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Lawmakers, candidates target high drug prices

November 16, 2015
Life sciences

Lawmakers and the Obama administration are ratcheting up efforts to target pharmaceutical companies over high-priced drugs, a sign that legislators are trying to bridge partisan differences to tackle a key driver of rising health care costs.

Some specialty drugs can now run $100,000 or more a year, and the issue has been amplified by several high-profile cases in which makers boosted prices dramatically and rapidly.

The Health and Human Services Department is considering new steps to protect consumers, while lawmakers are launching a task force to probe the issue and presidential candidates from both parties are criticizing drug makers.

The attention reflects a growing agreement among lawmakers that they need to respond to the escalating prices. The pharmaceutical industry—which sells about $374 billion in prescription drugs a year in the U.S., much of that paid for by Medicare and Medicaid—is going on the defensive as it faces an intensifying political backlash.

Industry officials say there is a mistaken belief that drug prices are driving up health-care costs. They say spending on retail prescriptions has stayed steady at about 10% of health-care spending.

Moreover, drug makers say, discounts and rebates mean patients don’t pay the full price, and that the public discussion undervalues the benefit to patients of the drugs while overestimating the cost.

The administration and Congress, drug makers argue, should focus on insurers that design health plans that make consumers pay their deductible before drug coverage kicks in.

“It’s new for patients, and that’s been a big shock to them,” said Robert Zirkelbach, a spokesman for Pharmaceutical Research and Manufacturers of America, or PhRMA.

But the insurance industry blames rising drug prices for higher insurance rates. “We’re all bearing drug makers’ excessive pricing, and the increases are a direct reflection of those cost pressures,” said Marilyn Tavenner, chief executive of American’s Health Insurance Plans, which represents about 1,300 companies.

HHS is considering ways to help consumers better afford high-priced drugs, said officials with knowledge of the conversations. The agency will hold a day-long forum Friday on the issue and has invited employers, insurers, consumers and drug makers, among others.

One approach could borrow from policies already adopted by California’s health-insurance exchange that restrict how much insurers can charge consumers for specialty drugs. Moreover, about a dozen states have enacted or are considering laws that cap the monthly costs of the high-priced drugs.

“I would hope they’re looking at what California has done,” said Peter Lee, executive director of Covered California, the state exchange. “Right now it’s the wild west out there.”

The Centers for Medicare and Medicaid Services on Nov. 5 sent letters to the heads of several drug manufacturers about expensive treatments for hepatitis C. The letter sought information on pricing arrangements and ways to keep prices sustainable for recipients of Medicaid, the state-federal insurance program for low-income Americans.

Both political parties see drug prices as an issue that resonates with voters. In an October survey by the Kaiser Family Foundation, 77% of Americans said making sure high-cost medications for chronic conditions are affordable should be a top health care priority for Congress and the president.

So far, some of the efforts are bipartisan, though the parties have sparred in the House over approaches.

On Capitol Hill, Sens. Claire McCaskill (D., Mo.) and Susan Collins (R., Maine) said their Senate Special Committee on Aging will tentatively hold a Dec. 9 hearing on the topic.

House Democrats on Nov. 3 announced the creation of a drug-pricing task force to explore the roots of the increases and possible ways the government can negotiate lower costs. They blamed Republicans for blocking their efforts to hold hearings or probe price boosts by some companies.

“The first thing we should do is figure out what’s going on, and no one should resist putting sunlight on this issue,” said Rep. Xavier Becerra, (D., Calif.). “If you look at the cost of health care, more and more it’s being driven by things such as prescription drugs. It highlights that’s something wrong with the system.”

While Republicans generally have been reluctant to take on drug makers, which are major donors, some are exploring the issue of prices. Rep. Jason Chaffetz (R., Utah), chairman of the House Committee on Oversight and Government Reform, has had conversations about pricing with Rep. Elijah Cummings of Maryland, the committee’s top Democrat.

Industry officials say drug prices are a reason why premiums and deductibles are going up for many people who buy policies on the federal health-insurance exchange.

Consumers will find that at least 80% of low-priced “bronze” plans and more than half of middle-tier “silver” plans will have higher out-of-pocket costs in 2016, according to a Wall Street Journal analysis of federal data covering more than 30 states that use the federal exchange.

A major driver of the costs is hepatitis C drugs such as Gilead Sciences Inc.’s Harvoni and Sovaldi, whose $1,000-a-pill price last year helped spark what has become a major political issue.

Presidential candidates have been tapping into the public concern. Democrat Hillary Clinton’s health plan would limit consumers’ monthly out-of-pocket costs for medications. Both she and rival Sen. Bernie Sanders (I., Vt.) would allow Medicare, the federal health plan for the elderly and disabled, to negotiate with drug companies for lower prices. That bargaining isn’t currently allowed by federal law, a restriction Senate Democrats are seeking to lift through legislation.

Among Republicans, candidate Donald Trump called the head of a pharmaceutical company a “spoiled brat” for raising the cost of one drug. Sen. Ted Cruz (R., Texas) has advocated for an overhaul of the Food and Drug Administration and former Florida Gov. Jeb Bush has talked about the need for more rapid approval of new drugs.

There are two main areas lawmakers may target. The first, and hardest, is fixing the root issues that lead to higher prices. Among them are drugs that remain on patent without generic equivalents, and the expense of creating newer biological-based drugs vs. traditional chemical-based ones.

The second challenge is how to soften the financial impact on consumers. Insurance carriers are requiring policyholders to pay more out of pocket for certain expensive drugs. Consumer advocates say such benefit plans discriminate against consumers with health issues such as HIV or hepatitis C. Carriers are deliberating discouraging consumers who are costlier to insure by denying them affordable access to care, they say.

“The insurers aren’t falling all over themselves to attract people who need specialty drugs,” said Gary Claxton, a vice president at the Kaiser Family Foundation.

By Stephanie Armour

Source: Wall Street Journal

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