Drugmakers point fingers as lawmakers seek solutions for rising drug costs

Richard A. Gonzalez , Chairman and Chief Executive Officer AbbVie Inc., far left, testifies as from l-r, Pascal Soriot, Executive Director and Chief Executive Officer AstraZeneca, Giovanni Caforio, M.D. Chairman of the Board and Chief Executive Officer Bristol-Myers Squibb Co., Jennifer Taubert, Executive Vice President, Worldwide Chairman, Janssen Pharmaceuticals Johnson & Johnson, Kenneth C. Frazier, Chairman and Chief Executive Officer Merck & Co., Inc., Albert Bourla, DVM, Ph.D. Chief Executive Office Pfizer, Olivier Brandicourt, M.D. Chief Executive Officer Sanofi, look on as they wait their turn before the Senate Finance Committee hearing on drug prices, Tuesday, Feb. 26, 2019 on Capitol Hill in Washington. (AP Photo/Pablo Martinez Monsivais)

The Senate Finance Committee heard from the nation’s biggest pharmaceutical companies Tuesday as Congress searches for ways to lower drug costs for Americans, but the companies that determine the list prices for drugs insisted others bear responsibility for the skyrocketing costs patients face for some medications.

Although pharmaceutical companies raised list prices on more than 1,000 drugs at the start of 2019, executives insisted higher costs for consumers are caused by insurance companies and the pharmacy benefit managers who serve as middlemen in the supply chain. PBMs often receive rebates from drugmakers for including their medications in the formularies that determine if a drug is covered by an insurance plan.

“None of the close to $12 billion of rebates that Pfizer paid in 2018 found their way to American patients,’’ Pfizer chief executive Albert Bourla told the committee, according to The Washington Post. “Pfizer supports reforms that would create a system in which transparent, upfront discounts benefit patients at the pharmacy counter, rather than a system driven by rebates that are swallowed up by companies in the supply chain.’’

Patient advocacy groups, insurers, and experts took issue with that assessment. Rebates paid to PBMs do cut into pharmaceutical companies’ profits, but they are far from the only driver of costs.

“We’re tired of the drug companies pointing fingers at everybody else,” said Gabriel Levitt, president of Prescription Justice, a non-profit organization dedicated to lowering prices. “They set list prices far above those in other countries. Yes, PBMs and insurers share some of the blame but the genesis of the problem is with Big Pharma. Moreover, it’s the drug companies with the greatest influence over Congress to prevent change.”

Insurers claim they are the ones fighting for consumers against the greed of the drugmakers.

“Drug prices are out of control, and we appreciate the bipartisan approach that Congress is taking to get to the root of the problem: the prices set by drug makers, and that they raise year after year, even on products that have been on the market for decades,” Matt Eyles, president and CEO of America’s Health Insurance Plans, a trade group for insurance companies, said in a statement.

The byzantine structure of the U.S. drug market creates unfortunate incentives for pharmaceutical companies to set high prices and offer big rebates. The only thing stopping drugmakers from lowering their prices or cutting rebates for PBMs is that it would cost them money and market share.

“The rebates give an incentive for a drug company to raise its list prices so the PBM can get a bigger rebate and the drug company can get their drug on the formulary, but it’s still important to know the drug company is the one that’s raising the price,” said Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management and a former Department of Health and Human Services official.

It is true very few consumers pay anywhere near the list price for expensive drugs due to insurance co-pays and coupons, but the price the company sets still has an impact on the final cost for patients.

“If a drug price starts high, it inevitably ends up high,” said Joe Conradi, spokesman for the Campaign for Sustainable Rx Pricing, a coalition that seeks bipartisan market-based reforms.

In a Des Moines Register op-ed Tuesday, Senate Finance Committee Chairman Grassley chided drug executives for “grandstanding” and said he was disappointed they attempted to shift blame rather than take responsibility.

“As a lifelong farmer who raised hogs, cattle and sheep on our Butler County family farm, I’ve been around long enough to know when someone’s trying to pull the wool over my eyes,” he wrote.

At a time of growing hostility in Washington, cutting prescription drug prices has emerged as a rare bipartisan priority. Republicans and Democrats do have somewhat different approaches to solving the problem, though.

Last week, the Department of Health and Human Services released its 2018 annual report, which includes an assessment of work done to advance the Trump administration’s “blueprint” for lowering drug prices and out-of-pocket costs. In the nine months since the blueprint was published, companies implemented 57 percent fewer price increases than in the previous year.

Accomplishments in 2018 cited by HHS include:

  • Approval of a record number of generic drugs, bringing the total number of generics cleared by the Trump administration to more than 2,000 and saving consumers $26 billion
  • Providing Medicare Part D plans with new negotiating tools for setting prices for 2020
  • Proposing a requirement for drug companies to disclose prices of medications in advertisements
  • Banning gag clauses that prevented pharmacists from telling patients about lower-cost ways to obtain drugs

Some planned price hikes on specific drugs have been rolled back or canceled in recent months, but overall drug costs continue to rise. Experts say it is not yet clear how much any of the administration’s efforts so far have done to rein in costs, in part because most of the blueprint has not yet been implemented.

Anderson noted one proposal by the administration would eliminate rebates for Medicare drugs, but that does not necessarily mean drug companies would then lower the price. They have already determined the profit-maximizing price and they have little reason to reduce it.

“If you need a cancer drug or a drug for your diabetes, you’re going to buy it and you’re going to buy it at whatever price they’re selling it for because it’s your health,” he said.

Grassley has co-sponsored two bills with Democrats that would help generic companies obtain materials needed to develop alternatives to brand-name drugs and crack down on payments made to generic companies by brand-name drugmakers to delay production of alternatives.

“The most important priorities are anything that will get generics and biosimilars into market quickly,” Conradi said.

There is bipartisan interest in allowing importation of prescription drugs from other countries, but there is less consensus on the specifics. Some proposals only allow imports from Canada and only for certain patients, while others would let patients import drugs from any country with comparable regulations and safety standards.

Since taking control of the House in January, Democrats have already introduced several pieces of legislation intended to bring down drug costs. Bipartisan bills co-sponsored by Rep. Peter Welch, D-Vt., would prevent manipulation of drug safety regulations to block the production of generics, improve transparency in Medicare drug pricing, and empower HHS to negotiate Medicare prescription drug prices.

According to Anderson, allowing HHS to negotiate could make a difference, but only if the legislation gives the agency the leverage to say no when the price is too high.

“When you negotiate, you have to be able to walk away from the table, and it’s not clear Medicare would be able to walk away from the table,” he said.

Democrats, including some 2020 presidential candidates, have laid out more ambitious strategies, including caps on out-of-pocket costs, taxing drugmakers for price increases, using foreign drug prices to impose limits on U.S. prices, and allowing the government to manufacture drugs itself.

U.S. consumers often pay much more than those in France or Canada for the same drugs, so Anderson argued basing pricing off what pharmaceutical companies charge in other countries would have a positive impact. The Trump administration has proposed an international pricing index model for Medicare Part B drugs, which are administered by physicians, but he believes it should also be considered for Part D drugs, which include those purchased in pharmacies.

“What’s the reason why we’re willing to pay three times more than France or Canada?” he asked. “There is no reason.”

Levitt has seen some promising signs from the Trump administration, but nothing that would really shake up the current drug market on the scale he feels is needed.

“They may have come up with potentially helpful policies to realign incentives, but the Trump administration does not seem to support larger policies with real impact, such as Medicare drug price negotiations and safe importation, to really bring about change,” he said.

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