Creating Stakeholder Dialogue Around Drug Pricing

The increase in prescription drug pricing and spending has been one of main factors contributing to the high costs of healthcare in the United States. In fact, according to a 2015 report by the National Center for Health Statistics, the national health expenditure for prescription drugs made up 10.1% of the total national health expenditure that reached $3.2 trillion that year [1]. Certain measurements of drug pricing villanize manufacturers an industry with outrageous cost and spending of prescription drugs. For example, patent exclusivity, research and development efforts, and competition in the market are generally blamed for the initial price increases. However, these measurements also cause skepticism and inaccuracies, thus shining a negative light on pharmaceutical companies. Therefore, the outliers misrepresenting pharmaceutical companies and the number of failed drugs need to be addressed in order for patients to have a better understanding on drug pricing.

Two outliers that don’t represent the overwhelming amount of biopharmaceutical companies are Mylan and Turing Pharmaceuticals. In 2007, Mylan Pharmaceutical acquired EpiPen, a handheld device that injects epinephrine to an individual with life-threatening allergic reactions, and increased the price of the drug by 500% [2]. The price rose from $100 to $600 in 2008 without any justification [3]. To no surprise, the company came under fire by the media for its unethical approach. The price increase can be attributed to Mylan’s patent use which allowed them to profit off of the drug without facing competition from a generic drug for a period of time [4]. In a similar situation, Martin Shkreli, founder and CEO of Turing Pharmaceuticals, raised the price of the drug Daraprim from $13.50 to $750 a tablet overnight [5]. What were once ‘affordable’ drugs became unaffordable for the vast majority of users causing outrage and shaming for pharmaceutical companies. Again, there are outliers that don’t represent the overwhelming majority of pharmaceutical companies that are developing new and novel drugs.

According to the 2017 Edelman Trust Barometer, the trust in the healthcare industry is slowly increasing compared to last year [6]. The trust in pharma in the U.S. seems to be “neutral.” With pharmaceutical companies like Mylan and Turing, it’s understandable why Americans might not be fully invested in pharma. When pharmaceutical companies make the headline in the news, it usually is unfavorable.

Furthermore, research and development is key when it comes to developing new drugs and used as justification for drug pricing. As we know, the process of creating a drug involves a lot of trials and errors where high costs are incurred in order to satisfy regulations imposed by the Food and Drug Administration (FDA); thus, it can create opportunities to price the drug even higher than it actually cost to get it out to the market. According to the 2017 Edelman Trust Barometer, 8 out of 10 people believe the pharmaceutical industry puts profit over people [7]. In reality, pharmaceutical companies only realize 39% of initial gross drug expenditures [8]. In addition, companies like Gilead are helping subsidize the cost of its drug, Epclusa, in Australia, which will help approximately 200,000 Australians that face the challenges of hepatitis C [9]. For example, Merck created an HPV vaccination program for cervical cancer in Rwanda [10]. Despite the media’s negative coverage, several other pharma companies have partnered with organizations like the Gates Foundation and UNICEF to provide medications for the developing world [11].

Lastly, it’s critical to address the failed formularies that ultimately lead to higher pricing as these costs must be recouped. The price to develop a drug is over $500 million [12]. According to the Tufts Center for the Study of Drug Development, the cost to develop and win marketing approval for a new drug is $2.6 billion [13]. The variance in the two aforementioned distinguish by fourfold, but it’s really expensive. Aside from this statistic, during clinical research phase studies, only 25-30% of initial drugs move to phase 4 where the drug is trialed by volunteers with the disease of interest [14]. The development of a drug can take a long time, especially when it comes to illnesses like cancer or HIV. During this time, the initial fund to conduct these studies starts to deplete. As patients, we need to understand that these are factors that even pharmaceutical companies have no control over.

As we wait for a viable healthcare reform under the current administration, it’s important to push for one that restores the well-being and decreases the burden of millions of Americans. During the process, there needs to be increased dialogue between patients and providers, such as pharmaceutical companies. All to avoid situations like that of Mylan and Turing. If drug pricing continues to increase, the biopharmaceutical industry will face more scrutiny. There will be increasing tension between patients, pharmaceutical companies, and pharmacy benefit managers (PBM). It’s important for all stake holders to be open and transparent in order to resolve these issues successfully. In an ever changing environment, we must learn to understand the process in order to appropriately resolve issues plaguing our society. We are ever changing.

To further explore the drug pricing trends, CHI is organizing the 5th Annual Healthcare Executive Roundtable on October 12, 2017, in Manhattan, New York. The Center for Healthcare Innovation’s “Understanding Value in Consumer-Orientated, Patient-Centric Era” Roundtable is an intimate, invitation-only, expert roundtable discussion for healthcare executives, key opinion leaders, and patient groups to discuss how stakeholders throughout the healthcare ecosystem can address critical issues related to healthcare value, quality, and cost. This year’s Roundtable will focus on several key market forces that affect the current state of healthcare in the U.S. Please visit http://chisite.org/roundtable/ for more information.

Work Cited

[1] Health Expenditures. Centers for Disease Control and Prevention. https://www.cdc.gov/nchs/fastats/health-expenditures.htm. Accessed September 14, 2017.

 

[2] Mylan Raised EpiPen’s Price Before the Expected Arrival of a Generic. The New York Times. https://www.nytimes.com/2016/08/25/business/mylan-raised-epipens-price-before-the-expected-arrival-of-a-generic.html?mcubz=3. Accessed September 14, 2017.

 

[3] Mylan finalizes $465 million EpiPen settlement with Justice Department. CNBChttps://www.cnbc.com/2017/08/17/mylan-finalizes-465-million-epipen-settlement-with-justice-department.html. Accessed September 14, 2017.

 

[4] Mylan Raised EpiPen’s Price Before the Expected Arrival of a Generic. The New York Times. https://www.nytimes.com/2016/08/25/business/mylan-raised-epipens-price-before-the-expected-arrival-of-a-generic.html?mcubz=3. Accessed September 14, 2017.

 

[5] Drug Goes From $13.50 a Tablet to $750 Overnight. The New York Times. https://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html. Accessed September 20, 2017.

 

[6] Trust in Healthcare: Making Progress. Edelman. https://www.edelman.com/post/trust-healthcare-making-progress/. Accessed September 20, 2017.

 

[7] Trust in Healthcare: Making Progress. Edelman. https://www.edelman.com/post/trust-healthcare-making-progress/. Accessed September 20, 2017.

 

[8] Majority of Drug Revenue Not Going to Pharmaceutical Companies. The American Journal of Pharmacy Benefits. http://www.ajpb.com/news/majority-of-drug-revenue-not-going-to-pharmaceutical-companies. Accessed September 20, 2017.

 

[9] New Hepatitis C Drug to be subsidized in Australia. The Pharma Letter. https://www.thepharmaletter.com/article/new-hepatitis-c-drug-to-be-subsidized-in-australia. Accessed September 25, 2017.

 

[10] Even Pharma’s Good Deeds Are Criticized. Forbes. https://www.forbes.com/sites/johnlamattina/2013/05/06/even-pharmas-good-deeds-are-criticized/#612c29ec4cd3. Accessed September 20, 2017.

 

[11] Even Pharma’s Good Deeds Are Criticized. Forbes. https://www.forbes.com/sites/johnlamattina/2013/05/06/even-pharmas-good-deeds-are-criticized/#612c29ec4cd3. Accessed September 20, 2017.

 

[12] R&D Costs For Cancer Drugs Are Likely Much Less Than Industry Claims, Study Finds. NPR. http://www.npr.org/sections/health-shots/2017/09/11/550135932/r-d-costs-for-cancer-drugs-are-likely-much-less-than-industry-claims-study-finds. Accessed September 20, 2017.

 

[13] Cost to Develop and Win Marketing Approval for a New Drug Is $2.6 Billion. Tufts Center for the Study of Drug Development. http://csdd.tufts.edu/news/complete_story/pr_tufts_csdd_2014_cost_study. Accessed September 28, 2017.

 

[14] Step 3: Clinical Research. U.S. Food & Drug Administration. https://www.fda.gov/forpatients/approvals/drugs/ucm405622.htm. Accessed September 20, 2017.

 

About Mauricio Peralta