entire world,” Bernie Sanders recently noted. “A life-saving drug does no good if the people who need it cannot afford that drug.”
He pointed out that nearly one in five Americans between ages 19 and 64 did not get at least one prescription filled last year because they did not have enough money.
“There is no question that medicines help millions of people live healthier and longer lives, and can also prevent more expensive illnesses and treatments,” Sanders continued. “However, it is unacceptable that the United States now spends more than $370 billion on prescription drugs, and spending is rising faster than at any point in the last decade.”
Rising drug prices are having tangible effects on consumers, including those in Massachusetts. Blue Cross Blue Shield of Massachusetts, the state’s biggest commercial insurer will hike premiums by an average of 5{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} this year, while rates will also rise between 3{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} and 7{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} at Tufts Health Plan, 6{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 12{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} at Harvard Pilgrim Health Care, and 9.5{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} on average at Fallon Health, according to the Boston Globe. There are other reasons behind the increases, including the cost of expanding coverage under the Affordable Care Act, but drug prices are universally cited as a driving factor.
Meanwhile, even amid ever-louder complaints from lawmakers and the media, Pfizer, Amgen, Allergan, Horizon Pharma, and other manufacturers have raised U.S. prices for dozens of branded drugs since late December, with many of the increases between 9{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} and 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}, according to the Wall Street Journal. Overall, prescription-drug spending rose 12.2{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} in 2014, after just 2.4{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} growth in 2013, the Centers for Medicare and Medicaid Services reported.
What’s happening?
There are a number of factors at play, ranging from the fact that the U.S. government doesn’t regulate drug prices to rising development and production costs; it can take more a decade and more than $1 billion to get a new drug approved. Still, there’s plenty of opportunity, industry critics say, to bring relief to patients.
“Their argument is we can — we can raise prices on this, the market will bear it, people like this drug, they rely on it, their physician will write it,” Marco Rubio recently told an audience on a campaign stop, blasting drug companies. “And so, because we can, we do. And it’s just pure profiteering.”

Exploiting the System
Dr. Peter Bach, a physician and director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, recently explained in the New York Times that drug manufacturers are hamstrung by the complexity of biology, government regulations, and shareholder expectations for high profit margins.
What they’re not saying, he went on, is that they take advantage of laws that force insurers to include virtually all expensive drugs in their policies, and an industry philosophy that demands that every new healthcare product be available to everyone — no matter its cost or how little it actually helps.
In late 2014, the New England Journal of Medicine detailed a number of ways drug companies take advantage of this system. For instance, they buy up the rights to inexpensive generic drugs, lock out competitors, and raise prices. In one example, albendazole, a drug used to treat certain kinds of parasitic infection, was approved 20 years ago and, as recently as 2010, had a wholesale cost of $5.92 per day. Three years later, it was $119.58.
“Many of these drugs remain key therapeutic tools. The number of prescriptions for albendazole has increased dramatically in part because the drug has increasingly been used to treat parasitic infections in refugees,” explained the report’s authors, Drs. Jonathan Alpern, William Stauffer, and Aaron Kesselheim.
“The Centers for Disease Control and Prevention recommends presumptive treatment of refugees arriving in the U.S. if they have not had prior treatment,” they went on. “Because the people who need albendazole are generally disadvantaged, the costs resulting from the enhanced demand and associated price increases are largely borne by the patients themselves through substantial out-of-pocket payments or by taxpayers through public insurers such as Medicaid and the Refugee Medical Assistance program.”
The albendazole situation is hardly unique, they added. “It is well-known that new, brand-name drugs are often expensive, but U.S. healthcare is also witnessing a lesser-known but growing and seemingly paradoxical phenomenon: certain older drugs, many of which are generic and not protected by patents or market exclusivity, are now also extremely expensive.”
For example, the price of captopril, which is used for hypertension and heart failure, increased by more than 2,800{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} between November 2012 and November 2013, from 1.4 cents to 39.9 cents per pill. Similarly, the price of clomipramine, an antidepressant also used for obsessive-compulsive disorder, increased from 22 cents to $8.32 per pill, and the price of doxycycline hyclate, a broad-spectrum antibiotic introduced in 1967, increased from 6.3 cents to $3.36 per pill.
The practice infuriated a number of U.S. lawmakers, who teed off on drug companies last month during a session of the Senate Special Committee on Aging.
“I find it so disturbing and unconscionable that a company would buy up a decades-old drug that it had no role in developing … and then would hike up the price to such egregious levels that it’s having an impact on patient care,” said U.S. Sen. Susan Collins, who chairs the committee.
Solutions have been difficult to come by, but Bach suggests one: what if insurance companies weren’t required to cover all drugs? He explained that, in Europe, many countries reject a handful of drugs each year based on their high cost and relatively low effectiveness — so companies are forced to offer their products at attractice prices.
As a result, prices in Europe for prescription drugs are typically 50{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} below what U.S. consumers pay. The pharmaceutical industry might argue, he went on, that drug spending accounts for just 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of all healthcare spending, but that equals around $300 billion per year.
And those costs are being passed on to patients. The Wall Street Journal noted that Lilly’s drug Cyramza will cost the average Medicare patient $2,600 per month without supplemental insurance — more than most Medicare-age people earn each month, before taxes.
It would make sense, Bach argued, to do one of two things: free insurers and government programs from the requirement to include all expensive drugs in their plans, or demand that policymakers set drug prices in the U.S. equal to those seen in Europe. “Either approach would be vastly superior to the situation we have today.”

Profit Motive
Joseph Gulfo, executive director of the Rothman Institute of Innovation and Entrepreneurship at Fairleigh Dickinson University, wrote in the Wall Street Journal recently that, quite simply, drug prices drive profits on Wall Street, and both investors and drug companies benefit.
“The system needs investors to be happy so that they continue to fund research and development activities by investing in smaller biotech companies and by being bullish on big biopharma, which then acquires the smaller companies outright, or licenses their successful programs,” he explained. “Investors are happy when earnings estimates are met or exceeded, and drug-price increases have been responsible for this.”
A better way, he argued, is to remove as much uncertainty as possible out of the research and development game, including a streamlining of the FDA’s role in approving new drugs, a process that currently takes too long and depresses the number of new products being developed.
“Americans have two choices: accept rising drug prices to sustain investment in private-sector research and development, or return the FDA to its proper role of adjudicating safety and effectiveness so that the medical ecosystem can select the most clinically beneficial products. The latter will benefit more patients and reduce drug prices,” he argued. “It seems to be an easy choice.”
The New England Journal of Medicine report offered another strategy for bringing prices under control. The authors suggest that substantial increases in the price of an unpatented drug could trigger the FDA to issue a public announcement seeking other manufacturers for generic versions of the product. Companies responding to such a request could receive expedited reviews of their manufacturing processes, and generic-drug user fees could be waived to further increase incentives for potential competitors.
“Entry into the market of more generics manufacturers should increase competition and reduce prices,” they wrote. “Of course, other players along the drug-distribution chain, such as wholesalers or pharmacies, may also contribute to price markups, and further investigation is needed into the relative contribution of these different actors to the high prices of drugs such as albendazole.”
Meanwhile, they concede, there is little that consumers can do.
“Some patients seek to acquire these drugs in other countries, since many of them are widely and inexpensively available outside the U.S., but such foreign sources may be of variable quality. Until regulatory and market solutions are implemented to reduce prices for these older drugs, patients requiring such drugs and the physicians treating them will continue to be faced with difficult choices.”