Big Pharma, hit for tenfold price hikes, also faces FTC middleman probe

ftclogo-300x95While U.S. patients are seeing their finances blown up by skyrocketing prescription drug prices, the members of Congress continue to wring their hands, ponder responses — and do nothing. The Federal Trade Commission, though, has at least launched an investigation of one part of Big Pharma to see if pharmacy benefit managers, the industry middlemen known as PBMs, jack up prices for patients.

Those footing the bill for drugs have plenty of reason for outrage, a trio of researchers from Brigham and Women’s Hospital in Boston have reported.

Their findings, published in the Journal of the American Medical Association, show just how stark Big Pharma’s recent push for profits has been. As the researchers wrote in a New York Times Op-Ed, calling for congressional action to lower drug prices, based on their study:

 “In a new analysis published in The Journal of the American Medical Association, we found that average prices for newly marketed prescription drugs in the United States grew by 20% per year from 2008 to 2021, amounting to a tenfold increase in just over a decade. In 2020 and 2021, nearly half of new drugs were priced at more than $150,000 per year, compared with fewer than 10% of drugs introduced at this price level in 2008. This trend dramatically outpaces the 1% to 3% annual inflation for other health care services.

“The rapid growth in prices is only partly attributable to the introduction of more complex medicines, such as injectables and biologics, or drugs focused on treating rare diseases. Even after accounting for shifts in the types of drugs being introduced and discounts provided by manufacturers, we found that prices for new drugs increased by 11% per year.”

The researchers cited an example of how drug prices don’t go up a little — they leap:

“The barometer for what constitutes an acceptable price has apparently grown by orders of magnitude. Three commonly used, once-a-day oral medications to treat Type 2 diabetes exemplify the problem. In 2009 saxagliptin, known by the brand name Onglyza, entered the market at roughly $5 per pill. Five years later, empagliflozin (Jardiance) was introduced at over $10 per pill, and in 2019 semaglutide (Rybelsus) kicked off at over $25 per pill, for an annual cost of almost $10,000. In a decade, the price of new oral diabetes treatments increased fivefold.”

Big Pharma rips American patients with relentless price increases because the industry can, the researchers wrote in their Opinion article, reporting:

Other developed countries broker prices for new drugs soon after the drug is approved for marketing. For example, Canada, France and Germany negotiate with manufacturers the price of each newly approved drug, based on the clinical benefits it provides compared with other available treatments. With these negotiations, other countries pay less than half as much as people in the United States do for the exact same drugs.

“Price negotiations need not impair or delay access to treatments. In Germany, for instance, drug manufacturers can freely market their medicines for one year while negotiations are underway, and 98% of drugs offering a benefit over existing treatments continue to be available after the negotiated price is set. Negotiating drug prices will not harm innovation. In fact, the status quo of allowing drug companies to freely set prices incentivizes development of many products that do not offer important therapeutic advances. These less innovative drugs offer low financial risk to manufacturers because they are based on existing products or work via similar biochemical pathways.

“The pharmaceutical industry has pushed a Congressional Budget Office estimate that lowering drug prices might lead to marginally fewer new drugs over the next several decades, but the report says nothing about which types of drugs would be affected. With new drugs, quality is at least as important as quantity. Shifting toward paying for drugs commensurate to their added therapeutic value could promote the development of more drugs that offer meaningful benefits to patients.”

Alas, while the researchers describe what has amounted to futile efforts to get Congress to act, they do not detail (and probably could not within the scope of their article) the cash that pharmaceutical players throw around to keep politicians from tamping down industry profits. The recent case involving the Alzheimer’s targeting drug Aduhelm also has underscored a glaring void in U.S. oversight of the prescription drug industry — the absence of an agency that even tries to determine a fair and reasonable price for a medication, especially considering its value to patients. So, instead, Big Pharma keeps churning out too many drugs that offer little benefit beyond what exists — but seemingly always at a significantly higher cost.

A U.S. probe of middlemen

The FTC, though, says it will delve into a growing source of anger among patients, doctors, hospitals, insurers, and drug makers themselves: the exact role of middlemen known as PBMs. The field is dominated by a handful of firms — UnitedHealth Group Inc.’s OptumRx Inc., Humana Inc., Prime Therapeutics LLC, and MedImpact Healthcare Systems Inc. — that negotiate rebates and fees with drug manufacturers, the Wall Street Journal reported, adding:

“Pharmacy-benefit managers also reimburse pharmacies for patients’ prescriptions and create drug formularies—a list of prescription drugs that are paid for by a health plan—and other policies. Independent pharmacies have criticized PBMs for charging them high fees and for steering consumers to PBM-owned mail-order pharmacies. The FTC said it would look into the tight integration that the PBMs have with both health-insurance companies and wholly owned mail-order and specialty pharmacies, and whether it gives the companies undue influence on what patients pay for their prescriptions and where they purchase them.

“The three largest PBMs—OptumRx, Cigna Corp.’s Express Scripts, and CVS Health Corp.’s Caremark— manage roughly 80% of U.S. prescriptions. ‘Although many people have never heard of pharmacy-benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,’ FTC Chairwoman Lina Khan said. ‘This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.’”

Middlemen of another sort also help foster shortages of crucial medications, CBS News recently reported. In an illuminating 60 Minutes segment, the network reported that middlemen — in the purported pursuit of efficiencies and, of course, higher profits for various different parties in the U.S. health system — can cause price spikes, shortages, of even the elimination of valuable drugs.

The middlemen, of course, claim they provide needed services, helping demystify an increasingly complex economic ecology that envelops costly prescription medications. These providers say their services say patients, doctors, hospitals, insurers, and big businesses time and money, though exactly how their services are priced and ultimately paid for — including by pocketing rebates and discounts offered by makers, ostensibly to patients and providers — is murky.

In my practice, I see not only the harms that patients suffer while seeking medical services, but also the damage that can be done to them and their loved ones by dangerous and bankrupting drugs, notably prescription medications.

Americans rightly are furious about the economic disruptions they have experienced due to factors beyond their control, including the coronavirus pandemic and Russia’s invasion of Ukraine. This has led to budget-busting inflation in which prices for goods and services we can’t do without or that make life so much nicer suddenly spike to outrageous highs.

Funny thing, though, is that CEOs are receiving walloping pay increases and big corporations, particularly in Big Oil, are reporting record profits. Republicans want to blame Democrats and President Biden for everything negative, including the unacceptable inflation that crushes the poor and middle class.

When it comes to fixing corporate greed, however — and this includes the documented gouge that Big Pharma has inflicted on us all — the federal machinery somehow grinds to a halt, especially as the Grand Old Party never speaks up for regular folks and only the privileged few. We have much work to do to ensure the safety, access, quality, affordability of our costly U.S. health care system, including bringing down prescription drug prices to fair, reasonable levels.

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