This administration doesn’t understand the US healthcare market

  • American consumers regularly pay two to six times more for the same drugs as people abroad, but the United States spends some of the lowest amounts of its total healthcare on prescription drugs relative to other developed nations.
  • By law, Medicare cannot engage in pharmaceutical negotiations for prices.
  • PhRMA cites that on average, it takes more than 10 years and $2.6 billion dollars to bring a drug to market but these costs may be overstated.
  • This administration doesn’t understand how our healthcare system really works.

Trump’s opening salvo at pharma pricing is way off the mark as is the idea to have a drug’s list price in DTC ads.  Yes, there is an argument to be made about the high price of prescription drugs at a time when pharma companies, and the healthcare sector in general, are making record profits, but we have to remember that only 10% of every healthcare dollar spent goes for prescription drugs.

In other countries, the health system is simpler, there aren’t as many organizations trying to buy drugs, so those groups can exert greater purchasing power and that can lower costs. The United Kingdom’s National Health Service, for example, purchases drugs for the entire country’s supply, known as a formulary. But in the United States, we have individual insurance groups, hospitals and plans that buy for their individual consumers. Plans and groups negotiate their own prices with the pharmaceuticals, resulting in an unregulated variety of pricing.  In other words, everyone wants a piece of the healthcare dollar.

Medicare’s buying power should be harnessed to reign in prescription drug costs.

Medicare is one of the largest buyers of prescription drugs. If it were able to negotiate with pharmaceuticals directly, it could drive the price of drugs down. When groups like Medicare can deal directly with the sellers, that can help determine the lowest cost. In Germany, nonprofit health insurers are able to bargain with pharmaceuticals and health providers to get the best price possible.  A single payer system is coming and when it does big pharma is definitely going to feel the pain.

Drug review boards can lower costs

In the United States, we don’t have a central agency, governmental or NGO (non-governmental organization) that engages in comparative research that comes up with clear statements of drugs efficacies. The U.S. Food and Drug Administration has no regulatory authority to do large comparative reviews of medications.  This is important because pharma companies love to come out with “me too” drugs to try and grab a share of a profitable drug’s market.

Perhaps nothing illustrates the outrage over high drug prices like the cost of insulin.  Eli Lilly, Novo Nordisk and Sanofi control almost the entire insulin market. Together, those companies had about $22 billion in global insulin revenue in 2017.  While most patients don’t pay the full list price for insulin, but people who are uninsured or have a high-deductible insurance plan do.

Generally, the companies have placed blame on insurance middlemen, saying they’re taking bigger cuts of the insulin market through rebates. That’s true — but the drug companies have also raised their prices and used the patent system to keep them high.

It’s hard to go on social media without seeing someone complaining about the cost of insulin.  Rather than dive into why most people just want lower prices.

PhRMA continually uses the argument that drug development costs are high, but that argument is weak.  Many pharma companies are buying other, smaller, pharma companies who have promising drugs in development and pricing them very high.  Gilead is an example of corporate greed run amok as they bought a drug from a government employee and priced it sky high.  Now that the drug has competition and sales are declining most of the executives at Gilead have abandoned ship.

If we are to lower drug prices this administration needs to target PBM’s as well as big pharma.  PBM’s are making a lot of money at our expense and they really don’t add value.  The FDA should also be given authority to deny approvals for “me too” drugs that don’t show better efficacy then those already on the market.

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