High-Cost Drugs: Who’s to Blame?

By Barry Rascovar

Feb. 25, 2019 — The most perplexing aspect of high-priced prescription drugs is finding the true culprit.

Is the really bad guy the developer of these miracle drugs? The manufacturer? Is it the federal government’s agonizingly slow approval process? Is it the lack of competition from far less expensive overseas drugs and biologically similar potions?High-Cost Drugs: Who's To Blame?

Or is the villain the health insurers or the pharmacy benefit managers – the middlemen?

Could it be the big chain pharmacies and independent pharmacists who make some prescription drugs so expensive?

The complexity of this bench-to-bedside pharmaceutical supply chain is stunning, making a simple-sounding solution – such as a Maryland price-control board (SB759/HB768) that sets a ceiling on what can be charged for a drug – nearly impossible to pull off.

What’s missing are the crucial data points that tell us where along this long, winding trail the price of a pill is artificially inflated, as opposed to points along the supply-chain road where true value and legitimate expenses are added.

Opaque View of Pricing Chain

Until we have a clear view of the pricing mechanisms at every step of this production line, a mandatory cost-control board is likely to have a myopic view of the entire situation – and come to short-sighted conclusions.

What’s needed is transformational transparency that gives us a clear picture of how drug-pricing happens. Only then can we identify who is manipulating the numbers for their financial benefit — and the patient’s detriment.

The National Academy for State Health Policy is calling for bills, like Maryland’s drug-pricing transparency and reporting proposal (SB819/HB920), which will “unlock the black box of pharmaceutical pricing and increase consumer awareness.”

Six states already have laws that require transparent reporting on pharmaceutical price increases and the reasons behind them. This is a big step toward finding out how the drug industry sets prices as a pill rolls through the supply chain.

The idea is to force key players in this chain to report and publicize how and why drugs are priced at sometimes super-expensive levels, and why exorbitant price increases happen.

There is also a need to learn more about discounts offered along the way, discounts that never seem to benefit the consumer at the end of the line.

Gagging Pharmacists

Another needed step is a ban on gag clauses that pharmacy benefit managers and other middlemen force pharmacists to sign. These clauses forbid pharmacists from telling customers there might be an equally effective but dramatically cheaper drug available.

Importing drugs from Canada and other countries with trusted, rigorous approval procedures could lower drug prices substantially. Vermont has such a law. But Alex Azar, the federal health secretary, called that proposal “a gimmick” and  blocked Vermont from moving forward.

Last week, the Republican governor of Florida, Ron DeSantis, strongly endorsed a drug-importation bill. DeSantis said he had spoken on Sunday and Monday with President Trump, who was “enthusiastic” and  “will take the necessary executive actions” to make drug imports from Canada a reality. Sadly by week’s end, a White House official tossed cold water on the idea.

Decoding the Supply Chain

There’s an important step Washington could take: Change the law so that Medicare officials can negotiate reduced costs for Part D prescription medications. If Medicare paid the same as state Medicaid programs and the Veterans Administration — who can negotiate for lower prices — the cost savings is estimated at $16 billion a year.

Decoding the supply-chain pricing mechanisms, though, remains the key to putting in place a rational system for establishing the true cost associated with the research, development and manufacturing of new, life-extending drugs. The Maryland bill (SB819/HB920) is no panacea, but it would start to unravel the drug-pricing mystery.

Transparency in pharmaceutical pricing holds enormous promise. For once, we might get some clear answers — and reams of data that can be analyzed and publicized to show which drugs are being priced at unreasonably high levels and who is to blame.

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High-Cost Drugs: Who’s to Blame?