At Forum on Pharmaceutical Costs, Panelists Seek to Dodge Blame

Wednesday's Oregon Health Forum breakfast, which looked at drug pricing, revealed the complexity of the issue – and the political will necessary to enact any changes.
Panelists at the Oregon Health Forum September breakfast event.

Representatives of the pharmaceutical industry, consumers, drug-management plans and a big health insurer gathered on Wednesday at Portland’s Multnomah Athletic Club, along with an academic and a politician, to try to determine who’s responsible for high pharmaceutical costs, with predictable results.

Somebody else is to blame, said nearly every panelist at the Oregon Health Forum September breakfast event. Either that, or we all are.

Mario Yedidia, senior research analyst at UNITE HERE, a labor union behind a prescription drug transparency law in California, spoke first. Yedida is involved in efforts to require drug price transparency in Oregon as well.

UNITE HERE used to work with pharmacy benefits managers, which administer prescription benefits and negotiate prices with drug companies, but took those functions in-house to save money for its 275,000 members, he said.

But without a better understanding of how drug companies set prices and why, here said, those who are paying for prescriptions or writing policies do not have all the information they need to make informed decisions.

Up next, Moda Health’s director of RX Clinical Innovation, Carly Rodriguez, noted that rising drug costs are a challenge for both the private sector and public employers.

“Moda believes rising drug costs are a shared responsibility,” Rodriguez said.

She noted that Moda has seen a 200 percent increase in spending attributable to specialty drugs in the past five years, and expects half of all prescription spending in 2018 to be on these specialty medications – which make up less than half of all prescriptions filled, and which often arise as new and innovative therapies are brought to the market.

At the same time, however, more people are being prescribed medication, and the prices of existing drugs are also rising, which both also contribute to rising spending, she noted.

Saumil Pandya, senior director of policy and research at pharmaceutical industry group PhRMA, defended drug companies and attempted to recast discussions of higher prices.

“We talk about medicines in this country and drug prices, I always ask, ‘Which price are you talking about?’ When a manufacturer comes up with a new drug, they don’t set the price in a vacuum,” Pandya said. 

“The list price is like a price on a car when you go to buy it. It’s the starting price for contract negotiations,” he continued. “The amount of rebates and discounts that manufacturers pay is not a trivial amount.”

Furthermore, Pandya argued, it’s not fair to simply blame drug companies for the final price of a medication.

“You have manufacturers, you have PBMs, you have drug wholesalers, you hae pharmacies, and you have hospitals,” he said, noting that middlemen add a charge before selling on drugs, and citing a study that hospitals often charge two to four times what they paid for drugs they dispense.

“When we come up with a product, everybody takes a cut,” he said.

Rep. Rob Nosse, D-Portland, who has been pushing for price transparency and caps on drug co-pays in Oregon, concurred that the system is complex and that unraveling drug pricing is daunting.

“It’s very easy to get lost in the policy and the politics on all of this,” Nosse said. “I didn’t even know what a pharmacy benefits manager was until I started in the Legislature in 2015.”

That complexity feeds high prices, he said.

“The main reason that drugs cost so much is that our political system tolerates it,” he said. Yet he argues that those who oppose regulation are overlooking the role that government could play in tackling the problem.

“There are safety regulations. There are price-gouging regulations. There are monopoly regulations. The FDA will not allow me to sell you a can of soup that makes you sick. Car manufacturers are required to install seatbelts. That’s not a free market,” Nosse said. “The drug market is not a free market either”

 “It’s not a free market. I characterize it as an incredibly dysfunctional market,” concurred Daniel Hartung, associate professor of pharmacy, at Oregon State University and  the OHSU College of Pharmacy

“No one knows, really, the net cost, that anyone is paying for these drugs,” Hartung said. And the reasons that drug prices change are hard to unravel as well.

In the 1990s, when three of the oldest leading multiple sclerosis drugs came on the market, treatment cost about $10,000 per year, Hartung noted. But as new drugs came on the market, competition did not push prices down – it seemed to drive them up, so that today MS treatment costs about $80,000 per year, whether with newer drugs, or with those released back in the ‘90s.

“More products on the market, for any disease, does not have the effect of lowering prices and instead appears to have the perverse effect of increasing prices,” he said.

With several panelists having put some of the blame on middlemen like pharmacy benefits managers, April Alexander, a senior director at PBM trade group Pharmaceutical Care Management Association defended her sector.

“The PBMs goal is to provide a high-quality service at the most affordable price in order to enable the client to provide services they are obligated to provide,” she said, noting that there are a number of tactics that help accomplish this.

PBMs negotiate with drug companies, pharmacy chains, and also look for was to save on dispensing costs, such as my encouraging insurance members to use mail-order prescription services, she said.

As panelists continued to defend their own roles in the pharmaceutical industry and to suggest the blame belonged with others, Nosse again emphasized how confusing the issue can be – and suggested transparency could help.

“We have no real idea why these things cost the way they do,” he said. “It’s a very complex system.”

Jesse O’Brien, policy director at OSPIRG and moderator at the Oregon Health Forum event, seemed to concede that despite the program’s title – “Who’s Responsible for Pharmaceutical Prices?” – the answer seemed as elusive as ever.

“It would be great if the answer to this was something other than, ‘It’s complicated,’” O’Brien said. “Who’s responsible for pharmaceutical prices?”

“We are ultimately,” Nosse said, delivering the final words of the breakfast gathering.

“In a democracy, we make laws, we set policy,” he said. “It’s up to us. We determine this.”

Reach Courtney Sherwood at sherwood@thelundreport.org.

 

 

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Comments

So somehow, other countries have figured out how to be less complex as their drug costs are exceptionally less. Perhaps use that as a starter to figure out which pockets need to be trimmed or eliminated to get the costs down.