Semro column: You think pot’s expensive, try prescription drugs
So, how does all of this sound? U.S. spending on prescription drugs has increased by 75 percent since 2005 and it’s projected to increase by another 65 percent by 2025. According to the Center for Improving Value in Health Care, between 2012 and 2015 the cost of pharmacy services in Colorado grew by 27 percent. The biggest increase in drug costs for Coloradans was for Medicare Advantage plans (the private insurance version of traditional Medicare). For Colorado MA plans, average pharmacy service costs quadrupled in the same three-year period, growing from $440 per person per year to $1,900 per person per year.
New drugs aren’t cheap. Pharmaceutical companies frequently say that bringing a new drug to market can cost a company well over $1 billion. In the real world, most academic studies show that actual R&D costs for new drugs range from $43.4 to $125 million. Not cheap to be sure, but hardly the billion dollar price tag that’s usually pitched. In addition, PhRMA never tells us how much of that billion dollars goes to marketing and promotion. In 2016, the pharmaceutical industry spent $5.6 billion on direct to consumer drug advertising alone.
But even old drugs can see mind-boggling price jumps.
Back in February of 2011 a drug company called KV Pharmaceuticals gained exclusive rights to market a drug called Makena. Makena’s a progesterone drug that reduces the rate of premature births in high risk pregnancies. Originally, this drug cost $10-20 per injection for a total $200-400 per pregnancy.
After KV got full marketing rights, that drug’s price ballooned to $1,500 a shot and $30,000 per pregnancy. This price jump was immediately condemned by physician organizations, hospitals and even the March of Dimes. Under mounting pressure, the Federal Drug Administration took the unusual step of announcing that pharmacies could continue to make the drug at the original price without fear of legal reprisal. After the FDA announcement, KV dropped the price to $690 per dose.
The above story is hardly unique. Last year, Marathon Pharmaceuticals increased the price of an old generic drug called Deflazacort that’s used to treat Duchene Muscular Dystrophy. Families can import a year’s worth of this drug from abroad for about $1,200. But, if you buy a year’s worth of Deflazacort in the U.S., where Marathon has exclusive marketing rights, the list price is now $89,000 ($54,000 after rebates).
What’s unusual about these two stories is that we heard about them. If KV and Marathon had only jacked up the price of their drugs by 400 or 500 percent instead of by 7,400 percent, it would‘ve never made the news.
To prove the point, according to a 2016 Government Accountability Office report on Medicare generic drug prices, while the average price of generic drugs actually dropped a bit, at least 300 generic medications have experienced at least one “extraordinary price increase of 100 percent or more.” Fifteen generic drugs saw price hikes of more than 1,000 percent. How many of those price increases have you heard about?
In 2015, 30 million Americans had diabetes. For those patients, the cost of Insulin continued to increase in spite of the limited advancements made to those drugs. According to Elisabeth Rosenthal, in her book “An American Sickness,” between 2010 and 2015 the recommended wholesale price of various Insulin drugs rose between 127 and 325 percent. From 2012 to 2015, the monthly wholesale price of Humulin, the most popular form of Insulin, increased from $258 to almost $1,100 for the average American patient.
In response, the state of Nevada passed a law requiring diabetes drug-makers that have raised their prices above a threshold amount to disclose information about production and marketing costs. Not surprisingly, the pharmaceutical industry is currently suing Nevada to stop the law they passed from taking effect, stating that it removes trade secret protections and improperly infringes upon federal authority.
This year, a similar bill (House Bill 1009) sponsored by state Rep. Dylan Roberts from House District 26 was introduced in the Colorado State Legislature.
As for that federal authority that pharmaceutical companies are suing to protect, a bipartisan bill (sponsored by Sens. McCain and Baldwin) called the Fair Drug Pricing Act was introduced in the U.S. Senate in 2016 and again in 2017 to address rising drug prices. Senate leadership has never brought the bill to the floor for a vote.
By the way, if you hope that things will improve on the regulatory front, it’s worth noting that the Trump administration’s new Secretary for the Department of Health and Human Services (HHS) is Mr. Alex Azar.
Azar was the Deputy Director of HHS from 2005 to 2007. From there he went straight through the revolving door to work for the drug company Eli Lilly where he was promoted to CEO from 2012 to 2017. And now, he’s back in “public service.”
Bob Semro of Glenwood Springs is a former health policy analyst for the Bell Policy Center, and a legislative and senior advocate.