PRESCRIPTION DRUG ADS: AN ESCALATING PROBLEM

The problem is even worse than I thought! Just released by Kaiser Health News: Pharmaceutical company spending on direct-to-consumer advertising has grown 62% since 2012, even as ad spending for most other products has remained static. Pharmaceutical ads tracked by Kantar Media exceeded $6 billion in 2016, with most of that spent on television.

The American Medical Association (AMA) recently called for a ban on direct-to-consumer drug ads, arguing that such ads promote demand for potentially inappropriate use. Unfortunately, a ban is unlikely because of arguments by the drug industry around free speech (first amendment rights), and that the ads are providing “valuable” information to patients about treatment options. For more perspective, the United States is 1 of only 2 countries that allows drug ads; the other is New Zealand.

In 2016, the top 3 ads based on spending were Lyrica, Humira, and Eliquis.

Lyrica is used for various types of neurological pain caused by diabetes “fibromyalgia,” and others. Despite its high cost, its efficacy is marginal, especially when compared with ordinary inexpensive pain medications such as Advil.

Humira is a so-called “biologic” drug used for various types of arthritis, inflammatory bowel disorders, psoriasis (skin disorder) and others. In most instances, Humira (and others in the same class) should be reserved for cases that are severe and do not respond to cheaper, older alternatives.

Eliquis is an anti clotting agent that can be used for problems such as heart (atrial fibrillation) and vein disorders that predispose toward dangerous blood clotting. Again, cheaper, effective alternatives are available.

In all the examples cited above, as in the case of most other drugs promoted on TV, one ‘s own physician should be consulted—and not pressured—before a decision to embark on such therapy. Cheaper alternatives should always be considered.

WHAT SHOULD BE DONE ABOUT THIS PROBLEM

The AMA has called for a ban on direct-to-consumer marketing of prescription drugs and medical devices, a position adopted at the Interim Meeting in November, 2015. The physicians adopting the new policy pointed to excessive advertising budgets in the billions of dollars and the increasing unaffordability of prescription drugs as reasons why the ban is necessary. Excessive advertising is often causing patients to demand new, expensive drugs when older drugs are usually less costly, more effective, safer, and more appropriate for the patient’s specific situation.

AMA members who voted for the policy also cited consolidation in the pharmaceutical industry and anti-competitive practices among drug companies as creating an untenable situation that leads to artificially inflated drug prices. Sadly, drug companies devote approximately 30% of their costs to this purpose, in comparison with about 15% allotted toward research on new, potentially more important products.

“Today’s vote in support of an advertising ban reflects concerns among physicians about the negative impact of commercially-driven promotions, and the role that marketing costs play in fueling escalating drug prices,” said AMA Board Chair-elect Patrice A. Harris in a press release. “Direct-to-consumer advertising also inflates demand for new and more expensive drugs, even when these drugs may not be appropriate.”

In addition to suggesting a marketing ban, the AMA announced it will step up efforts to monitor the pharmaceutical industry and advocate for federal regulators to take action when anti-competitive practices limit the availability of generic medications or manipulate the market to favor an expensive medication.

This is a welcome position by the AMA, and in my opinion, it is long overdue. For the benefit of all consumers, I hope it will eventually result in governmental legislative action! In the meantime, take all these ads with a healthy dose of skepticism!

 

 

 

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High Prices for Drugs With Generic Alternatives: The Case of Duexis and Others

 

    A recent article appeared in the AMA journal noted why certain drug prices, especially generics, are outrageously high. As I explained in a previous post, (http://www.mortontavel.com/2017/01/06/), some drug makers employ legal “scams” to achieve such astronomical results. Below we describe a more subtle means they achieve the same results of bilking the public.

To begin, approximately 13% of health care expenditures in the United States are for prescription drug spending, nearly $420 billion in 2015. High-priced pharmaceuticals, therapies that cost more than $600 per month, are projected to eclipse 50% of total drug spending by 2018. Price increases for these therapies have been persistent, with unit costs increasing 164% between 2008 and 2015.

Pharmacy benefit managers are third-party administrators that process and pay prescription drug claims and negotiate drug prices with manufacturers. These managers are ostensibly charged with the responsibility of mitigating cost increases through such means as controlling increased co-payment requirements for patients, and exclusion of some expensive medications from health plan formularies. Below we use the illustrative example of Duexis, a single-tablet, fixed-dose combination of the nonsteroidal anti-inflammatory (NSAID) ibuprofen and the common antacid, famotidine (PepcidR), marketed by Horizon Pharma (Dublin, Ireland). This is how the pharmaceutical companies have sought to circumvent such restrictions and maintain high prices for drugs with generic alternatives.

Duexis was approved by the US Food and Drug Administration (FDA) in 2011 to relieve symptoms of arthritis and to decrease the risk of developing peptic ulcers in patients at risk for such problems. After approval, Duexis was first marketed at an average wholesale price, used for pricing and reimbursement of prescription drugs, of $158.40 per month. The drug is a combination of 2 over-the-counter medications that are sold as generics and would cost approximately $16 per month if purchased separately at the same doses. Since 2012, Duexis has had 11 price increases. As of August 12, 2016, the monthly wholesale price was $2061, representing a 1131% aggregate increase. In 2015, nearly $200 million was spent on Duexis in the US, with estimated cumulative revenue over 5 years of more than $600 million since FDA approval.

To circumvent co-payment requirements imposed by pharmacy benefit managers on patients to reduce use of high-priced drugs, pharmaceutical companies frequently offer co-pay assistance, also known as drug coupons; coupons cover direct costs to patients but not the amounts that insurers pay the manufacturer. In 2015, pharmaceutical manufacturers spent more than $7 billion on co-pay assistance. Horizon reports that 98% of patients prescribed Duexis have co-payments of no more than $10. Thus, patient out-of-pocket costs for Duexis are less than for ibuprofen and famotidine purchased separately. Federal programs, such as Medicare, do not permit manufacturers to provide co-pay assistance, because such assistance is considered an illegal inducement to encourage use of the drugs. Pharmaceutical companies, however, can work around this federal policy by providing financial assistance to patients through “independent” charities. The Patient Access Network Foundation, a large co-pay charity, provides financial assistance to patients prescribed Duexis and others.

Pharmacy benefit managers can also limit use of high-priced drugs by excluding them from health insurance formularies. When 2 large pharmacy benefit managers, Express Scripts and Caremark, excluded Duexis in 2015, Horizon provided Duexis without charge to patients covered by plans using these benefit managers. This response ensured that patients who received Duexis at no cost and the physicians who prescribed it remained aware of the brand, while the company collected revenue from other payers that continued to reimburse the drug. Pharmaceutical companies also ensure that their expensive therapies remain on formularies by providing rebates to pharmacy benefit managers, calculated as a percentage of the dollar value of a dispensed drug. As the result of an increased rebate offer from Horizon, Caremark removed Duexis from its exclusion list for 2017. Pharmacy benefit managers may provide some of the rebate savings to their customers, but typically much of the rebate is kept by the benefit manager as additional revenue, clearly an ethical violation.

In 2015, Horizon’s CEO was among 5 industry leaders elected to the board of directors of the Pharmaceutical Research and Manufacturers of America. Such tactics have been used to increase sales for other expensive drugs with effective, lower-priced, generic alternatives. Examples include Horizon’s Vimovo (naproxen/esomeprazole), Novum’s Alcortin A (hydrocortisone/iodoquinol) topical gel, Valeant’s Zyclara (imiquimod) topical cream, Mallinckrodt’s Acthar gel (Corticotropin injection), and Insys Therapeutics’ Subsys (fentanyl) sublingual spray.

The US experience with Duexis illustrates the problem of self-serving interests in health care. Companies charge what the market will bear and use available strategies to circumvent price constraints. Insurance plans and pharmacy benefit managers generally avoid the negative publicity that accompanies restrictive drug formularies and pass along the associated increases in costs through higher premiums. Patients, noting that they have paid for health insurance coverage, request what they believe to be the best and most convenient therapies, regardless of the price or generic alternatives. Physicians, perceiving that they are acting in the best interests of the individual patient and seeking to avoid disagreements and insurance hassles, are often unwilling to advocate for clinically equivalent but less costly therapies.

REMEDY FOR THIS PROBLEM

There should be greater scrutiny of the medical value of expensive drugs, especially those with inexpensive generic alternatives. The states and the federal government should ban all third parties from being involved in prior authorization. This is the responsibility of the physician who prescribes the medication. Additionally, states should restrict the use of co-pay assistance programs, particularly since the majority of drug coupons are for brand-name medications for which lower-cost therapeutics are available. Finally, better federal regulation of “charitable” organizations that provide financial assistance to patients is needed. For example, contributions to such organizations from manufacturers should not be allowed for diseases treated by a single drug, because manufacturers can effectively ensure that donations will be spent only on co-pay assistance for their products. To preserve the long-term financial stability of the health care system, the use of medications that provide clearly established benefit to patients should be the first priority, although they have their own challenges. High-priced drugs with generic alternatives should be, as described above, carefully controlled by governmental action

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DRUG PRICES: WHY ARE THEY SO HIGH AND CAN WE DO ANYTHING ABOUT IT?

drug prices

    America spends a tremendous amount for prescription drugs—$424 billion last year alone. And that number is rising fast with no sign of slowing down anytime soon. We often encounter horror stories of drug companies that decide to raise prices to astronomical levels, and we wonder why they get away with such reprehensible behavior. The answer is, sadly, because they can!

We have long known that when new drugs are patented, the originating company gains the exclusive right to be a de facto monopoly for the life of the patent, ordinarily 17 years. After that, competition is allowed to enter and, in theory, provide generic versions, which should cause the prices to drop considerably. But now we are witnessing a significant increase in both new and some older drugs as well.

Let’s look at some reasons for such high prices:

Reason 1): Drug companies can charge whatever price they want. There is simply no regulatory source, government or otherwise, that has the power to control drug pricing. When asked why they are charging apparently exorbitant prices, they often respond by claiming they are recouping very high costs for research and testing. This is partially true, but, for large companies such as Pfizer, approximately 16% of their revenue is devoted to research, whereas they spend about 30% on selling, marketing, and advertising expenses. Moreover, taxpayers already shoulder a substantial portion of those research costs. About 38% of all basic science research is paid for with tax money through federal and state governments, according to a recent study published in the AMA journal.

There is also no restraint on companies’ raising prices on already marketed drugs that continue under patent protection.  For instance, in the past year or so, Abilify, given for bipolar disorder and other mental problems, increased over 10% to approximately $1,000 per average monthly prescription.

Reason 2): Insurance companies are charging you more. In theory, these companies should be protecting you against high prices, but instead, they have been passing on the elevated prices through raising your co-pay or deductible amounts, or simply raising your premiums, all of which, in effect, pass on much of the high costs directly to the consumers.

Reason 3): Old drugs are being reformulated as costly “new” drugs. One example is that of insulin, a drug that is over 100 years old. But companies repeatedly change its formulation, allowing them to get new patents each time. For instance, one new form of insulin is called Toujeo, given by an injection that lasts for about 1 week. Each dose of 450 units may cost about $350, and depending upon how much one requires, can amount to tidy sums for the company.

Reason 4: Generic drug shortages can trigger massive price increases. For various reasons, shortages of basic ingredients of generic drugs can arise and lead to price gouging. One example is that of the old drug, colchicine, commonly used for the treatment of gout, a form of arthritis. In past years this drug could be purchased for mere pennies, but now, it retails for approximately $8 per pill, and often as many as 8-10 pills or more can be necessary for a single attack. A daily dose of one pill or more may also be needed on an extended basis.

Reason 5): “Specialty” drugs can be “out of sight”. The rise of super-expensive, so-called specialty drugs is a real threat. For example, the hepatitis C medications, Sovaldi and Harvoni, can cost up to $95,000 for a single 12 week course of treatment.

At present, according to a recent report by the Congressional Research Service, these drugs account for less than 1% of prescriptions in the U.S. but represent about one-third of total drug spending by consumers. Since drug companies push heavily in the direction of such highly profitable products, it is likely that by 2020 very expensive drugs will constitute an even bigger chunk of drug spending.

More than half of the 56 medications approved by the FDA in 2015 were of this specialty variety, and more than 900 biologic drugs are currently under development. While these products offer great hope for the future, this raises the important question of how society is going to afford them.

Compounding this problem, competition in this specialty arena may not eventually bring down prices as one would usually expect, for many such drugs are biologics—medications derived from living microorganisms. That makes them much more difficult to copy than conventional drugs, meaning that cheaper generics are far more difficult to produce in a reasonable period of time.

HOW CAN WE DEAL WITH THIS PROBLEM?

The drug companies should be encouraged to adopt a more humane policy, which would involve controlling prices at a more reasonable level, certainly in line with overall inflation. But at least they should be forced by the public to justify apparently unreasonable prices. For instance, Vermont passed a bill that requires these companies to justify high costs and price increases, and to calculate the financial effect on insurance premiums with many specified drugs. This measure at least raises public awareness and provides misbehaving companies with bad PR, something that should get their (and their stockholders’) attention. In most foreign countries, governmental intervention causes prices for the same drugs to be considerably less than in the U.S. For instance, in the U.K., a centralized advisory board calculates the value of a medication by taking into account a drug’s efficacy, safety, and total benefits to the healthcare system. As a result the price of the same drugs in that country averages about 50% less then here. Although reasons vary from country to country, prices in the U.S. are far greater than all the other western nations.

Our government should do more to curb these prices, and could accomplish this through the following means: First they could set a limit on out-of-pocket costs, providing protection against very high or sudden spikes in prices. For instance, California enacted a law limiting a consumer’s burden at $250 for a single prescription drug per month, or $500 for certain high-deductible plans. Second, they could more rapidly approve more generic versions of common drugs, currently a slow process. Third, they could allow limited importation of drugs from legitimate Canadian and European sources, which is currently illegal under U.S. law. Fourth, they could use their so called “march in” rights, that is, in cases of high prices of drugs developed in part from taxpayer money, the Department of Health and Human Services could force the company to allow another manufacturer to make a generic version that is cheaper for the consumer. Finally, the government should prohibit direct to consumer advertising of prescription drugs; other than New Zealand, we are the only nation that allows such promotion.

Perhaps the most potent means to control excessive pricing is through the enactment of a single payer system in the U.S., i.e. Medicare for all, which I have discussed before, http://www.mortontavel.com/2015/12/31/. This would allow the government to negotiate directly from a position of power with all pharmaceutical companies. This provides another good reason—of many—to move to the single payer format. Some have estimated that such an intervention could reduce drug prices by about 40%.

Finally, the consumer can fight back on a personal level. Ask your physician, before he or she writes a prescription, what the expected costs are likely to be, and if there are equivalent cheaper generics available. Although you could mention a given drug advertised on TV, do not insist that you receive it unless this is agreed upon by your own doctor. Also, there are many instances of older drugs, while not identical to the newer patented variety, are just as effective and far less expensive.

In all instances, consider shopping around for the lowest prices, which includes online sources such as GoodRx to learn a drug’s “fair price.” Prescriptions can be filled by legitimate sources such as HealthWarehouse.com. Be careful, however, since fraudulent sites abound, use only those operating within the U.S. and display the VIPPS symbol to show that it’s a Verified Internet Pharmacy Practice Site.

Unfortunately, the ultimate answer may lie with our government, which has the power to restrict such excesses, while, at the same time, must avoid stifling necessary research. This is a daunting task, but for those that believe that government should stay away from this problem altogether, be ready to suffer the consequences!

 

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