The News & Observer
Increasing drug prices hurt patients and families
By John Rother
March 30, 2016
The U.S. Senate Aging Committee conducted a hearing recently to investigate why certain decades-old drugs are seeing sudden price spikes of more than 5,000 percent.
Senators on the committee asked pointed questions about two “hedge fund” pharmaceutical companies, Turing and Retrophin – both at one point headed by disgraced former CEO Martin Shkreli. What they uncovered was a disturbing pattern of drug acquisition that exploits vulnerable patients to the tune of major profits.
According to the committee’s investigation, these hedge fund pharmaceutical companies executed a plan designed to generate profits by taking advantage of the monopolies many of them maintain over certain medications.
First, they identify older, well-established brands with expired patents and no generic competitors. Second, they make sure the drug is the “gold standard” – meaning health care providers either can’t prescribe a substitute or are uncomfortable in doing so. Third, the company picks a drug with a small patient population, which leads to less scrutiny since there are fewer people to complain. Fourth, they put the drug in a closed distribution system to guarantee zero competition. Finally, they raise the price – often substantially.
Unfortunately, patients, families and taxpayers bear the brunt of these higher prices, as noted by several senators on the committee.
“Every single taxpayer and every single person who has insurance should be angry, too,” said U.S. Sen. Thom Tillis, referring to Turing’s overnight increase on the price of Daraprim from $13.50 to $750 per pill. “To provide the treatment, this company, Turing, and their leaders have decided they’re going to pick the pockets of everybody. They’re going to put you in a devastating situation.”
While companies like Turing and Retrophin represent a set of bad actors, the problem of sudden price increases on drugs isn’t new. In fact, more reputable drug companies have steadily increased prices on a range of drugs for years.
Pfizer, for example, has already raised prices on more than 100 prescription drugs since the beginning of the year. And from 2007 to 2014, diabetes patients saw the cost of Eli Lilly’s Humulin R U-500 insulin jump more than 350 percent. Even Mylan-made epi-pens have skyrocketed 222 percent over that same timeframe – costing patients with severe allergies $182.35 per pen in 2014.
There are countless more examples. According to a recent report by AARP, retail prices for 622 prescription drugs widely used by Medicare beneficiaries increased by an average of 9.4 percent in 2013. In contrast, the general inflation rate was 1.5 percent over the same period. Moreover, a new report from Express Scripts found that brand-name medications have increased in price by 164 percent between 2008 and 2015.
While it’s unconscionable that hedge fund pharmaceutical companies like Turing and Retrophin purchase treatments and suddenly raise prices, the current model in which drug companies raise prices year after year is just as bad for patients – and, frankly, unsustainable for our entire health care system.
The increasing cost of medications often encourages patients to cut corners, such as saving money by not taking medicine as prescribed. This leads to much less effective treatments. A recent Express Scripts report on drug trends found that not taking medicine as prescribed costs taxpayers about $330 billion annually in preventable medical complications.
The impacts of rising drug prices are real. These increases – whether overnight or year after year – threaten access and affordability for patients and families who need these vital treatments today. A system that shields consumers from knowing the true cost-drivers behind their medications and allows companies to exploit the market of life-saving medications is a broken system.
Americans deserve better. It’s time for more transparency and increased competition in the pharmaceutical market. The truth is, like millions of patients across America, we can’t afford to wait any longer.
John Rother is the Executive Director of the Campaign for Sustainable Rx.