Time to curb the rising costs of prescription drugs

The U.S. will see the largest increase in per capita costs in pharmaceuticals among developed markets through 2018. The CREATES Act: Ending Regulatory Abuse, Protecting Consumers, and Ensuring Drug Price Competition would approve federal and state regulation on costs to allow for return on investment by manufacturers but ensure affordability for patients.


In June of this year, I testified before the Senate Judiciary Committee about the rising costs of prescription medications and specifically about the CREATES Act: Ending Regulatory Abuse, Protecting Consumers, and Ensuring Drug Price Competition (S. 3056), a bill with bipartisan support. I was 1 of 6 witnesses, a group that also included representatives of the Pharmaceutical Research and Manufacturers of America (PhRMA), generic drug manufacturers, and health plans. ACP was the only medical organization asked to give testimony at the hearing.

I brought the perspective of an internist and of my patients. As an example, I cited a 67-year-old patient with diabetes, hypertension, and heart disease who can no longer afford his medications, as he has fallen into the “doughnut hole” of drug coverage and has no generic alternatives to brand-name drugs.

As another example, I cited a 40-year-old woman with asthma who cannot afford her preventive and rescue inhalers due to their high cost and her high-deductible plan. I pointed out that lack of adherence will lead to asthma exacerbations and potential emergency department visits and admissions to the hospital.

I also mentioned a third patient with rheumatoid arthritis who cannot afford immune-modulating medications, considered the standard of care, because of lack of generic low-cost alternatives. Poor control of her disease will lead to more problems such as joint replacement surgery and medical complications.

The last example I gave involved patients with type 1 diabetes who have no generic insulin options. I emphasized that these are examples from 1 day in the office, and these experiences are repeated thousands of times around the country for internists and our patients.

The CREATES Act seeks to provide injunctive relief to generic drug manufacturers for instances of abuse by brand-name drug companies in not sharing drug samples and safety protocols required for FDA approval before bringing a drug to market. This is one of several tactics used by brand-name manufacturers to squelch competition.

Other methods include “product hopping,” which extends patent life with slight alterations in dosing schedule, a new indication, or a new route of administration or delivery device, and “pay for delay” or “reverse payment settlement,” which allows brand-name companies to pay generic manufacturers to keep drugs off the market. Another strategy is “evergreening,” which extends patent life with slight modifications in molecular structure but no appreciable change in efficacy or safety.

We know that prescription drug costs are rising rapidly. According to data from CMS and from the IMS Institute for Healthcare Informatics, in 2013, prescription drug costs accounted for 9.3% of total health care spending in the U.S., with a growth of 2.4% over the previous year to $263 billion. In 2014, spending grew by 12.2% to $297 billion. The reasons for high drug costs are multifactorial. They include lack of price transparency, regulatory barriers, a shortage of comparative data on cost-effectiveness and value of drugs, health plan benefit structure, high profit margins, and loopholes as mentioned above.

The pharmaceutical industry argues that research and development costs, regulatory requirements, and the costs of “failed” drugs that never make it to market or are discontinued shortly after marketing contribute to high prices. It also argues that by improving quality of life for millions of patients and preventing diseases, new drug development has controlled other health care costs.

What the industry fails to point out is that much of research and development is conducted in academic institutions and that drug manufacturers receive public funding for some of their research. Rules and regulations are important and are needed to protect patient safety. In addition, according to Kantar Media, U.S. spending on direct-to-consumer advertising has grown 30% in the past 2 years to $4.5 billion per year, which is more than is spent on research and development.

The larger context of the cost of drugs or any health care expenditure is the free-enterprise nature of our economy. Drug manufacturers account for approximately 14% of health care costs and contribute to the nearly 20% of the gross domestic product (GDP) that is the health care industrial complex. In this setting, the pharmaceutical industry will try to maximize profit for its shareholders. Outliers such as Turing Pharmaceuticals, which recently increased the price of the antiparasitic drug pyrimethamine (Daraprim) from $13.50 to $750 a pill, highlight extremes of the for-profit pharmaceutical industry.

The benefit of drugs in maintaining, preventing, and curing disease is a major advance in the practice of medicine. The aging population will mean more patients on multiple medications (a study published in Mayo Clinic Proceedings in July 2013 found that 70% of patients take at least 1 prescription medication), more brand-name drugs, more specialty drugs for the treatment of cancer or hepatitis C, more drugs for diabetes and heart disease, and more genetically tailored drug therapy. Therefore, it is imperative that we address the rising costs of drugs.

The College has taken a proactive position with a recent policy paper, “Stemming the Escalating Cost of Prescription Drugs,” which was published online by Annals of Internal Medicine on March 29. These are some of the recommendations:

  • ACP supports transparency in the pricing, cost, and comparative value of all pharmaceutical products. Pharmaceutical companies should disclose actual material and production costs to regulators and research and development costs contributing to a drug's pricing, including those drugs that were previously licensed by another company. Rigorous price transparency standards should be instituted for drugs developed from taxpayer-funded basic research.
  • ACP supports greater flexibility by Medicare and other publicly funded health programs to negotiate volume discounts on prescription drug prices and pursue prescription drug bulk purchasing agreements. It also supports consideration of legislative or regulatory measures to develop a process to reimport certain drugs manufactured in the United States, provided that the safety of the source of the reimported drug can be reasonably assured by regulators, and establishment of policies or programs that may increase competition for brand-name and generic sole-source drugs.
  • ACP opposes extending market or data exclusivity periods beyond the current exclusivities granted to small-molecule, generic, orphan, and biologic drugs. ACP supports robust oversight and enforcement of restrictions on product-hopping, evergreening, and pay-for-delay practices as a way to increase marketability and availability of competitor products.
  • ACP supports research into novel approaches to encourage value-based decision making, including value frameworks, bundled payments, indication-specific pricing, and consideration of pricing, cost, value, and comparative effectiveness of prescription medications included in a health plan's benefit package.
  • ACP believes payers that use tiered or restrictive formularies must ensure that patient cost-sharing for specialty drugs is not set at a level that imposes a substantial economic barrier to enrollees obtaining needed medications, especially for enrollees with lower incomes.

The escalating costs of medications need to be addressed, and doing so will require a coordinated effort by all stakeholders, including the pharmaceutical industry, pharmacy benefit managers, health plans, the federal and state government, physicians, and patients. The effort needs to focus on transparency, value, patient affordability, and a reasonable return on investment to promote innovation.

ACP's position paper cites data showing that the U.S. will see the largest increase in per capita costs in pharmaceuticals among developed markets through 2018. Federal and state regulation on costs will be needed to allow for return on investment in our free-market system but ensure affordability for our society.