Big Pharma’s Price-Gouging and Anti-Competitive Tactics Drive Increased Rx Spending

Dec 13, 2019

CMS Report Demonstrates Impact of Out-of-Control Launch Prices and Tactics That Prevent Patients From Accessing Affordable Alternatives

In case you missed it, according to the Centers for Medicare and Medicaid Services’ (CMS) annual report on health care spending, the pricing practices and anti-competitive tactics of Big Pharma kept drug costs rising last year — even as prices on generic drugs fell. The report found “growth in retail prescription drug spending increased from 1.4 percent in 2017 to 2.5 percent in 2018.” CMS attributed the increase to wider use of more expensive brand name drugs that continue to increase in price.

CMS noted costly brand name treatments for cancer and auto-immune therapies were a driving factor. Big Pharma has helped dramatically increase the cost of treating rare and serious conditions by bringing drugs to market with out-of-control launch prices.

  • Over The Past Decade, “Launch Prices For New Brand-Name Drugs Have Skyrocketed.” “The median monthly price of a new brand-name drug has increased 381% since 2006 (from $150 to $722).”(Caitlin Owens, “1 Big Thing: New Drugs Are Launching With Ever-Higher Prices,” Axios, 10/16/19)
  • Brand Name Giant Novartis Recently Launched Zolgensma, A Drug Used To Treat Infant Spinal Muscular Atrophy, At $2.1 Million Per Patient – Making It The World’s Most Expensive Drug. “The treatment attacks a debilitating genetic disease that often kills infants, and it will come with a price tag of more than $2.1 million, making Zolgensma the most expensive drug on the planet … The Institute for Clinical and Economic Review, a group that evaluates drug pricing and effectiveness, said in a statement that an appropriate all-in price range for Zolgensma would be between $1.1 million and $1.9 million — below what Novartis set. Other ICER estimates say the price should be even lower, between $310,000 and $900,000.” (Bob Herman, “FDA Approves Novartis’ Gene Therapy,” Axios, 5/24/19)
  • From 2013-2018, Spending On Cancer Drugs Doubled And “Every New Cancer Drug Brought To Market [In 2017] Cost $100,000 Or More.” “The average cost of a new drug released in 2017 was $150,000, according to the report from The IQVIA Institute for Human Data Science, formerly IMS Health and Quintiles. Those drug costs are expected to double again by 2022, the report finds. That compares to the average $79,000 cost of new cancer drugs that hit the market in 2013.” (Maggie Fox, “Cancer Drug Spending Doubled In Last 5 Years, Report Says,” NBC News, 5/24/18)
  • At $225,000, Pfizer Is Price-Gouging Patients For A New Heart Failure Drug That Its Creators Concluded Is Only Cost-Effective At $16,563. (Emma Court, “Doctors Who Helped Develop Heart Drug Now Balk At $225,000-A-Year Price,” Bloomberg, 11/19/19)
  • Experts Confirm That Initial Pricing Decisions Of Medications To Treat Multiple Sclerosis (MS), A Rare Neurological Disorder, Were Determined By Market Considerations Like Competitors’ Prices, Not R&D Costs. The Average Price Of These Medications Is Over $80,000. (Hartung, Alley, Johnston & Bourdette, “Qualitative Study On The Price Of Drugs For Multiple Sclerosis,” American Academy of Neurology, 11/25/19)
And Big Pharma deploys a host of anti-competitive tactics – including things like co-pay coupons, ‘charitable’ kickback schemes and keeping more generics and biosimilars out of the market with REMS and patent abuse – to prevent patients from accessing more affordable alternatives.

‘Charitable’ Kickback Schemes:

It’s no secret that Big Pharma employs a number of shady tactics in order to keep prices high. Recent reports show how brand name drug manufacturers game the system by using industry backed ‘charities’ to provide kickbacks in the form of copays to doctors and patients to quell concerns over sky-rocketing prices.

  • Big Pharma Backs Charities As A Vehicle To Boost Their Bottom Line By Creating The Illusion That They’re Helping Make Costly Drugs More Accessible For Patients. The Charities Will Pay Patients’ Co-Payments For Them, But All This Really Does Is Encourage Patients To Choose A Brand Name Drug Over A Generic Alternative — Even If That Drug’s Price Is Much Higher And Continues To Rise. “The impact of these charities is large and growing. Most of them are less than 15 years old. In 2001 just five drugmakers operated charities, spending a total of $370m. That had risen 20-fold, to $7.4bn, by 2016. According to Ronny Gal, an analyst at Berstein, a research firm, the co-payment on the price of a drug is usually just 10% of the cost the pharmaceutical company ultimately charges to the insurance provider. This would mean that $7.4bn, if it were all spent on co-payments, could earn drugmakers $74bn in revenues—which would account for nearly a quarter of total drug spending in America.” (“Why America’s Biggest Charities Are Owned By Pharmaceutical Companies,” The Economist, 8/15/19)
  • In November, One Foundation Agreed To “Pay The Federal Government $4 Million To Settle Allegations That It Funneled Kickbacks From Three Drug Companies To Induce Medicare Patients To Use The Companies’ Multiple Sclerosis Drugs.” “According to federal prosecutors in Boston, The Assistance Fund was supposed to be open to any Medicare patient with multiple sclerosis. Instead, a DOJ complaint alleged that TAF conspired with MS drug makers Teva, Biogen, and Novartis to use the fund as a conduit for money from those manufacturers to patients taking their MS drugs. ‘The conspiracy enabled the pharmaceutical companies to ensure that Medicare patients did not consider the high costs that the companies charged for their MS drugs,’ DOJ said. ‘The conspiracy also minimized the possibility that the companies’ money would go to patients taking competing MS drugs made by other companies.’” (John Commins, “Foundation To Pay $4m To Settle Kickback Allegations,” HealthLeaders, 11/21/19)
  • Brand Name Drug Maker Mallinckrodt Used A Foundation To Secretly Hike The Price Of The Drug Acthar From $50 To $32,200 Over A 13-Year Period, All While Marketing The Drug As ‘Free’ In An Illegal Kickback Scheme. “Mallinckrodt ARD LLC will pay the federal government $15 million to resolve whistleblower allegations that the United Kingdom-based company wined and dined physicians to induce them to write prescriptions for the company’s pricey H.P. Acthar Gel, the Department of Justice said … The kickbacks to patients were funneled through three funds that Mallinckrodt’s foundation set up to pay only Acthar Medicare copays. The subsidies were used to stymie doctor and patient concerns about the drug’s high cost and to market the drug as ‘free.’” (John Commins, “Mallinckrodt To Pay $15m To Settle False Claims Liability,” HealthLeaders, 9/6/19)
  • Overall, “The Federal Government Has Also Collected More Than $840 Million In Total From Eight Pharmaceutical Companies To Resolve Kickback Allegations Linked To The Foundation Schemes.” (John Commins, “Foundation To Pay $4m To Settle Kickback Allegations,” HealthLeaders, 11/21/19)
Co-pay Coupons:

Brand name drug manufacturers have long used co-pay coupons to drive patients towards their expensive drugs and away from cheaper alternatives under the guise that they are helping patients afford their prescription medications. This scheme keeps health care costs high for patients and taxpayers.

  • According To The National Bureau Of Economic Research, “Coupons Increase Sales Of Brand-Name Drugs By 60% Or More By Reducing Generic Sale … These Programs Increase Drug Spending By $30 Million To $120 Million Per Drug.” (Emma Court, “The Real Reason Drug Makers Offer Discount Cards (You’ll Pay Eventually),” MarketWatch, 1/3/17)
  • A New England Journal Of Medicine Article Asserted That “‘The More That Patients Use Drug Coupons To Obtain Brand-Name Medications When Lower-Cost Alternatives Are Available, The More Expenses Will Rise For Their Insurers,’ Making Insurers Likelier To Raise Their Rates.” (Emma Court, “The Real Reason Drug Makers Offer Discount Cards (You’ll Pay Eventually),” MarketWatch, 1/3/17)
  • Coupons Led To Increased Spending On 23 Popular Branded Drugs That Started To Face Generic Competition Between 2007-2010 By Between $700 Million To $2.7 Billion Over Five Years. (Lydia Ramsey, “Actually, Prescription Drug Coupons Can Make Us Spend More On Healthcare,” Business Insider, 10/17/16)
REMS Abuse:

Risk Evaluation and Mitigation Strategy (REMS) abuse refers to an anti-competitive tactic employed by Big Pharma to keep less expensive generics and biosimilars from coming to market by denying generic manufacturers access to samples of brand name drugs needed to complete U.S. Food and Drug Administration (FDA) testing.

  • The FDA Reports That Over 50 Brand Name Drug Makers Have Blocked Requests For Access To Their Samples From Over 150 Generic Drug Manufacturers. (“Reference Listed Drug (RLD) Access Inquiries,” U.S. Food & Drug Administration, Accessed 12/9/19)
  • A 2018 Report Found That REMS Abuse Results In $13.4 Billion In Annual Lost Savings. “Of the $13.4 billion in annual savings lost because of branded drugmakers blocking generics companies from accessing reference product samples, $3.1 billion stems from products restricted by REMS programs while the remaining $10.3 billion comes from products that branded drugmakers created non-REMS restrictions for, according to the study.” (Jacob Bell, “Generics Group Says Branded Drugmakers Blocking $13B In Annual Savings,”BioPharmaDive, 9/5/18)
Patent Abuse:

Big Pharma has a long history of price gouging American patient through patent abuse schemes to hinder generic competition and maintain monopolies over their biggest money makers.

A Recent Series Of Studies Conducted By Initiative For Medicines, Access, And Knowledge (I-MAK) Found That Of The Top 12 Grossing Drugs In America, Over 125 Patent Applications Were Filed And 71 Were Granted Per Drug. These patent applications attempted to block generic competition from entering the market by an average of 38 years, nearly double 20-year protection normally intended under U.S. patent laws. (“Overpatented, Overpriced: How Excessive Pharmaceutical Patenting Is Extending Monopolies And Driving Up Drug Price,” I-MAK, 8/18)

I-MAK also found:

  • Roughly 100 Best-Selling Drugs Between 2005 And 2015 Found That, On Average, 74 Percent Of The Drugs Associated With “New Patents” In The Food And Drug Administration’s (FDA) Records Were Not New Drugs Coming On The Market, But Rather Existing Drugs. (Tahir Amin, “The Problem With High Drug Prices Isn’t ‘Foreign Freeloading,’ It’s The Patent System,” CNBC, 6/27/18)
  • The Price Of Humira, The World’s Top Drug By Sales, Has Had Its Price Increased By Nearly 100 Percent Since 2012 From $19,000 To $38,000. Humira producer, AbbVie, has filed 247 patent applications in an effort to delay competition for 39 years. (Danny Hakim, “Humira’s Best-Selling Drug Formula: Start At A High Price. Go Higher,” The New York Times, 1/6/18; “Overpatented, Overpriced: Special Humira Edition,” I-MAK, 9/18/18)
  • Insulin Drug Lantus’ Makers, Sanofi, Have Filed 74 Patent Applications Since Coming To Market In 2000, Which Aim To Extent Their Market Exclusivity To 37 Years. That is one and half times the number of patent applications filed for Lantus in the European patent office and three times the number filed in the Japanese office. (“Overpatented, Overpriced Special Edition: Lantus,” I-MAK, 11/1/18)
  • Autoimmune Drug Enbrel’s Primary Patent Ended In 2010, But 57 Patent Applications Have Extended Its Market Exclusivity To 2029. Amgen’s patent efforts have led to a 129 percent increase in total Medicare and Medicaid spending between 2012 and 2016 alone, and Medicare spending per person during that time doubled. (“Overpatented, Overpriced: Enbrel Special Edition,” I-MAK, 12/3/18)
Congress must act to hold brand name drug makers accountable for their egregious price-gouging and anti-competitive practices and lower prescription drug prices for Americans.

Fortunately, there are a number of market-based solutions to curb Big Pharma’s anti-competitive tactics and deliver relief for patients being considered in Congress. Lawmakers must continue to work together, across party lines, to ensure these measures are passed into law before year-end.

Learn more about measures with significant bipartisan momentum in Congress HERE.

Read the full CMS report HERE.