Are you paying too much for your medicines? The headlines lately have been full of controversy about how politicians will try to lower high drug prices. But current prospects are looking grim. Everybody in Washington talks a good game. But, have you ever heard the phrase “Everybody complains about the weather, but nobody does anything about it”? The same thing could be said about plans to lower high drug prices.
“We’ll Save You Money” – Blah…Blah… Blah!
Politicians of almost every description have called for lower costs of critical medicines. And yet legislators of all stripes are happy to take big bucks from Big Pharma. According to OpenSecrets.org, Democrats received $14,555,547 from Pharmaceuticals / Health Products last year. Republicans took in $14,118,143.
The President promised to lower drug prices during his last election campaign. Instead, they have gone up. This reportedly makes him furious.
Big Dose of Bad News:
Last week there was a double dose of bad news on efforts to lower high drug prices. The administration came up with a plan to shame pharmaceutical companies into lowering their prices.
The idea was to force drug companies to include the list price of their costly prescription meds in television commercials. On May 8, 2019, Alex Azar, head of Health and Human Services (HHS) offered (“Remarks on Requiring List Prices in Drug Ads”):
“Putting prices in TV ads may be the most significant single step any administration has ever taken toward this very clear commitment: Patients have a right to know the price of the healthcare they receive, before they receive it.
“We believe today’s step on transparency will help make prices in healthcare work much more like they [sic] in any other market—not utterly uniform, but more predictable and more competitive.
“We’re moving from a system where patients are left in the dark to where patients are put in the driver’s seat. That’s the kind of healthcare system that will deliver the affordability Americans need, the options and control they want, and the quality they deserve.”
Still in the Dark!
Not surprisingly, drugmakers such as Merck, Eli Lilly and Amgen did not take kindly to the idea of such transparency. They went to court to avoid providing price information on prescription medications.
On July 8, 2019, a federal judge sided with these drug companies. He told Alex Azar and HHS that they could not require drug prices in prescription drug commercials. So much for transparency or putting patients in the driver’s seat.
More Bad News on Strategies to Lower High Drug Prices:
Alex Azar used to be a drug company executive before taking over as head of HHS. In his May 8, 2019, announcement about the administration’s “American Patients First prescription pricing blueprint,” he offered another idea:
“A related problem in today’s drug market is the system of drug rebates, which are passed around a labyrinthine drug pricing system rather than going directly to patients. In Medicare Part D, we’ve proposed replacing today’s system, which involved $29 billion in rebates last year, with a requirement that all negotiated drug discounts go to patients.
“This change will substantially diminish the incentive for sky-high list prices, making the new advertising rules that much more useful. List prices already matter to patients—but in a truly competitive drug market, without today’s broken rebate system, they’ll be even clearer signals.”
“1 : blocking the passage of radiant energy and especially light: exhibiting opacity
“2 a: hard to understand or explain b: OBTUSE, THICKHEADED”
We would describe the rebate system described above by Alex Azar of HHS as opaque. It is one of the most thickheaded boondoggles we have ever encountered. Even insiders have a hard time explaining how it works.
Pharmacy benefits managers (PBMs) are middlemen between drug companies and insurance companies and buyers of medications. Drug companies offer PBMs secretive rebates for negotiating deals. The PBMs retain a percentage of the rebate. Confused? We’re not surprised. It’s all very mysterious. Rarely do patients or pharmacies see any of the rebates.
Alex Azar’s plan was to do away with the opaque PBM rebates and/or discounts. This was supposed to lower drug prices and save Medicare patients billions of dollars. Then his bosses in the administration did a U-turn. They decided to keep the “broken” rebate “system” in place after all. Not surprisingly, pharmacy benefit managers and big insurance companies saw their stock prices go up after the announcement that the status quo was back.
Drug Companies Raise Drug Prices…Again!
Presumably, pharmaceutical firms could have stabilized or even lowered their drug prices. That is what President Trump asked them to do last year.
However, this year prices have risen on more than 3,000 medicines, with the increase averaging about 10.5 percent. That is roughly five times higher than the general rate of inflation.
Drug manufacturers raised the price on certain medications by triple digits; one form of fluoxetine (generic for Prozac) went up by 879 percent, according to reports from ArsTechnica, a technology news site. In addition, mometasone, a generic steroid cream, went up by 381 percent.
FDA Can’t Lower High Drug Prices:
While the US Food and Drug Administration regulates drugs, it does not regulate drug prices. As a result, Americans pay far more for their prescriptions than anyone else in the world. Prices for the same medications in Canada frequently cost just one third what they do in the US.
Where does that money go? Pharmaceutical firms frequently argue that it is essential for the research and development that must go into discovering new treatments. But we suspect a lot goes to marketing.
You can’t watch television without seeing slick and expensive prescription drug commercials. At last count, in 2016, there were over 700,000 TV commercials for prescription medications. In 2019, the tally is likely much higher.
Drug Prices Going UP-UP-UP!
Then there is the whole issue of profitability. Shareholders expect a healthy return on investment. The Motley Fool, an investment advice website, offers this forecast for 2019:
“More than $320 billion was spent on prescription drugs in the U.S. in 2016, a figure that’s expected to nearly double to $610 billion by 2021, according to IQVIA (formerly QuintilesIMS).
“With so much money being spent on necessary medicines, there’s serious opportunity for pharmaceutical companies and investors alike.”
Aging baby boomers are expected to take lots of medicines and turbocharge the industry’s profits.
Big Pharma Pays Its CEOs Handsomely:
In addition, pharmaceutical CEOs enjoy pretty impressive salaries. On May 26, 2019, the New York Times offered a table prepared by Equilar Figures based on 2018 remuneration. Total compensation packages, including stocks, options and perks, are breathtaking.
Here are a few examples: Leonard Schleifer, CEO of Regeneron Pharmaceuticals, gets $26,520,555 total. Miles White of Abbott Laboratories racked up $22,872,393 and Kenneth Frazier of Merck took home $20,934,504 in total. It is hard to imagine that paying a CEO $20 million (like AbbVie and Johnson & Johnson do) doesn’t impact drug pricing. Other executives and middle managers are also compensated handsomely.
The 2020 Election: Will Politicians Promise to Lower High Drug Prices…Again?
With the 2020 election campaign looming, Americans will be paying attention to proposals for controlling drug prices. There are reports that Health and Human Services Secretary, Alex Azar (a former pharmaceutical company executive), may reverse his long-standing opposition to consumers buying drugs from Canada. In the meantime, you can learn more about online Canadian pharmacies in our eGuide to Saving Money on Medicines in the Health Guide Section of www.PeoplesPharmacy.com.
Share your own thoughts about how to lower high drug prices in the comment section.