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'''Prescription drug prices in the United States''' have been among the highest in the world. The high [[prescription costs|cost of prescription drugs]] became a major topic of discussion in the new millennium, leading up to the [[U.S. health care reform]] debate of 2009, and received renewed attention in 2015.
'''Prescription drug prices in the United States''' have been among the highest in the world. The high [[prescription costs|cost of prescription drugs]] became a major topic of discussion in the new millennium, leading up to the [[U.S. health care reform]] debate of 2009, and received renewed attention in 2015. High prices have been attributed to monopolies given to manufacturers by the government and a lack of ability for organizations to negotiate prices.<ref>{{cite journal|last1=Kesselheim|first1=Aaron S.|last2=Avorn|first2=Jerry|last3=Sarpatwari|first3=Ameet|title=The High Cost of Prescription Drugs in the United States|journal=JAMA|date=23 August 2016|volume=316|issue=8|pages=858|doi=10.1001/jama.2016.11237}}</ref>


==Background==
==Background==

Revision as of 18:26, 25 August 2016

Prescription drug prices in the United States have been among the highest in the world. The high cost of prescription drugs became a major topic of discussion in the new millennium, leading up to the U.S. health care reform debate of 2009, and received renewed attention in 2015. High prices have been attributed to monopolies given to manufacturers by the government and a lack of ability for organizations to negotiate prices.[1]

Background

History of drug retail price

Pharmaceutical drugs are the only major health care service, in which the producer is able to set prices relatively unrestrained, according to Peter Bach from the Health Outcomes Research Group, Memorial Sloan Kettering Cancer Center, New York and Steven Pearson from the Institute for Clinical and Economic Review, Boston.[2] As of 2004, prices of brand name drugs were significantly higher in the United States than in Canada, India, the UK and other countries, nearly all of which have price controls, while prices for generic drugs tended to be higher in Canada.[3]

In 2005, the Government Accountability Office (GAO) had examined the change in US drug retail prices from January 2000 through December 2004 and found the average usual and customary (U&C) prices for a 30-day supply of 96 drugs frequently used by people enrolled in BlueCross BlueShield Federal Employee Programs had increased 24.5%. Drilling down, the average U&C prices for brand prescription drugs increased three times as much as the average for generic drug.[4]

In 2007, the AARP published a series of studies showing that prescription drug prices have been rising significantly faster than general inflation.[5] The American Enterprise Institute, a conservative think tank, criticized the methodology as overstating drug price inflation.[6]

A December 2015 NYT editorial stated that "drug prices have been pushed to astronomical heights for no reason other than the desire of drug makers to maximize profits", pointing in particular to strategies carried out by Turing Pharmaceuticals and Valeant Pharmaceuticals to acquire rights to make and sell generic drugs that had administrative exclusivity and then raise the prices dramatically, which were widely condemned inside and outside the pharmaceutical industry.[7] In response to these moves, the Department of Health and Human Services (HHS) and both houses of Congress held a public meeting and hearings resepectively to investigate price gouging.[8]

Drug expenditures

Spending on pharmaceuticals, defined as expenditure on prescriptions medicines and over-the-counter products, excluding pharmaceuticals consumed in hospitals,[9] has been mentioned together with price, although not being the same. Historically, spending on pharmaceuticals accounted for 11.5% of U.S. national healthcare expenses in 1960, gradually falling to a low of 5.5% in 1980, before rising back to 10.4% in 2000 and ranging up to 12% since then until 2013.[10] As of 2013, US "pharmaceutical spending" was $1034 per capita in the OECD's international comparisons.[9]

Relationship between drug research and development and retail price

Pharmaceutical companies argue, that the prices they set for a drug are necessary to fund research. 11% of drug candidates that enter clinical trials are successful and receive approval for sale.[11] Although the cost of manufacturing is relatively low, the cost of developing a new drug is relatively high.[12]: 422  In 2011, "a single clinical trial can cost $100 million at the high end, and the combined cost of manufacturing and clinical testing for some drugs has added up to $1 billion."[13] It has been stated that the U.S. pharmaceutical industry is able to invent drugs that would not be profitable in countries with lower prices, because of the high drug prices in the United States.[12]

Critics of pharmaceutical companies point out that only a small portion of the drug companies' expenditures are used for research and development, with the majority of their money being spent in the areas of marketing and administration.[14]

European pharmaceutical companies are as innovative, or perhaps even more so, than their U.S. counterparts, despite price controls. In addition, some countries, such as the United Kingdom and Germany, encourage comparative effectiveness reviews, whereby cost-benefit analyses of rival drugs determine which perform best.[15][page needed]

Effects

Because of the price differential between the U.S. and Canada, US Americans purchased more than US$1 billion in brand-name drugs per year from Canadian pharmacies as of 2004 to save money.[3]

The Washington Post wrote in 2003 that "U.S. Customs estimated 10 million U.S. citizens brought in medications at land borders each year. An additional 2 million packages of pharmaceuticals arrive annually by international mail from Thailand, India, South Africa and other points".[16]

A quarter of Americans taking prescription drugs said, they had not filled a prescription in the past 12 months due to cost, and 18 percent reported they "cut pills in half or skipped doses" according to a Kaiser Family Foundation survey in June 2015.[17]

Reasons for high prices

Variability and non-transparency

As of 2015, the price of a pharmaceutical drug depends on who is paying and numerous other variabilities, per the acting administrator of the federal Medicare and Medicaid programmes: list price, wholesale price, average wholesale price (pharmaceuticals), rebates, supplemental rebates, markups from hospitals, markups for physicians, drug price for inpatients versus outpatients, formulary (pharmacy) tiers, mail order price, biosimilar prices, "patent expirations, compounds, samples, and many other ways that end up obscuring the reality of the price paid, who pays it, and how all of it influences treatment decisions."[18]

Drug company profits

A Kaiser Family Foundation survey from June 2015 found the public citing "drug company profits as the number one reason for the high cost of prescription drugs (picked by 77%), followed by the cost of medical research (64%), the cost of marketing and advertising (54%), and the cost of lawsuits against pharmaceutical companies (49%)."[17]

As of 2015, several pharmaceutical companies had developed a new business strategy "of dominating noncompetitive markets for older drugs and then increasing the price substantially".[19]

Pharmacy benefit managers

Pharmacy benefit managers (PBMs) may increase drug prices they charge to their clients, in order to increase their profits. For example, they may classify generic drugs as brand name drugs, because their contract does not contain a definition, or only an ambiguous, or a variable definition. This allows PBM's to classify drugs "for one purpose in one way, and for another purpose in another way", and to change the classification at different points during the life of a contract. This, as of 2010 unlitigated freedom, affects "drug coverage, making contract terms, and the reporting about the satisfaction of contract terms".[20]

PBM's can make confidential business agreements with pharmaceutical companies, which PBM's have called collective buying power, then set a (lower) reimbursement maximum amounts to drugstores for generic drugs and set (higher) charges to insurers. This practice is also known as "spread pricing".[21] There are examples where PBMs can double drug costs.[21]

Drug rebates

Drug manufacturers may offer to pay an insurance company a rebate after they have sold them a drug for full price. This is largely invisible to the consumer, because a drug company does not report how much money it returns to the payer. In 2012, the aggregate in the US has been estimated at $40 billion per year.[22]

Orphan drugs

Drug companies can price new medicines, particularly orphan drugs, i.e. drugs that treat rare diseases, defined in the United States as those affecting fewer than 200,000 patients, at a cost that no individual person could pay, because an insurance company or the government are payors.[23] An orphan drug may cost as much as $400,000 annually. The orphan drug business model could come under increased payer regulation.[24]

FDA backlog in generic drug application review

Generic drugs cost less and companies wishing to manufacture generic drugs must show in their US Food and Drug Administration (FDA) applications that they guarantee quality and bioequivalence. In fiscal year 2014, the FDA had not approved any of about 1500 such applications by the end of 2014.[25] The slow pace of the FDA review (6–12 months even for a priority review) has not allowed the market to correct itself in a timely manner, i.e. not allowed manufacturers to begin to produce and offer a product, when a price is too high. The following suggestions have been made: prioritize review of applications for essential drugs, i.e. move them up in the queue. If the FDA felt unable to make this largely economic evaluation about priority, the Department of Health and Human Services (DHHS) Office of the Assistant Secretary for Planning and Evaluation could do this. Second, the FDA could temporarily permit compounding. And third, the FDA could "temporarily permit the importation of drug products reviewed/approved by competent regulatory authorities outside the United States".[19]

In a January 2016 senate hearing, the director of the FDA’s Center for Drug Evaluation and Research said, that increasing numbers of generic drug applications had "overwhelmed the FDA staff and created unpredictability and delay for industry",[26]: 2  but that the FDA is ahead of schedule in reducing the backlog since then.[26]: 11 

Solutions

Discounts

Private insurers can negotiate discounts, and discounts are mandatory for State Medicaid programs, administered by the Health Resources and Services Administration (HRSA).[2] Per HRSA's 340B Drug Pricing Program drug manufacturers must provide outpatient drugs "to eligible health care organizations/covered entities at significantly reduced prices".[27]

At the same time that drug companies must offer lowest prices to DHSS for Medicaid, it strongly disincentivizes the drug companies against lowering drug prices. medicare is forbidden by law to negotiate with the drug industry.[18]

Value-based prices

Professional associations in Oncology and Cardiology have made efforts to determine reasonable price ranges for drugs commensurate with their value based on published evidence of their treatment benefit, aka value-based pricing, including the Institute for Clinical and Economic Review, and the DrugAbacus.[citation needed]

Policy makers

The FDA has a "priority review process" for drugs which compete with another drug whose price exceeds its value-based price. Congress could also grant the FDA the ability to change the exclusivity period for new drugs.[2] The FDA could also temporarily allow the import of drugs approved for sale outside the United States.[19]

In December 2015, the DHHS held a public meeting and both houses of Congress had hearings on off-patent drugs with limited or no competition.[28]

Canada's model

In Canada, the Patented Medicine Prices Review Board determines a maximum price for all drugs. The government is purchasing drugs similar to how the United States purchases medications for military personnel, but on a much wider scale.[15]: 280 

Healthcare providers

Healthcare providers can substitute three-month for one-month supplies of medicines. A three-month supply represented a 29% decrease in out-of-pocket costs and an 18% decrease in total prescription costs in one study.[29]

Individual importation of lower cost prescription drugs from foreign countries – as done by 2% of U.S. consumers in 2011 and 2012 – is likely not an effective public health solution.[30]

See also

Further reading

References

  1. ^ Kesselheim, Aaron S.; Avorn, Jerry; Sarpatwari, Ameet (23 August 2016). "The High Cost of Prescription Drugs in the United States". JAMA. 316 (8): 858. doi:10.1001/jama.2016.11237.
  2. ^ a b c Bach, Peter B.; Pearson, Steven D. (2015-12-15). "Payer and Policy Maker Steps to Support Value-Based Pricing for Drugs". JAMA. 314 (23): 2503–2504. doi:10.1001/jama.2015.16843. ISSN 1538-3598. PMID 26619354.
  3. ^ a b Morgan, Steven; Hurley, Jeremiah (2004-03-16). "Internet pharmacy: prices on the up-and-up". CMAJ. 170 (6): 945–946. doi:10.1503/cmaj.104001. PMC 359422. PMID 15023915. Retrieved 11 July 2007. {{cite journal}}: Unknown parameter |lastauthoramp= ignored (|name-list-style= suggested) (help)
  4. ^ United States Government Accountability Office (GAO) Prescription Drugs: Price Trends for Frequently Used Brand and Generic Drugs from 2000 through 2004. Report to Congressional Requesters. GAO-05-779. 15 August 2005.
  5. ^ David Gross, Leigh Gross Purvis and Stephen W. Schondelmeyer,"Trends in Manufacturer Prices of Prescription Drugs Used by Older Americans", AARP, March 2007
  6. ^ Joseph Antos and Thomas F. Wildsmith, "Inflated Claims about Drug Prices", American Enterprise Institute, 8 July 2005
  7. ^ The Editorial Board (19 December 2015). "No Justification for High Drug Prices". New York Times. Retrieved 20 December 2015.
  8. ^ US Senate Special Committee on Aging. Collins, McCaskill open Senate investigation into Rx drug pricing, announce intention to hold hearings. November 4, 2015. Accessed 4 January 2016.
  9. ^ a b Pharmaceutical spending (indicator). OECD Data, Health resources. 2013 doi: 10.1787/998febf6-en, accessed 27 November 2015
  10. ^ "National health expenditures, average annual percent change, and percent distribution, by type of expenditure: United States, selected years 1960–2013" (Table). CDC. Retrieved 2 December 2015.
  11. ^ Nature Reviews Drug Discovery, 2004 (3), 711–716.
  12. ^ a b The Process of New Drug Discovery and Development Second Edition, Charles G. Smith and James T. O'Donnell, Taylor & Francis, 2006, ISBN 0849327792, 9780849327797 688 pages, published by Informa Healthcare
  13. ^ Herper, Matthew. "The Truly Staggering Cost Of Inventing New Drugs". Forbes. Retrieved 29 March 2013.
  14. ^ Why Are Drug Prices So High?, PSC/City University of New York
  15. ^ a b Brandon Kramer and Michael Shally-Jensen. Prescription Drug costs. pp 273-283. in: Encyclopedia of Contemporary American Social Issues 4 volumes, ABC-CLIO, December 22, 2010, Social Science, 1707 pages, Santa Barbara
  16. ^ Millions of Americans Look Outside U.S. For Drugs, Washington Post, 23 October 2003
  17. ^ a b Poll Finds Nearly Three Quarters of Americans Say Prescription Drug Costs Are Unreasonable, and Most Blame Drug Makers Rather Than Insurers for the Problem Kaiser Family Foundation. 16 June 2015, accessed 27 November 2015
  18. ^ a b Jaffe, Susan (28 November 2015). "USA grapples with high drug costs". The Lancet. 386 (10009): 2127–2128. doi:10.1016/S0140-6736(15)01098-3.
  19. ^ a b c Jeremy A. Greene, Gerard Anderson, Joshua M. Sharfstein. Role of the FDA in Affordability of Off-Patent Pharmaceuticals. JAMA. 2016 Feb 2;315(5):461-462. Published online 4 January 04, 2016, doi 10.1001/jama.2015.18720 (subscription required)
  20. ^ Linda Cahn When Is a Brand a Generic? In a Contract With a PBM Managed Care, September 2010. accessed 2 December 2015.
  21. ^ a b Jayne O'Donnell (3 March 2014). "Do drug benefit managers reduce health costs?". USA TODAY. Retrieved 1 August 2016.
  22. ^ Matthew Herper (10 May 2012). "Inside The Secret World Of Drug Company Rebates". Forbes. Retrieved 2 December 2015.
  23. ^ Matthew Herper How To Charge $1.6 Million For a New Drug And Get Away With It. Forbes, Mar 19, 2012, accessed 2 December 2015
  24. ^ Ed Silverman High Prices for Orphan Drug can be Sustained, a Payer Survey Shows. WSJ, 29 September 2014, accessed 2 December 2015
  25. ^ FDA. FY 2014 Performance Report to the President and Congress for the Generic Drug User Fee Amendments. FDA User Fee Reports, Accessed 4 January 2015.
  26. ^ a b Implementation of the Generic Drug User Fee Amendments of 2012 (GDUFA) Testimony of Janet Woodcock, M.D.Director, Center for Drug Evaluation and Research U.S. Food and Drug Administration Before the Committee on Health, Education, Labor and Pensions. United States Senate, 18 pages, January 28, 2016.
  27. ^ Office of Pharmacy Affairs (n.d.). "340B Drug Pricing Program". Health Resources and Services Administration. Retrieved 2 December 2015.
  28. ^ Sudden Price Spikes in Off-Patent Drugs: Perspectives from the Front Lines United States Senate Special Committee on Aging, December 9, 2015, retrieved 2 February 2016
  29. ^ Rabbani, A; Alexander GC (2009). "Cost savings associated with filling a 3-month supply of prescription medicines". Applied Health Economics and Health Policy. 7 (4): 255–264. doi:10.2165/11313610-000000000-00000. PMID 19905039. Retrieved 10 November 2011.
  30. ^ Zullo, Andrew R.; Dore, David D.; Galárraga, Omar (March 2015). "Development and validation of an index to predict personal prescription drug importation by adults in the United States". Journal of Pharmaceutical Health Services Research. 6 (1): 33–41. doi:10.1111/jphs.12088.
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