It may come as a surprise that as a pharmacist I am as mad as anyone about the ongoing trend of prescription drug price gouging. The real tragedy is that this gouging is often occurring with older prescription drugs for rare diseases that have limited manufacturer availability. It’s not that they can’t be made inexpensively; many of them previously were. It’s that they don’t turn an industry profit in their current old generic form, so they won’t be made.
The history of wildly fluctuating drug prices is something I have seen regularly during my 25-plus years in healthcare. How a drug price gets set in the U.S. is a complicated and often secretive task. Drug prices are determined by pharmaceutical companies, pharmaceutical benefit managers (PBMs), and by government negotiations. Any and all of these forces may be in play. How a drug price eventually is determined is an puzzle for most healthcare providers, pharmacists included. Most pharmacists have no authority or desire to set drug prices, and in fact, most healthcare providers are probably just as appalled as I am about the skyrocketing price tags.
In a perfect world, prescription drug prices should take into account these business costs:
- Research and development (R&D)
- Manufacturing costs, maintenance, and educational costs
- Advertising and marketing costs
- All coupled with a reasonable amount of profit for the manufacturer
But in the real world, drug pricing is considered proprietary information; transparency in the details of U.S. drug pricing is nonexistent.
Much of the recent finger pointing, such as what happened recently with Turing Pharmaceuticals’ drug Daraprim, is well-deserved. Daraprim is an old drug used for the same indications it’s always had, and there was nothing novel about it’s formulation. I understand that pharmaceutical industry does need to make a profit to fund the groundbreaking research that is occurring in many areas, such as hepatitis C and cancer. However, there are incentives for industry that need to be re-evaluated to help curb drugs prices that have gone out of control.
Orphan Drugs: In many of these sticker shock cases we are talking about orphan drugs – drugs that are used for treatment in rare disease states typically affecting less than 200,000 people in the U.S. A person with a rare disease for which limited treatment options exists is a vulnerable target. In addition, these orphan drugs may be decades old and have long lost their patent. Due to high maintenance cost and low numbers of patients with orphan conditions, these small molecule, old drugs often go by the wayside of generic manufacturers. Lonely orphan drugs are just waiting to be swallowed up by start-up pharma companies in need of quick cash. Payers, both government and private, get the brunt of the cost increases which are then passed on to employers and consumers through higher premiums, increased taxes, and bigger deductibles and copays. Developing a way to protect Orphan Drugs may a first step in preventing these outrageous charges.
Pay-for-Delay: This practice needs to be outlawed. In a nutshell, in pay-for-delay pharmaceutical companies are allowed to enact agreements with other (often generic) drug makers to keep cheaper versions of their brand name drugs off the market. A pay-for-delay deal can prevent generics from entering the market for up to 17 months, on average. Pay-for-delay was the scheme enacted between Pfizer and Ranbaxy Laboratories to keep the generic version of the cholesterol blockbuster Lipitor off of the market.
A 2014 report from the Federal Trade Commission highlighted 29 so-called pay-for-delay agreements involving 21 different brand-name drugs. It forces consumers to pay higher prices for drugs that have met their patent life and should now be developed generically. Pay-for-delay also keeps prices high for insurance companies or government who may also be footing the drug bill, which eventually gets passed along to consumers.
This practice mimics illegal price-fixing. Interestingly, distaste for this practice even crosses political party lines. According to Drug Topics, Senators Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa) recently reintroduced legislation to block this practice. Unfortunately, the bill, called “Preserve Access to Affordable Generics Act”, did not make it through Congress last year, which may come as no surprise.
6-Month Exclusivity for Generics: You’ve seen the headlines: “Your Drug Now Approved Generically”. Yet, when you get to the pharmacy and pick up your newly minted generic version, the bill has not dropped at all.
This is not an uncommon occurrence. A tactic known as “6-Month Exclusivity for Generics”, part of a rule under the 1984 Hatch-Waxman Act, allows the generic manufacturer who is the first to get the generic approval to have 180 days of market exclusivity. That’s right – no other generics are allowed on the market. Competition and a free market are squelched.
The Hatch-Waxman Act was originally enacted as an incentive to spur generic competition. So it’s no wonder that the drug price remains high, often not far from the price of the brand. In fact, Stanford University reports that in markets with a single generic drug maker, the generic price is roughly 94 percent that of the brand. Zolpidem (Ambien CR), fluoxetine (Prozac) and simvastatin (Zocor) are examples of drugs that have undergone 6-month exclusivity in the past.
Time For Action
Drug pricing in the U.S. is an extremely complicated topic and one that deserves thoughtful attention and deliberate action from policy and healthcare experts. New rules surrounding pharmaceutical industry “incentives” must be put into place to prevent families from juggling with catastrophic medical bills and failing health. It’s not surprising that this is what most Americans want – and frankly may demand – in the upcoming 2016 election.
Updated October 12, 2015
Leigh Anderson, PharmD