SECOND OPINION: PHRMA REDUXES DEBUNKED BLAME GAME RHETORIC IN NEW AD CAMPAIGN
Big Pharma Trots Out Tired, Dishonest Arguments Designed to Evade Accountability, Keep Prices High
As lawmakers in Congress continue to weigh market-based solutions to lower prescription drug prices, Big Pharma is once again doubling down on bogus blame game tactics — designed to evade accountability for brand name drug companies’ egregious practices and keep prices high.
The latest ad campaign from Pharmaceutical Researchers and Manufacturers of America (PhRMA) is the latest dishonest escalation of Big Pharma’s blame game strategy. Here, we set the record straight and shine a light on how branded drug companies’ anti-competitive tactics and pricing practices are responsible for out-of-control prescription drug prices.
What Do PBMs Do?
Pharmacy Benefit Managers’ (PBMs) mission is to bring down health care costs for patients. They do this in a few ways.
First, they negotiate with drug companies for lower prices – savings that Americans see in lower premiums and lower out of pocket costs. Second, they work with doctors to ensure that patients are getting medications that are right for them. Third, they work with patients to ensure they take their medication properly, so they get healthier faster and stay healthier longer.
More than 266 million Americans are served by the PBM industry. Even Big Pharma companies, who are themselves large employers, contract with PBMs to negotiate lower drug prices for their own employees. And despite placing blame on others for the rising cost of prescription drugs, not so long ago, the brand name drug industry was quick to praise the role of PBMs.
Despite Big Pharma’s attacks, understanding how PBMs help Americans is straightforward:
- PBMs negotiate lower drug prices, using competition from generic drugs, as well as formulary placement, to secure discounts, rebates and other savings.
- PBMs save payers and patients between 40 and 50 percent on annual prescription drug costs. (“The Return On Investment [ROI] On PBM Services,” Visante, February 2020)
- PBMs save payers and patients an average of $962 per person per year. (“The Return On Investment [ROI] On PBM Services,” Visante, February 2020)
- On average, PBMs’ savings per person per year in Medicare Part D are $2,147. (“The Return On Investment [ROI] On PBM Services,” Visante, February 2020)
- PBMs produce savings for patients and plans of $266 per branded drug, reducing the average cost of a brand-name prescription drug from $578 to $312. (“PBMs Save Employers and Patients $100 Billion Per Year on Rx Costs,” PCMA, February 2021)
- The resulting savings are then passed on to patients and consumers. Those savings can be seen through lower out-of-pocket costs, lower premiums or lower tax dollars.
- Two of the largest PBMs pass the vast majority of rebates on to customers. On average, Express Scripts returns 95 percent of rebates directly to its clients and CVS Caremark returns 98 percent of rebates. (“A Call for A Consensus: Price Increases in Branded Drugs Are Unsustainable,” Express Scripts, 8/2/18) (“Myths vs. Fact: Pharmacy Benefit Management,” CVS Health, January 2021)
- A report from the U.S. Government Accountability Office found that virtually all – 99.6% – of prescription drug rebates negotiated by PBMs with drug manufacturers, in Medicare Part D, are passed through to plan sponsors and used to lower costs for Medicare beneficiaries. (“Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization,” U.S. Government Accountability Office, July 2019)
- PBMs are projected to save health plans and consumers more than $1 trillion on prescription drug costs over the next decade. That translates to an average savings of $962 per person per year. (“Pharmacy Benefit Managers (PBMs): Generating Savings for Plan Sponsors and Consumers,” Visante, February 2020)
PBMs lower prescription drug costs by directly negotiating down drug prices with drug manufacturers and encouraging competition in the market. To do this, PBMs often rely on formularies, a list of preferred drugs that balance effectiveness with cost.
For example, if a generic becomes available, PBMs might promote its use by placing it on a formulary rather than a clinically equivalent but pricier brand-name medication. Drug makers looking to boost their market share want patients to use their drugs and jockey for position on the formularies by offering discounts on their drugs, known as rebates. Because PBMs serve a large number of clients and individuals, they can leverage their buying power to negotiate steeper discounts, which in turn lowers overall prescription drug costs and helps keep premiums down. These rebates, however, remain confidential out of concern drug manufacturers will collude to game the system and institute a floor price that prevents PBMs and payers from negotiating savings for consumers.
Big Pharma’s Biennial Price Hikes
Big Pharma traditionally hikes prescription drug prices in two major batches each year — the first starting in January and the second starting in June. The industry’s biennial price hikes have continued unabated despite the COVID-19 pandemic.
In January of this year alone, Big Pharma hiked prices on 791 brand name medications, including treatments for serious conditions like cancer and HIV. Big Pharma companies among those hiking prices to start the year included:
- Pfizer hiked prices on more than 100 drugs, including a whopping 16.8 percent price increase on its popular drug Solu-Cortef which treats various conditions such as arthritis, blood diseases, and certain cancers.
- GlaxoSmithKline raised prices on more than 30 drugs, with cancer drug Zejula and seizure drug Lamictal topping the list with seven percent price increases each.
- Bristol Myers Squibb raised prices on more than a dozen of their drugs.
- Gilead Sciences raised prices 5.6 percent on HIV drugs Biktarvy and Descovy.
This marks the fourth major round of price hikes Big Pharma has launched since the start of the pandemic.
- In July of 2020, despite calls to suspend traditional mid-year price hikes at the height of the pandemic, Big Pharma hiked prescription drug prices on more than 65 brand name drugs — more than the previous year.
- In January 2021, Big Pharma raised the list price of 822 brand name prescription drugs by an average of 4.6 percent.
- Then, in June and July 2021, Big Pharma hiked prices on 67 brand name prescription drugs by an average of 3.5 percent.
Learn more about Big Pharma’s Pandemic Price Hikes HERE and HERE.
Anti-Competitive Patent Strategies Block Competition And Harm Consumers
Big Pharma’s anti-competitive behavior, including tactics like product hopping and patent-thicketing, delay more affordable alternatives from coming to market and cost patients and our health care system billions of dollars. The American public faces unsustainable costs because of this anti-competitive behavior.
- In May 2022, STAT News covered a Health Affairs analysis that uncovered rampant monopoly tactics in the inhaler market. Particularly, between 1986 and 2020, 85% of inhalers approved by the FDA were brand-name products and had an average of 16 years of patent protection.
- A 2021 report from AARP found that total Medicare Part D spending on 50 top brand-name drugs was $38 billion higher between 2015 and 2019 than it would have been if drug manufacturers had not increased their prices faster than the corresponding rate of inflation.
- A May 2021 report found delayed alternatives to AbbVie’s blockbuster drug Humira will cost the U.S. health care system an estimated $19 billion by 2023.
- A July 2020 report estimates patent gaming around Imbruvica will cost the U.S. health care system $41 billion.
- And a September 2020 study found Big Pharma’s biologic patent abuse will cost patients an additional $25 billion by 2029.
As a recent New York Times editorial pointed out, Big Pharma games the patent system to maximize “market share” and “extend product monopolies for decades.”
Spending on Share Buybacks and Ads, Not R&D – While Blaming Others
Often, when asked for the underlying reason behind their egregious price hikes, drugmakers point to research and development costs (R&D). Though, over the last several years, a number of reports have debunked that rhetoric and instead shown that brand drug makers spend more on share buybacks and advertising and marketing than R&D.
- A July 2021 report by the U.S. House Committee on Oversight & Reform examined financial data from 14 of the largest branded drug makers in the world and found that between 2016 and 2020 brand name drug companies spent $577 billion on stock buybacks and dividends, $57 billion more than they did on research and development (R&D).
- A 2019 study from the Campaign for Sustainable Rx Pricing (CSRxP) found Big Pharma spends more on advertising, corporate overhead and profits than R&D by a margin of more than two to one.
- An October 2021 study from America’s Health Insurance Plans (AHIP) found that several Big Pharma firms spent more on more on advertising and marketing products than investing in research and development (R&D) in 2020, even amid unprecedented focus on the development of new treatments as a result of the COVID-19 pandemic.
- AbbVie spent $11 billion on sales and marketing, compared to $8 billion on R&D.
- Pfizer spent $12 billion on sales and marketing, compared to $9 billion on R&D.
- Novartis spent $14 billion on sales and marketing, compared to $9 billion on R&D.
- GlaxoSmithKline spent $15 billion on sales and marketing, compared to $7 billion on R&D.
- Sanofi spent $11 billion on sales and marketing, compared to $6 billion on R&D.
- Bayer spent $18 billion on sales and marketing, compared to $8 billion on R&D.
- Johnson & Johnson spent $22 billion on sales and marketing, compared to $12 billion on R&D.
Lawmakers should capitalize on the growing momentum surrounding prescription drug prices and support market-based, bipartisan solutions to deliver on their repeated promises to lower prescription drug prices and hold Big Pharma accountable.
Read more about why Big Pharma’s bogus rhetoric on innovation doesn’t add up HERE.
Read more about how Big Pharma targets critical medications like anti-cancer drugs for price hikes HERE.
Read more about Big Pharma’s patent abuse HERE.
Learn more about market-based solutions to hold Big Pharma accountable HERE.