Rising Drug Prices: What's Behind Them?

The rising prices of many prescription drugs have been the subject of Congressional hearings, the target of reform groups, and a constant source of alarm for physicians.

In a panel discussion this morning at the American College of Physicians Internal Medicine Meeting (ACP 2017) San Diego, California, physicians including a pharma industry defender debated strategies to curb these costs.

“Despite the headlines and the hearings, prices keep rising,” said panel moderator Robert Doherty, the ACP’s Senior Vice President of Governmental Affairs and Public Policy. “We’re seeing crippling drug costs,” he said.

Among the suggestions: have the federal government manufacture all generics for which patents have expired. (Not likely they agreed.)

Have the government buy the companies that make direct acting antivirals for hepatitis C. (Two panelists that that could work.)

There was agreement that prices seem to be rising at unsustainable rates.

Those include increases in generic drugs, like the common antibiotic erythromycin, insulin, adrenaline injectors, and other once inexpensive drugs—as well as certain drugs where high prices are justified, such as ones for rare diseases that were expensive to develop but have a small market.

The panelists focused on possible ways to rein in costs.

The ACP favors more negotiation on drug prices between manufacturers and third-party payers—though panelists pointed out that it is the major pharmacy benefits managers that are already doing much of that negotiating and not disclosing what prices they have agreed upon.

More transparency is needed, the ACP holds.

Panelists appeared to agree that there would be lower prices if there were more competition among generics. One problem is that the US Food and Drug Administration has a huge backlog of generic candidates awaiting approvals.

If steps are taken to help the FDA do that, prices for many drugs where patents have expired should face competition and price wars. It takes about a dozen generic competitors for a drug price to drop to 10% of the price of the original brand-name product, said Michael Ybarra, MD, an emergency medicine physician who also consults for pharma.

A related FDA issue is that while the price of insulin is rising dramatically for a drug that has been around for decades, under FDA rules there can be no generic insulin because insulin is a biologic. All favored finding a way to change that situation.

John Rother, John Rother, JD, President and CEO of the National Coalition on Health Care said policy makers are floating the idea of system where pharma manufacturers do not have the final say in what drugs cost.

In Germany, he said, manufacturers set the price of newly introduced pharmaceuticals for one year. “After that they are paid for value, for what works.” An independent board decides what the price should be based on how effective a product is, and the private insurers agree to pay that price.

The concept is similar to the pay-for-performance metrics that physicians are increasingly subject to, he said.

Other factors driving US drug prices are that in addition to lack of price controls, patents last longer than in other countries, older generics may have been underpriced and were never profitable, and that drug companies spend a hefty share of drug prices on sales and marketing.

The panelists disagreed on whether some high prices are justified, such as the annual cost of direct acting antivirals for hepatitis C, which they said was as much as $100,000 per patient for a full course of treatment. That price is justified compared to the lifetime costs of care for such a patient, Ybarra said.

Similar benefits are seen in treating heart failure patients with drugs that keep them out of the hospital, he noted.

He agreed with panelists that direct-to-consumer advertising can make physicians’ jobs harder when patients request brand-name drugs because they have seen them on television.

“I’m not the most popular person in the room today, but DTC is clearly an issue and no one likes this advertising,” he said.

Ybarra defended pharma saying “These companies are for-profit and the do make money, clearly,” but they also come up with effective products. “There have been important advances that we want to have to offer our patients options,” Ybarra said, “I’m thinking of a 91-year-old man with melanoma who had complete remission, President Carter.” Pharma made that possible, he said.

Samuel Nussbaum, MD, an endocrinologist and former executive vice president and chief medical officer for Anthem, said there have been “breath-taking advances in understanding molecular markers that have advanced disease treatment,” but that “affordability is still a paramount issue.”

It’s the best of times and the worst of times, he said, borrowing from Dickens. Prices are sky-high but new products continue to amaze.

“Think back on what we’ve seen-- statins, antivirals for HIV, improved cancer survival,” he said.

People want those successes but they also want to be able to afford them.

“We need to sit together and solve this,” Nussbaum said.