Did land­mark laws from Congress en­able high drug prices?

Daily Local News (West Chester, PA) - - BUSINESS - By Ri­cardo Alon­soZal­divar

WASH­ING­TON >> Law­mak­ers are vent­ing out­rage over high pre­scrip­tion drug costs, but law­mak­ers and pres­i­dents of both par­ties may have set the stage for the star­tling prices that have con­sumers on edge.

As the proverb says: Physi­cian, heal thy­self.

In the last 13 years, Congress passed ma­jor leg­is­la­tion that ex­panded tax­payer-fi­nanced cov­er­age for pre­scrip­tion drugs but lacked ex­plicit mech­a­nisms for deal­ing with costs, in­stead re­ly­ing mainly on mar­ket forces. Law­mak­ers look like un­wit­ting en­ablers in the eyes of some ex­perts.

Congress “in­ad­ver­tently cre­ated a sit­u­a­tion where price in­creases are much more rapid,” said econ­o­mist Paul Gins­burg, a Medi­care ex­pert who di­rects the Brook­ings In­sti­tu­tion health pol­icy cen­ter.

Gov­ern­ment-spon­sored cov­er­age in­jected more dol­lars into the mar­ket for med­i­ca­tions, and new con­sumer pro­tec­tions cur­tailed some blunt in­stru­ments in­sur­ers used to con­trol costs, such as an­nual and life­time lim­its on the dol­lar value of cov­er­age.

“The his­tory we see over and over again is that when the gov­ern­ment steps in as a guar­an­teed payer with­out re­gard to price, it will be taken ad­van­tage of,” said Dr. Peter Bach, direc­tor of Me­mo­rial Sloan Ket­ter­ing’s Cen­ter for Health Pol­icy and Out­comes.

Con­gres­sional in­dig­na­tion was on dis­play re­cently as House mem­bers grilled My­lan CEO Heather Bresch about price in­creases for her com­pany’s EpiPens, pre­filled sy­ringes that de­liver a res­cue drug for peo­ple suf­fer­ing life-threat­en­ing al­ler­gic re­ac­tions. The com­pany was ac­cused of goug­ing pa­tients, but there was lit­tle in­tro­spec­tion about the role of gov­ern­ment.

It’s not as though a se­cret sig­nal went out from Capi­tol Hill that it was OK for My­lan to charge $608 for an EpiPen two-pack. In­stead, gov­ern­ment poli­cies foster an en­vi­ron­ment that makes it eas­ier to in­tro­duce new med­i­ca­tions at a high price and to charge more for ex­ist­ing drugs.

“It has dra­mat­i­cally changed the pric­ing en­vi­ron­ment,” ex­plained Gins­burg. “If a man­u­fac­turer sets the price higher, there will be less re­sis­tance to that price be­cause a lot more peo­ple will be able to ac­cess that drug than in the past. The ra­tio­nal thing for the man­u­fac­turer would be to raise the prices both of ex­ist­ing drugs and newly in­tro­duced ones.” Con­sider the fol­low­ing: • Passed in 2003 un­der Pres­i­dent Ge­orge W. Bush, Medi­care’s “Part D” pre­scrip­tion ben­e­fit pro­vided drug cov­er­age to se­niors. Medi­care was for­bid­den to ne­go­ti­ate prices. In­stead, pri­vate in­sur­ers and phar­macy ben­e­fit man­agers would keep costs in check. For a while it seemed to be work­ing amid greater use of generic drugs. But ex­pen­sive new “spe­cialty” drugs and price in­creases for some older med­i­ca­tions changed things. A fea­ture of the pro­gram that pro­tects ben­e­fi­cia­ries from “cat­a­strophic” costs has al­lowed drug­mak­ers and in­sur­ers to pass the bill for very ex­pen­sive med­i­ca­tions on to tax­pay­ers.

• En­acted in 2010 un­der Pres­i­dent Barack Obama, the Af­ford­able Care Act, or ACA, ex­panded cov­er­age for the unin­sured. It made pre­scrip­tion drugs an es­sen­tial ben­e­fit, and barred dol­lar lim­its on in­sur­ance cov­er­age. The drug in­dus­try sup­ported the leg­is­la­tion and, ac­cord­ing to doc­u­ments re­leased by House Repub­li­cans, got a White House com­mit­ment not to seek Medi­care re­bates op­posed by drug­mak­ers. The ad­min­is­tra­tion helped de­feat an at­tempt to let pa­tients im­port lower-cost drugs from abroad.

• Obama’s health care law pro­vided makers of cut­tingedge bi­o­logic drugs 12 years of pro­tec­tion from generic com­peti­tors, not a shorter pe­riod sought by con­sumer ad­vo­cates.

“It’s not clear to what ex­tent Part D and the ACA may have di­rectly caused the very large in­creases in drug prices in the last five years or so,” said Rick Foster, for­merly Medi­care’s chief ac­tu­ary, or num­ber­cruncher. “Hav­ing said that, it wouldn’t sur­prise me if the sig­nif­i­cant in­crease in in­sur­ance cov­er­age — and es­pe­cially the cat­a­strophic pro­tec­tion — con­trib­uted to the drug price in­creases.”

The drug in­dus­try, a for­mi­da­ble lobby, re­jects such spec­u­la­tion.

“Fun­da­men­tally, we dis­agree that there is not ad­e­quate cost con­tain­ment for medicines built into Part D, or the ACA,” said Lisa Jold­er­sma, vice pres­i­dent of pol­icy and re­search with the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica.

“We think the mar­ket is best able to man­age the holis­tic pic­ture and to strike the right bal­ance across cost con­tain­ment, ac­cess and con­tin­u­ous in­no­va­tion,” she added.

The pub­lic seems re­cep­tive to gov­ern­ment ac­tion. A Kaiser Fam­ily Foun­da­tion poll re­leased Thurs­day shows strong sup­port for re­quir­ing drug com­pa­nies to dis­close how they set prices (86 per­cent), Medi­care ne­go­ti­a­tions (82 per­cent), price lim­its on costly drugs to treat cancer and diseases like hep­ati­tis (78 per­cent), and al­low­ing Amer­i­cans to im­port med­i­ca­tions from Canada (71 per­cent).

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