Tag Archives: drug prices

Big Pharma’s Skyrocketing Prices

The AP reported yesterday on a new Government Accountability Office (GAO) report on soaring drug prices:

Prices on a growing number of prescription medications have ballooned in recent years as consolidation in the drug industry leaves fewer companies manufacturing niche medications.

Congressional investigators say the number of extraordinary price hikes on drugs doubled between 2000 and 2008. The drugs affected are mostly specialty medications but also include some popular products like Bayer’s antibiotic Cipro and the Eli Lilly schizophrenia treatment Zyprexa.

The Government Accountability Office report issued Monday attributed the rise to a combination of factors, including industry consolidation and price hikes by third-party providers who repackage drugs for patients.

The GAO’s findings could put new pressure on drugmakers to contribute billions more to the health care reform effort being finalized by Congressional Democrats.

The drug industry originally pledged $80 billion to defray the costs of covering millions more Americans, but the package being negotiated between the House and Senate is expected to call for well over $100 billion in financing from drug companies.

GAO found more than 400 examples of unusual price jumps on brand name drugs during the eight-year period — most ranged from 100 to 499 percent, but several exceeded 1,000 percent.

Unsurprisingly, the drug industry lobby Pharmaceutical Research and Manufacturers of America (PhRMA) “says the requested investigation is based on misleading data.”

What I’m waiting to see is whether these findings actually do inspire the Democrats to “put new pressure on drugmakers to contribute billions more to health care.” As I’ve written before, Big Pharma’s $80 billion “gift” to health care reform is a Trojan horse. And measures that might actually cut into their still-wide profit margin–like government price controls–are weak in the House’s bill, and absent altogether from the Senate’s.

Big Pharma Is the Big Winner in Health Care Reform

 Big Pharma was the real winner in last week’s shouting match between Obama and the insurance industry. Insurance execs took all the heat for attacking the White House’s health care reform plan after the administration and lawmakers had negotiated for months to craft a proposal that the industry could live with. Meanwhile, Pharmaceutical Research and Manufacturers of America (PhRMA), the main industry umbrella group, got to play the good guy—all the while escaping scrutiny for the fact that in recent months it has been quietly jacking up drug prices. 

Of course, Big Pharma already stands to hit the jackpot from Obama’s proposed reform plan. Under the deft direction of its chief lobbyist, former Louisiana congressman Billy Tauzin, PhRMA had already secured a valuable deal from the White House to provide a $80 billion in cost savings over the next 10 years in return for the President’s promise to oppose controls on drug pricing and importation of drugs from abroad.

As Fox’s Brian Sullivan points out, health care reform will increase the market for pharmaceuticals by tens of millions of people—a stock market bonanza:

The top 10 prescription drugs in America do around $40 billion per year in sales. It is estimated that 30 to 40 million Americans… lack insurance, or about 20 percent of the population. These 30 to 40 million new ‘customers’ will have greater access to doctors and prescriptions. …this could add another 20 percent to sales of just the top 10 drugs alone. Twenty percent of $40 billion is—bingo—$8 billion per year. And remember that only factors in the top 10 drugs. There are hundreds more in the market. It is clear that $8 billion in cost cuts will be made up in multiples over the years.

But just in case someone throws a wrench into the deal, Big Pharma has been hedging its bets by quietly running up drug prices this year. The Pharmalot blog reports:

During this year’s third quarter, eight of the biggest drug makers introduced hefty price increases of an average 8.7 percent—easily outdistancing the core Consumer Price Index of 1.4 percent, according to a recent research report by Credit Suisse analyst Catherine Arnold.

Who led the pack? Schering-Plough (soon to be bought by Merck) with a 12.8 percent hike, while Abbott imposed a 4.4 increase (Abbott’s price hikes have, in fact, been declining over the past year, the report notes). What about the others? Merck upped the ante by 9.9 percent; Wyeth (soon to be part of Pfizer) drove prices higher by 9.3 percent; Lilly was at 9.1 percent; Bristol-Myers Squibb prices rose 8.9 percent; Johnson & Johnson increased prices by 7.8 percent, and Pfizer prices rose 7 percent.

Of course, the White House could back out of its arrangement. But as the Senate Finance Committee moved the legislation last week, the deal seemed to be holding together just fine. Newsweek’s Howard Fineman explains how two attempts to ramp up funds from the drug industry were beaten—not by Republicans, but by Democrats:

The Senate Finance Committee’s bill, which passed out of committee on Tuesday, leans very hard on Medicare—but treads very lightly on the private sector. Sen. Bill Nelson, a Democrat from senior-dominated Florida, apparently had not gotten the memo about leaving Big Pharma alone. He wanted to offer two amendments, each of which would have taken another $100-billion-plus bite out of the industry’s Medicare revenue. Tauzin was not pleased. Neither was the White House. The senator was talked out of offering one amendment. He narrowly lost on the other after [Jim] Messina, the White House aide, called to express his dismay and to remind everyone that a deal was a deal. Democrats celebrated the outcome as a victory. The only losers were the American people. But, hey, they weren’t at the table.

Drug Store Cowboys

News reports are touting Obama’s determination to advance health care reform, regardless of Republican resistance. But developments taking place behind the public debate tell quite another story, and show the usual suspects–the drug companies and the insurance industry–hard at work to advance their own interests.

Consider, for example, last week’s AARP study showing that Big Pharma has been increasing the prices of the brand name drugs most often prescribed to older Americans at well beyond the rate of inflation. According to an AP account of the report, AARP “said that prices manufacturers charged for the most widely used brand name drugs rose 8.7 percent in 2008, higher than in years past. The general inflation rate in 2008 was 3.8 percent.”

Perhaps the drug companies are acting out of sheer greed in a deep recession. Perhaps they know that patents are running out, and want to make as much as possible before the plug gets pulled. Or perhaps the drugsters sense impending change and want to rake in the cash before Congress pulls the plug.

In any case, they offer, as some sort of consolation prize, the fact that generic drug prices are falling. Of course, thanks to the generous patents handed out to Big Pharma even for lifesaving drugs, generics do not exist for many prescriptions. And there is another problem: generic equivalents sometimes turn out not to be equivalent, after all. An increasing body of evidence shows that small differences in their chemical makeup, which are allowed by law, can affect the way they work. So many patients are left with no other choice than to shell out for the brand names.

A second troubling development in the area of prescription drugs arises out of the continuing scams run by private Medicare Advantage plans. Now the pharmacists are getting cut into the act. By hooking up with insurance companies running Medicare Advantage plans, pharmacists get to charge consultant fees for telling people which drugs to take, and how, and when, and even for “making recommendations to physicians”–especially if the drugs they recommend happen to be cheaper.

The Kaiser Daily Health Policy Report, citing reporting by the Tennessean newspaper, notes that “pharmacies’ income typically comes from adding an additional fee to the price of medications. However, as profit margins decline, consultations are becoming another way for pharmacists to bring in additional revenue.” Here’s how it works, according to rules established by the Center for Medicare Services (CMS), the government agency that oversees the program:

Under existing CMS guidelines, insurers that offer Medicare Advantage plans are required to pay pharmacies for the meetings with patients, during which they discuss the importance of taking the proper medications at the appropriate times….Some pharmacists now earn up to $160 for a one-hour meeting with patients….

In 2010, new CMS guidelines will broaden the pharmacy consultation benefit to more MA beneficiaries. Under the revised guidelines, MA plans will be required to review their member rolls on a quarterly basis to identify eligible members for the program. In addition, health plans will be prohibited from restricting access to the benefit to members with a high number of chronic health conditions and medications….

The idea of the friendly neighborhood druggist watching out for local elders might seem appealing on the surface. But these days, of course, its mostly faceless chain stores that provide medications to Medicare recipients. And these drug stores are are being given something like a backdoor license to practice medicine, doing work that doctors ought to be doing–at a much cheaper price.

Controlling cost, after all, is what it’s all about, rather than the benign task of ensuring that oldsters “take the proper medications at the appropriate times.” As Kaiser reports, “Pharmacists will be paid $50 to review a beneficiary’s medications and make recommendations to their physician. Pharmacists will receive additional payments if they recommend a less-costly, therapeutic equivalent to the patient.”

It occurs to me that these two bits of news show the pharmaceutical industry and insurance industry working at cross purposes:  While the drug companies are doing everything they can to profit off of costly brand name drugs, the insurance companies are coming up with new strategies for moving patients to less expensive alternatives.  Maybe we should just step back and let the two industries fight each other to the death, to the vast benefit of the American health care system.