The Mad World of Drug Pricing is Scary
Today’s video involves a return to the seemingly crazy world of prescription drug pricing in the U.S. A recent video was a result of “disrupters” entering the market, namely Amazon Pharmacy and Mark Cuban’s Cost Plus drug program. We concluded, however, that there wasn’t much to disrupt. We found that most inexpensive generic drugs are, after all, INEXPENSIVE, and can be purchased in many convenient ways.
Today’s video highlights the frustration when drugs are not affordable and Big Pharma keeps them unaffordable in questionable ways. There is no conclusion to today’s video except to remind everyone of how scary this should be to all of us. After all, someone we care about might be prescribed one of these unaffordable drugs while they are unaffordable and even with coverage, what you might owe to remain on a given drug, can be terribly burdensome. We also have sympathy for the uninsured who suffer the most from high list prices and in our complex system, even a conscientious soul might unwittingly find themselves with a gap in coverage.
Let’s focus on actual examples. Humira, originally manufactured by Abbott Medical and later by AbbVie after a corporate spinoff, was to have gone off patent in 2016. Humira is primarily prescribed for rheumatoid arthritis. AbbVie was able to maintain exclusivity until this year apparently by a combination of clever intellectual property claims combined with litigation against future competitors. The settlements of these suits resulted in other manufacturers agreeing to delay introduction of their drugs to the market.
Another recent example involves insulin products for diabetics. Recent action by the federal government limits what those on Medicare have to pay out-of-pocket for insulin products to $35/month. This brought great pressure on manufacturers to protect non-Medicare consumers. As a result, Eli Lilly recently announced a 70% price cut for its most prescribed insulin products. According to a Wall Street Journal article, President Biden praised Eli Lilly’s action, stating on March 1, “this is a big deal and it’s time for other manufacturers to follow.” This was followed by Sanofi’s announcement of a 78% reduction in the list price of many of its insulin products.
We understand this is only the list price but that is a starting point for negotiations that occur in the murky world of rebates so its importance cannot simply be dismissed. And the list price is also what the uninsured would be charged if they are not savvy enough to know to shop the world of manufacturer’s coupons. Common sense suggests that if any business can cut the list price of anything 70% or 78% that the prices were outrageous.
It all seems too extreme and so unnecessary. Drug manufacturers must have the resources to spend on research and development but the apparent ease with which they are able to manipulate list prices might engender outrage rather than praise. It’s unlikely that companies can alter their objective of profit maximization at any cost so, unfortunately, we must rely on regulation of the field.
And where has the government’s attention recently focused? Of late we have Bernie Sanders blasting the CEO of Moderna for charging $130/dose for its COVID vaccine. We know the government provided Moderna with billions in funding in research and development and purchased millions of doses of the vaccine but that benefitted us all. And Moderna spent the prior ten years developing the mRNA platform. In the context of these other debates, with the price of Humira reportedly increasing from around $50,000/year in 2016 to over $80,000/year in 2022, it is difficult to be too upset about a $130 charge for a vaccine that not only protects you but your family and community.
There are many issues we haven’t discussed above including direct-to-consumer advertising. This is another topic altogether but if only the United States and New Zealand allow direct-to-consumer advertising, doesn’t that suggest it may not be a “best practice?”
Studies suggest that in the United States we pay more for drugs than any other country. Perhaps we should all check on which pharmaceutical manufacturers are in our 401(k) portfolios!
Even if we regret missing out on the opportunity to buy Moderna stock, I hope we can agree that prescription drug issues remain the most opaque, adversarial and vexing problems in healthcare. Surely we can do better.