By Beverly George, ACE Leader
If you travel the world, you will find the costs for an iPad Pro, a blockbuster movie ticket, or a Big Mac are about the same in most countries. But not prescription drugs. Americans pay the highest prices because the U.S. is unique in (1) offering strong drug patent protections and (2) limiting the ability of public and private payers to appraise new drugs and bargain effectively for lower prices.
On May 11, 2018, President Donald Trump announced his plan for bringing down prescription drug prices for Medicare patients, which was a major campaign promise to his supporters and, frankly, to all Americans. Soon after his announcement, pharmaceutical stocks soared.
On the May 14 “PBS News Hour,” I listened to Judy Woodruff interview Alex Azar, currently secretary of health and human services, formerly an executive at Eli Lilly, and now President Trump’s point man to elucidate the administration’s new plan. Talking points from the plan covered in the interview included the following.
- Improve competition by speeding generics to market.
- Give Medicare insurance plans greater ability to negotiate some drug prices.
- Use trade deals to force other countries to pay more for drugs.
- Require drug makers to disclose list prices in public advertising.
Sounds pretty good so far. However, President Trump backed away from prior promises made by Candidate Trump, namely that his drug plan does not call for Medicare to negotiate directly with drug makers on all categories of drugs.
Azar argued to Woodruff that the administration’s plan gives Medicare patients “more tools to negotiate” their drug prices in the following ways.
- The individual health insurance plans seniors purchase as part of their supplementary Part D would have their companies negotiate individually with pharmaceutical companies to bring prices down on retail drugs; and
- Medicare would negotiate the prices for “office administered” drugs, that is, those given by a physician in an office. This category of drugs comes under Medicare Part B.
Azar said he felt this was a better, more aggressive plan that would affect better results than using the government Medicare program to negotiate all prescription prices, alluding negatively to government that in the past incompetently ordered toilet seats so highly priced they could have been made of gold.
However, the idea of Part D plans individually negotiating prices on retail drugs errs in assuming all insurance companies are the same size with the same number of enrollees and their voices would carry the same clout with pharmaceutical companies. The ultimate goal of negotiating for lower drug prices should be that they be uniform for all Medicare patients.
Granting Medicare the right to negotiate lower Part B costs is a fine idea but enabling them to do so is a different matter altogether. Enabling them means giving them the bargaining power and right to refuse to cover drugs with exorbitant prices.
Wait! I hear shouts of “drug rationing” from readers. Recall that before 2003, Medicare did not cover any drugs at all. Would support for Medicare’s negotiating lower prices evaporate in the face of what such negotiations might require?
What about patent protections driving up the costs of drugs? Patents are designed to offer short-term protection with an economic edge to drug makers in order to recoup some of their expenses for research and development. But patent extensions come too easily when a company adds a time-release component to an established, soon-to-expire-patented drug formulation, which, by the way, does not change the active ingredients on which it works nor the statistical outcomes for patient health.
I predict requiring drug makers to include pricing in their public ads will not ever happen. Azar stated in his interview with Woodruff that he’d like to see companies voluntarily post their prices in TV ads before they’re forced to by the government. He also said he sympathized with Medicare patients who made (and paid for) an appointment with their doctor to seek information on a drug only to find out they couldn’t possibly afford it.
However, too many members of congress are securely in the pockets of drug makers, both in the amount of campaign contributions and in the promise of rich lobbying jobs with them post-political career. This is the reason that posting costs for drugs on public ads will not get any traction.
While pharmaceutical manufacturers constantly play the refrain of the cost of bringing their products to market, I never hear them sing the verse about the cost of TV and other media ads. The U.S. (pop. 326 million) and New Zealand (pop. four million) are the only two countries that allow a direct-to-consumer sales pitch for prescription drugs. Given the number of drug ads I see in prime time, I am convinced that the bottom line of drug companies would soar without the cost of these ads. And just think about the $1.2 million Novartis could have saved had they not tried to get their foot in the White House door via Michael Cohen.
The U.S. should require pharmaceutical manufacturers to price their products based on a “benchmark of the drug’s therapeutic and economic value, underlying R&D costs, and expected global revenues.” Thomas Bollyky, Aaron Kesselheim, and Joshua Sharfstein explained this formula used by other developed countries, and our making trade deals to force other countries to raise their drug costs to consumers will not in any way reduce drug costs for American consumers. Trade deals made with Australia and South Korea have been in place for over ten years, and the cost of prescription meds to their citizens have not gone up, nor have they effected lower costs to American patients. Trade deals also require years to reach agreement and additional time to put into action and see outcomes.
So why exactly did drug stock prices rise enthusiastically after Trump announced his plan?
“The reaction of the stock market was pretty telling in the fact that, at the moment, the plan feels very much in a brainstorming format,” according to Stacie Dusetzina, associate professor of cancer research at Vanderbilt University Medical Center. “While there are potentially some very good policy ideas there, when the industry sees this, it feels like nothing is going to happen very soon.”
The costs of prescription drugs should come down. We simply pay too much in the U.S., and the prices vary state to state. The system needs a major overhaul to facilitate price negotiating.
PBS News Hour, May 14, 2018. Interview by Judy Woodruff with Alex Azar, secretary of health and human services
“Just Saying Yes to Drug Companies” by Paul Krugman
“What Trump Should Actually Do About the High Cost of Drugs” by Thomas J. Bollyky, Aaron S. Kesselheim, and Joshua M. Sharfstein
ACE Leader Beverly George also is a member of Indivisible, the Naperville League of Women Voters, and the Citizens Climate Lobby. She also volunteers with her parish PADS group. A former chemist, George worked in clinical chemistry and hematology research at the Centers for Disease Control for six years and taught chemistry and freshman science at Naperville North High School for 20 years.