Managed Care Update

March 30, 2019

Increased transparency, value-based pricing, and other policy reforms are necessary to ensure that Americans can access medications at affordable prices, a panel of experts said during a US Senate hearing January 29, 2019.

Senate Committee Discusses the Burden of High Drug Prices and Potential Solutions

Increased transparency, value-based pricing, and other policy reforms are necessary to ensure that Americans can access medications at affordable prices, a panel of experts said during a US Senate hearing January 29, 2019.

Douglas Holtz-Eakin, PhD, president of the American Action Forum; Mark E. Miller, PhD, vice president of healthcare for the Laura and John Arnold Foundation; and Peter B. Bach, MD, MAPP, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, joined Kathy Sego, the mother of a child with insulin-dependent diabetes, at a hearing on prescription drug prices before the US Senate Committee on Finance.

Sego relayed the heartbreaking story of her 22-year-old son, Hunter, who received a diagnosis of type 1 diabetes around his eighth birthday. Just before leaving for college, Hunter found out exactly how much his insulin cost his family when he went to pick it up at the pharmacy and was given a price tag of $1700 for 4 vials. According to Sego, her son panicked at the thought of spending that much money, even with health insurance.

Later, she found out that he purchased just 1 vial and decided to ration it. In 2 weeks, he lost 20 pounds because he severely cut his food intake to match the amount of insulin he was taking. According to Sego, her son could have died. “I’m heartbroken to know my son thought he was a financial burden to us,” she said. “Money over life is not the choice we want him to make.”

At the beginning of the hearing, Sen Ron Wyden (D, Oregon), the ranking Democrat on the committee, highlighted what he called a “grotesque” practice by pharmaceutical companies: ratcheting up the price of older drugs.

He provided the example of Humalog, from Eli Lilly, which cost $21 a vial in 1996 and is $275 a vial today. That represents a 13-fold price increase for insulin, which was discovered in the 1920s. “Humalog is not 13 times more effective,” Wyden said. “A vial does not last 13 times longer than it did in 1996.”

Price increases by companies that have been left unchecked to set prices on their own have “turned patients into beggars,” he added.

Both Wyden and the committee chair, Sen Chuck Grassley (R, Iowa), noted that the heads of the major pharmaceutical companies had been invited to the hearing, and they all passed. According to Wyden, that is telling. In the past, even representatives of cigarette companies, which “make a product that kills people,” he said, testified before the committee.

It is important to address the rising costs of prescription drugs because they are a basic necessity for many Americans and their loved ones, Grassley said. Although he acknowledged the need for a strong research engine to develop new treatments, he said there must be a discussion about the affordability of new drugs. “When it comes to drug pricing, you should not need a PhD in economics to understand how much your prescription costs,” Grassley said.

Grassley added that he is in favor of more transparency and mentioned the idea of including drug prices in television ads. In October 2018,1 President Donald Trump proposed requiring drug companies to include prices in ads as part of his blueprint, American Patients First. According to Grassley, this is a logical step. Drug advertisers tell consumers about the benefits of the drugs and also are required to disclose side effects, “but they don’t seem very gung ho to tell you how much a drug costs,” he said.

Holtz-Eakin described the combination of supply and demand as a recipe for an economic crisis: Development costs about $3 billion, and just 8% of drugs are ultimately approved; meanwhile, more than half of Americans take drugs; 60% have at a chronic condition and 40% have at least 2. He explained that policies need to address how to improve the supply side by lowering the cost, shortening the time between when a drug is tested and when it comes to market, and increasing the number of both branded and generic drugs. “There’s nothing better than having multiple drugs,” he said.

Miller highlighted the importance of protecting innovation and also lowering the cost for the patient and the taxpayer. “You have headroom between the prices being charged and being paid and how much is being spent on [research and development],” he said. “I think you can go after prices and go after spending and not immediately threaten innovation— but you should always keep that in mind.”

Another solution is value-based pricing, which can address expensive drugs that have no current competition, Bach said. Through this mechanism, prices would be set based on the drug’s benefits. The current healthcare system has little alignment between costs and benefits.

Bach also discussed value-based insurance design, which reduces the copayment for patients if the drug has higher value. “The notion is not that the patient should pay more,” he said. “The notion is that the pharmaceutical company should capture a higher price if their drugs work better relative to if their drugs work less well.” This would reallocate money away from drugs where the prices don’t match the benefit and free up money for drugs that work better, he said.

The idea of drug reimportation was raised during the hearing after Sego said that during a visit to Hungary, her family found that there, a vial that would cost them more than $400 out of pocket in the United States costs just $10.

Although she wanted to stockpile vials, that wasn’t a sustainable option. Her family couldn’t visit another country every time Hunter needed more insulin.

Another committee member, Sen Debbie Stabenow (D, Minnesota), said that it’s just a 10-minute drive for some of her constituents to cross the border to Canada, where drug prices can be 40% lower. She questioned how a company can argue that an FDA-approved drug is not as safe if it’s bought in Canada: “We have trade on everything else, but we close the border on safe, FDA-approved drugs on both sides of the border.”

Stabenow noted that Sego’s situation is not rare, adding that she wished it was. She relayed that she heard about a similar situation from a constituent in Minnesota, whose son died after rationing his insulin. What, Stabenow asked Sego, would she say to the drug company executives if any of those invited had shown up?

“As a mother, I would probably say to them: ‘I hope you know that there are people who are going without their medication, and because they’re going without their medication, they’re at risk of dying,’” Sego said. “I don’t know how any person would be OK with knowing that the medication [cost] is so high that you have to make a decision about life or death.”

Editor’s note: As Evidence-Based Diabetes Management™ went to press, leaders of several major drug manufacturers, including Sanofi, were scheduled to appear before the Senate Committee on Finance on February 26, 2019.

REFERENCE:

  1. Caffrey M. Trump officials outline plan to put drug prices in TV ads. The American Journal of Managed Care® website. ajmc.com/newsroom/trump-officials-outline-plan-to-put-drug-prices-in-tv-ads. Published October 16, 2018. Accessed February 25, 2019.