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The cost of care: Surging drug prices in the physician spotlight
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Skyrocketing drug prices have recently been highlighted in national news stories, due in part to several drug products used to treat infectious diseases. In particular, drug products that have soared 1,000% or more within several days have caught the attention of journalists and the medical community alike.
Daraprim (pyrimethamine, Turing Pharmaceuticals) and Albenza (albendazole, Amedra Pharmaceuticals) have recently been highlighted in the press and medical literature. Both drugs are costly and unavailable as a generic product: pyrimethamine at $900 per 25-mg tablet and albendazole at $122 per 200-mg tablet (average whole prices). Pyrimethamine is labeled for use in treating toxoplasmosis, while albendazole is labeled for use as an anthelmintic to treat various parasitic infectious diseases.
While both agents were originally labeled for use by the FDA more than 20 years ago, the prices for both have risen by 2,000% to 6,000% within the past few years when they were newly acquired by pharmaceutical manufacturers. Significant price hikes have occurred for several older drugs as well. Among other reasons, pharmaceutical manufacturers have recently raised prices for these drugs many-fold because little, or no, competition exists with their product.
Can health care professionals and our patients respond to these drug price spikes in a meaningful way?
Understanding drug pricing and economics
Drug prices and the economics of drug-product pricing and availability have come under heightened scrutiny within recent years due to changes in health care policy from implementation of the Affordable Care Act (ACA), pharmaceutical company mergers, the upcoming presidential election and its focus upon health care costs, among other factors. How the price of a drug product is determined and how this price affects our patients and third-party payers is very complex and not well-known outside of the product’s manufacturer (see Parker-Lue 2015 for a more in-depth analysis).
In some respects, drug products can be viewed similarly as other market place commodities that the public purchases, in that shopping for the best price can be helpful and the manufacturers strive to make a profit for the company and its shareholders. In other respects, however, drug products can be viewed differently — they improve our health and may allow us to live longer, more productive lives.
Some drug products may be essential to a person’s life. In this respect, drug-product availability to the public and its price, which may limit availability to segments of the population, then assumes an ethical characteristic. Data from various surveys have demonstrated that up to 40% of patients will reduce medication adherence to save money on high drug costs, by not filling prescribed medications, skipping doses, cutting tablets in size to create more doses, or substituting less expensive over-the-counter drug products for prescription products.
A drug-pricing strategy that is increasingly recognized and scrutinized is differential pricing — variations in drug-product pricing by country as reflected by the country’s wealth. For example, some drug prices in the United States have been criticized for being significantly greater than in other countries. Other pricing strategies may potentially reduce drug prices, including governmental price controls and national drug formularies as enacted in other major developed countries, reference pricing (a single reimbursement price for a drug class), or value-based pricing (price established by the value to the customer, or patient).
Drug patents and exclusive marketing
Factors affecting drug prices include length of drug-product patents, generic product availability and bargaining power by government and insurance payers. The length of a patent extended to a developed drug product is 20 years. However, when this period begins and its relationship to when the drug product is commercially available to the public is not straightforward.
A drug patent is granted at some time during drug development, and most commonly precedes its FDA labeling and availability. The term “exclusivity” is used to describe exclusive marketing rights for a specified time period by the drug-product developer once the drug product is available. The federal government aims to strike a balance between innovative, commercial drug development and generic drug-product development; a balance between drug-manufacturer profitability and innovation and reduction in drug prices to promote availability to the public. As may be imagined, this process becomes competitive and very complex.
Prices for generic drugs do not decrease substantially until more than one generic drug product is available, and generally, the greater the number of generic drug products available for a specific drug, the lower the price. The first generic drug manufacturer to offer a generic drug product is allowed to solely market the product for 180 days, and thus the first generic drug-product price often is not significantly less than the brand name product.
Some older drug products that are currently available only as one generic product have recently been criticized as inappropriately expensive, often with very steep price increases applied within a short time period. Approximately 80% of prescription medications prescribed in the U.S. are dispensed as generic products. To maximize profits, some pharmaceutical manufacturers may employ tactics to reduce generic-product availability, such as “pay-for-delay” (pharmaceutical manufacturers paying generic makers to suspend generic-product availability) or development of very clinically similar drug products (eg, active enantiomer drug products) when a drug product patent or exclusivity is nearing its end.
The actual “list price” of a drug product is ill-defined and complex, and depends largely upon who is purchasing the product, such as health insurance payers, pharmaceutical benefit managers, federal or state government programs, or cash-paying patients (a small minority). Pharmaceutical manufacturers often set prices differently based upon payer bargaining power. Federal government programs have been criticized lately for insufficient bargaining power to force lower drug prices, and this topic is now entering presidential race politics. Medicare is forbidden from negotiating lower drug prices by current law. Because of these characteristics (third-party payer source, and for some drugs, lack of product competition), pricing of drug products is unique when compared with other commodities.
Pharmaceutical manufacturers set the “list price” of a drug high for some products simply because they are able to; no regulation prevents this, there may be no competition for a drug product (eg, a unique drug indication or treatment, or no generic product availability), and economic market forces that may apply to other products are not relevant. Several examples of high-priced drugs include Kalydeco (ivacaftor, Vertex Pharmaceuticals), labeled for use in treating cystic fibrosis, and Naglazyme (galsulfase, BioMarin Pharmaceuticals), to treat Maroteaux-Lamy syndrome, both with an annual cost of $300,000. Numerous other drug products with annual “list prices” of more than $50,000 are available.
The pharmaceutical industry maintains that overall drug-product prices are not high relative to other valued commodities, and provide significant — often lifesaving — value. The industry argues that most prescription medications dispensed in the U.S. are generic products, research and development costs (mostly for the cost of clinical trials) for innovative, effective drugs are high and must be recouped, and that patient-assistance programs are available to the public who cannot afford some medications. Effective drugs that offer a substantial clinical and societal value merit a high price, according to the pharmaceutical industry. Others counter that research and development costs for developing new drugs are greatly overstated by pharmaceutical manufacturers, and that the price of manufacturing a drug product is far less than reflected by high drug prices.
What health care practitioners and patients can do
Within the past several years, the topic of drug-product pricing has been given increased attention. Senate committee hearings addressing drug prices are in progress, and it has been heavily discussed in the recent presidential candidate debate politics. Some published data indicate that physicians and other prescribers are not familiar with drug-product prices. Some have recommended that prescribers strive to become familiar with drug prices, and utilize specific drug products that are clinically similar and therapeutically effective, but with lower costs.
Does a new, often expensive, drug product offer a significant therapeutic advantage over an older drug product within the same therapeutic class? What will the patient’s out-of-pocket costs be for the drug product, and is the patient able to afford these costs? What is the cost to the health care system for the drug? These are important questions to consider.
Patients may have some leverage as well. Patients can benefit from price-shopping for specific drug products. A recent Consumer Reports survey of five different drug-product price comparisons at more than 200 national pharmacies found that prices varied significantly. For example, a 30-day supply of montelukast varied from $8 to $200. A lower price for some drug products may be offered to the patient simply by asking at the pharmacy, as found in this survey.
Similar to the prices of many new, and older, drug products, attention and focus upon drug-product pricing is rising. Some drug products that were until recently available for only several dollars, and some new innovative drug products that are priced for many thousands of dollars, are forcing this focused attention. The economics surrounding drug-product pricing is unique and ill-defined. Drug products with tremendous positive impacts upon disease treatment and life expectancy are certainly important considerations. Familiar market forces of competition and affordability often assume different meanings for drug products, however, and this may negatively affect drug-product pricing and availability for many in our population.
Recommendations recently have been made to seriously consider the value of new, expensive drugs, including some oncologic agents for late-stage diseases process, or innovative drugs to control hyperlipidemia (eg, PCSK9 inhibitors). Consideration of the clinical value or quality-adjusted life years of drug products, as practiced in other developed countries, may be beneficial. Regulatory changes to allow increasing governmental payer negotiating power and increased industry competition also may be beneficial. These issues are likely to be increasingly discussed in the near future.
- References:
- Alpern JD, et al. N Engl J Med. 2014; 10.1056/NEJMp1408376.
- Cogdill B, et al. Ann Pharmacother. 2012;10.1345/aph.1Q485.
- Parker-Lue S, et al. Annu Rev Pharmacol Toxicol. 2015; doi: 10.1146/ annurev-pharmtox- 010814-124649.
- Save money on your meds. Consum Rep. January 2016:13-17. http://www.consumerreports.org/drugs/6-tips-for-finding-the-best-prescription-drug-prices. Accessed December 16, 2015.
- Schulman KA, et al. N Engl J Med. 2015; doi: 10.1056/NEJMp1509863.
- For more information:
- Edward A. Bell, PharmD, BCPS, is a professor of pharmacy practice at Drake University College of Pharmacy and Health Sciences and Blank Children’s Hospital and Clinics, Des Moines, Iowa. He also is a member of the Infectious Diseases in Children Editorial Board. Bell can be reached at ed.bell@drake.edu.
Disclosure: Bell reports no relevant financial disclosures.