Cleaveland: Controlling runaway drug costs

Cleaveland: Controlling runaway drug costs

February 3rd, 2019 by Dr. Clif Cleaveland in Opinion Columns

Prescription drug costs are out of control. Manufacturers can set the price of a new drug and increase that price at will. Soaring prices stress the budgets of individuals, businesses, and state and federal health plans. Depending on their health insurance, consumers must deal with co-payments which may reach hundreds of dollars monthly for a single drug or thousands of dollars if multiple drugs are needed for complex illnesses.

The cost of long-established drugs, including generics, may also be sharply increased with no explanation. A small manufacturer may be purchased by a hedge-fund, which can immediately hike the costs of the company's products.

Dr. Clif Cleaveland

Dr. Clif Cleaveland

Photo by Contributed Photo /Times Free Press.

Intense lobbying curtails congressional response to these price increases. In 2018, the Pharmaceutical Research and Manufacturers Association (Pharma) spent $27.5 million on lobbying. From 1998 to 2018, PhRMA spent more than $364 million for lobbying. Individual companies spent up to several million dollars each for lobbying activities in 2018., according to OpenSecrets.org.

During the 2017-2018 election cycle, campaign contributions from pharmaceutical and health product sources ranged from more than $200,000 to more than $530,000 for the top 20 congressional recipients. Democratic and Republican candidates benefited. The average contribution to House campaigns was more than $39,000, for Senate campaigns more than $66,000.

Many medical journals depend upon pharmaceutical advertisements to sustain publication. Journals criticize drug pricing at their peril. Conventions of medical specialty organizations depend upon sponsorships of pharmaceutical and other health product makers to underwrite costs of their assemblies. Prominent displays of the sponsors dominate convention sites.

Because costs of therapy are seldom publicized in training venues and conferences, many health care providers do not know the costs to their patients of the medications which they prescribe.

The configuration of drug costs is complex. A July 2018 Health Affairs blog provides a useful analysis. The study concludes that in 2016, total spending on prescription drugs was $480 billion. Two-thirds of the total represented net revenues by drug makers. One third represented payments to pharmacies, prescription-benefit managers, and hospitals and clinics where drugs were administered.

Three options can be considered for controlling prescription drug costs:

» The president convenes a White House conference of Big Pharma executives to announce a 90-day window in which the executives formulate an industry-wide plan to bring costs under control. The plan must address pricing of new drugs upon FDA approval, length of exclusive marketing, and allowable price increases during that interval. The plan must include regulation of prices of established medications, as well as generics. If the cost controls fail, Congress and the administration will assume control of the process.

» Congress imposes a series of regulations that include the posting of retail prices on all direct-to-consumer advertising. Content of the advertisements must meet standards of accuracy and appropriateness of use of the products. Congress opens Medicare Part D to competitive bidding among drug companies. Carefully monitored importation of less expensive drugs from foreign manufacturers is permitted.

» In a more radical approach, Congress regulates drug manufacturers as a public utility in the same fashion that electricity, water, and other services are regulated. A national board is established to determine initial pricing of a drug, length of exclusive marketing, and subsequent price increases. Companies are prohibited from interfering with the entry into the market of generic medications. Companies must report if manufacturing of their products is moved abroad to take advantage of cheaper labor and materials.

Congress will act on drug pricing only if we, the consumers, are unrelenting in our insistence that the status quo is unjust and unaffordable. Copies of receipts for drug purchases will strengthen our argument when we communicate with our senators and representatives.

Contact Clif Cleaveland, a retired physician, at ccleaveland@timesfreepress.com.

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