Why do we pay outrageous prices for common drugs?
This question is on everyone’s mind and has spurred a flurry of bills and proposals to tackle the issue. The problem is multi-pronged with questionable negotiations, obscure reimbursement schemes, and controversial rebate deals poisoning a supply chain that financially rewards some players at the expense of patients.
For additional information on challenges and potential solutions, check out the nonpartisan organization, National Academy for State Health Policy.
Video Spotlight: Here’s Why Drug Prices Are So High
This post is based on the Washington Post article, Why Prescription Drug Prices Have Skyrocketed – and Why the Government Needs to Take Action, by R. Feldman, November 26, 2018; and the YouTube video, Here’s Why Drug Prices Are So High, by CNN Business, April 24, 2018. Image source: Fancy/Veer/Corbis/Getty Images.
1. According to the Washington Post article, what are some of the reasons for high drug prices?
Guidance: A few of the reasons include a system that favors more expensive drugs over cheaper ones; increased demand through Medicare prescription drug coverage; drug companies that artificially inflate discounts with higher prices; health plan structures that allow for some payments at list prices; rebates to providers; obscure fees; stifled competition; suppressed access to generic drugs; and manipulation of patent rights.
2. How can drug companies extend the patent rights for certain drugs? Provide examples.
Guidance: Review the product life cycle. Discuss the common design principles of giving “new life” to an established product with declining market share and repurposing the drug with an expansion of service offerings.
For example, Humira was first developed to treat patients with rheumatoid arthritis. Now, it is also marketed and used to treat juvenile idiopathic arthritis, psoriatic arthritis, plaque psoriasis, Crohn’s disease, and ulcerative colitis.
3. Effective supplier management often involves viewing and treating a few suppliers as partners. How does it work in the drug supply chain?
Guidance: Review the players in the drug supply chain: manufacturers, PBMs, healthcare providers, pharmacists, and payers (patients, government, private insurers).
Treating suppliers as partners financially benefits all players, except patients and Medicare/Medicaid. One might argue that patients benefit from R&D and new drugs, but financially, the system rewards manufacturers, PBMs, private insurers working with PBMs, and healthcare providers. Note: most pharmacists are not part of the schemes described in the article.
4. Identify some bills/solutions that have been proposed. Can you foresee some obstacles?
Guidance: Solutions include anti-gag clauses allowing pharmacists to inform patients about cost-saving options (Know the Lowest Price Act and Patient Right to Know Drug Prices Act); aligning Medicare drug payments with international prices which are lower; paying doctors a flat fee for prescribing medicine, irrespective of the price of the drug; allowing vendors to negotiate drug prices; and make PBMs’ practices more transparent.
Examples of obstacles include the powerful drug lobby, the strong impact of direct-to-consumer advertising, and loopholes. This may also lead to a discussion of whether it is ethical to pay doctors to prescribe medicine.