The High Cost of Prescriptions - JAMA

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SpecialCommunication | August23/30,2016
TheHighCostofPrescriptionDrugsintheUnited
States
OriginsandProspectsforReform FREE
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AaronS.Kesselheim,MD,JD,MPH1JerryAvorn,MD1AmeetSarpatwari,JD,PhD1
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JAMA.2016316(8):858871.doi:10.1001/jama.2016.11237.
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ABSTRACT
ABSTRACT|INTRODUCTION|BRANDNAMEVSGENERICDRUGS|SOURCESOFHIGH
DRUGPRICESINTHEUNITEDSTATES|JUSTIFICATIONSFORHIGHDRUGPRICES|
CLINICALCONSEQUENCESOFHIGHDRUGPRICES|POSSIBLESOLUTIONS|
CONCLUSIONS|ARTICLEINFORMATION|REFERENCES
ImportanceTheincreasingcostofprescriptiondrugsintheUnitedStateshasbecomeasourceof
concernforpatients,prescribers,payers,andpolicymakers.
ObjectivesToreviewtheoriginsandeffectsofhighdrugpricesintheUSmarketandtoconsiderpolicy
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optionsthatcouldcontainthecostofprescriptiondrugs.
States(3:35)
EvidenceWereviewedthepeerreviewedmedicalandhealthpolicyliteraturefromJanuary2005toJuly
JAMAReportVideo
2016forarticlesaddressingthesourcesofdrugpricesintheUnitedStates,thejustificationsand
consequencesofhighprices,andpossiblesolutions.
FindingsPercapitaprescriptiondrugspendingintheUnitedStatesexceedsthatinallothercountries,
largelydrivenbybrandnamedrugpricesthathavebeenincreasinginrecentyearsatratesfarbeyondthe
consumerpriceindex.In2013,percapitaspendingonprescriptiondrugswas$858comparedwithan
averageof$400for19otherindustrializednations.IntheUnitedStates,prescriptionmedicationsnow
compriseanestimated17%ofoverallpersonalhealthcareservices.Themostimportantfactorthatallows
manufacturerstosethighdrugpricesismarketexclusivity,protectedbymonopolyrightsawardedupon
FoodandDrugAdministrationapprovalandbypatents.Theavailabilityofgenericdrugsafterthis
exclusivityperiodisthemainmeansofreducingpricesintheUnitedStates,butaccesstothemmaybe
delayedbynumerousbusinessandlegalstrategies.Theprimarycounterweightagainstexcessivepricing
duringmarketexclusivityisthenegotiatingpowerofthepayer,whichiscurrentlyconstrainedbyseveral
factors,includingtherequirementthatmostgovernmentdrugpaymentplanscovernearlyallproducts.
Anotherkeycontributortodrugspendingisphysicianprescribingchoiceswhencomparablealternativesare
availableatdifferentcosts.Althoughpricesareoftenjustifiedbythehighcostofdrugdevelopment,thereis
noevidenceofanassociationbetweenresearchanddevelopmentcostsandpricesrather,prescriptiondrugs
arepricedintheUnitedStatesprimarilyonthebasisofwhatthemarketwillbear.
ConclusionsandRelevanceHighdrugpricesaretheresultoftheapproachtheUnitedStateshas
takentograntinggovernmentprotectedmonopoliestodrugmanufacturers,combinedwithcoverage
requirementsimposedongovernmentfundeddrugbenefits.Themostrealisticshorttermstrategiesto
addresshighpricesincludeenforcingmorestringentrequirementsfortheawardandextensionof
exclusivityrightsenhancingcompetitionbyensuringtimelygenericdrugavailabilityprovidinggreater
http://jama.jamanetwork.com/article.aspx?articleid=2545691
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SenateCommitteeInvestigatesPrice
HikesforOffPatentDrugs
JAMA.2016315(6):549.
doi:10.1001/jama.2016.0162.
RoleoftheFDAinAffordabilityofOff
PatentPharmaceuticals
JAMA.2016315(5):461462.
doi:10.1001/jama.2015.18720.
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opportunitiesformeaningfulpricenegotiationbygovernmentalpayersgeneratingmoreevidenceabout
comparativecosteffectivenessoftherapeuticalternativesandmoreeffectivelyeducatingpatients,
prescribers,payers,andpolicymakersaboutthesechoices.
INTRODUCTION
TheincreasingcostofprescriptiondrugsintheUnitedStateshasbecomeasourceofgrowingconcernfor
patients,prescribers,payers,andpolicymakers.Afterrelativelymodestgrowthaftertheexpirationof
patentsonmanywidelyusedmedicationsfrom2010to2012,medicationexpenditureshavebegunto
increaseagain,punctuatedbyseveralhighprofileexamplesofverycostlynewagentsandsharpincreases
inthepricesofsomeolderones. 1Between2013and2015,netspendingonprescriptiondrugsincreased
approximately20%intheUnitedStates, 2outpacingaforecast11%increaseinaggregatehealthcare
expenditures. 3Prescriptionmedicationsnowcompriseanestimated17%oftotalhealthcarecosts, 4and
prescriptionmedicationcoverageconstitutes19%ofemployerbasedinsurancebenefits. 5Sincetheadventof
theMedicaredrugbenefitin2006,governmententitieshavepaidforapproximately40%ofthenationstotal
retailprescriptiondrugexpenditure. 6Certainexpensivedrugproductsareimportantclinicalbreakthroughs
andmayevenberelativelycosteffectiveothersaremerelycostly,withpricesthataredifficulttojustifyin
relationtotheiractualcontributionstopatientoutcomes.
TheUnitedStateshaslongspentmoreonprescriptionmedicationsthanothercountries. 7 In2013,per
capitaspendingonprescriptiondrugswas$858comparedwithanaverageof$400for19advanced
industrializednations(Figure1). 8 Listpricesforthetop20highestrevenuegrossingdrugswereonaverage
3timesgreaterintheUnitedStatesthantheUnitedKingdom. 9Thesedisparitiesarereducedbutremain
substantialevenafteraccountingforundiscloseddiscounts(rebates)thatmanufacturersoffertoUS
payers.In2010,estimatedaveragepostrebatepricesformedicationswere10%to15%higherintheUnited
StatesthaninCanada,France,andGermany(Table1). 11
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Figure1.
PerCapitaSpendingonPrescriptionPharmaceuticals
DataarederivedfromtheOrganisationforEconomicCooperationandDevelopment(OECD),reflect
expendituresin2013(orthenearestyear),andincludeallcountriesforwhichvalueswerereported.Data
usedwithpermissionfromOECD,HealthataGlance2015:OECDIndicators,2015. 8
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Table1.ExamplesofCountrySpecificAverageDrugPricesforTopSellingDrugsin2015
ViewLarge|SaveTable|DownloadSlide(.ppt)
Inadditiontotheircontributiontohealthcarespending,increasingdrugcostshaveimportantclinical
implications.Becausecostcontainmenteffortsrequirepatientstopayhighercopaymentsfortheir
medications,suchincreasescanreducetheaffordabilityofprescribedregimensandthuspatientadherence,
leadingtonegativehealthoutcomes. 12However,somecostlydrugsmayofferreasonablevalue.For
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example,sofosbuvir(Sovaldi)wasfoundtobeacosteffectivetreatmentofhepatitisCinfectionevenatits
2013launchpriceof$84000per12weekcourseincertainpatientpopulationswhenviewedfroma
patientslifetimehorizonandasocietalperspective. 13Payersmustpayforthistreatmentupfront,though,
withhealthcarebenefitsoftenaccruingdecadeslatertoadifferentpayer.In2014,stateMedicaidprograms
spentanestimated$1.1billion(afterdiscounts)onsofosbuvir, 14usuallywithnoadditionstotheirbudgets.
Itisthereforeimportanttounderstandwhatfactorshavecontributedtorecentmedicationpriceincreasesto
laythefoundationforconsideringoptionstoensurethatprescriptiondrugexpendituresarecommensurate
withtheirvalue,affordablewithinhealthbudgets,andequitableforallpartiesinvolvedinthesecomplex
transactions.WeexaminedtheoriginsandeffectofdrugpricesintheUSmarketandconsideredavailable
policyoptionsrelatedtothesepayments.Todoso,wereviewedliteraturepublishedinpeerreviewedmedical
andhealthpolicyjournalsfromJanuary2005toJuly2016,searchingforrigorousempiricalarticles
addressingthedeterminantsofdrugpricesintheUnitedStates,thejustificationsandconsequencesofthese
prices,andpossiblepolicyoptions.
BRANDNAMEVSGENERICDRUGS
Theprimaryreasonforincreasingdrugspendingisthehighpriceofbrandedproductsprotectedbymarket
exclusivityprovisionsgrantedbytheUSPatentandTrademarkOfficeandtheFoodandDrug
Administration(FDA)(Table2).Althoughbrandnamedrugscompriseonly10%ofalldispensed
prescriptionsintheUnitedStates,theyaccountfor72%ofdrugspending. 15Between2008and2015,prices
forthemostcommonlyusedbrandnamedrugsincreased164%,farinexcessoftheconsumerpriceindex
(12%). 16,17 Theannualcostofagrowingnumberofspecialtydrugshighcost,ofteninjectablebiologic
medicationssuchaseculizumab(Soliris),pralatrexate(Folotyn),andelosulfasealfa(Vimizim)exceeds
$250000perpatient.
Table2.KeyTerminologyandExamplesofTherapeuticProducts
Suchhighpriceshavehistoricallybeenlimitedtobrandnamedrugsthattreatrareconditions.Forexample,
thepriceofalglucerase(Cerezyme),atreatmentforGaucherdisease,was$150000perpatientperyear
whenthedrugwaslaunchedin1991(itisnow$300000)18,19thepriceofivacaftor(Kalydeco),indicated
forasmallsubsetofpatientswithcysticfibrosis,islikewisecurrentlyapproximately$300000perpatient
peryear.Bothdrugsaregenerallyreceivedforlife.However,drugsthattreatconditionsaffectingmillionsof
individualsintheUnitedStatesalsonowhavehighcosts.Forexample,manynewoncologydrugsenterthe
marketatapriceexceeding$100000percourseoftherapy. 20Eventheaveragepriceofinsulinhas
increased300%from2002to2013. 21
Althoughbrandnamedrugsaccountforthegreatestincreaseinprescriptiondrugexpenditures,another
areathathascapturedtheattentionofthepublicandofpolicymakershasbeenthesharpincreaseinthe
costsofsomeoldergenericdrugs.In2015,TuringPharmaceuticalsraisedthepriceofpyrimethamine
(Daraprim),a63yearoldtreatmentfortoxoplasmosis,by5500%,from$13.50to$750apill. 22The
companywasabletosetthehighpricedespitetheabsenceofanypatentprotectionbecausenoother
competingmanufacturerwaslicensedtomarketthedrugintheUnitedStates.Significantincreasesinthe
pricesofotherolderdrugsincludeisoproterenol(2500%),nitroprusside(1700%),anddigoxin(637%).Even
thoughthepricesofmostgenericdrugproductshaveremainedstablebetween2008and2015,thoseof
almost400(approximately2%ofthesampleinvestigated)increasedbymorethan1000%. 23
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SOURCESOFHIGHDRUGPRICESINTHEUNITED
STATES
DrugpricesarehigherintheUnitedStatesthanintherestoftheindustrializedworldbecause,unlikethatin
nearlyeveryotheradvancednation,theUShealthcaresystemallowsmanufacturerstosettheirownprice
foragivenproduct. 11Incontrast,incountrieswithnationalhealthinsurancesystems,adelegatedbody
negotiatesdrugpricesorrejectscoverageofproductsifthepricedemandedbythemanufacturerisexcessive
inlightofthebenefitprovided(Table3)manufacturersmaythendecidetoofferthedrugatalowerprice. 24
InEnglandandWales,forexample,theNationalInstituteforHealthandCareExcellenceconsiders
whetheranewdrugpassesacostutilitythresholdusuallybetween20000and30000($25000
$40000)perqualityadjustedlifeyearaddedbeforerecommendingitforcoveragebytheNationalHealth
Service. 25Althoughpricescanvarywidelyaroundtheworld26andhavealsoincreasedfasterthanmember
statesgrossdomesticproductsinrecentyearsinEurope, 27 USdrugpricespercapitastillsubstantially
outpacethoseinothersettings. 10
Table3.ApproachestoDrugPricinginSelectedCountries
DrugcompaniesabilitytomaintainhighpricesintheUnitedStatesisbasedon2marketforces:protection
fromcompetitionandnegotiatingpower.
CompetitioninthePharmaceuticalMarketplace
Themostimportantfactorthatallowsmanufacturerstosethighdrugpricesforbrandnamedrugsismarket
exclusivity, 28 whicharisesfrom2formsoflegalprotectionagainstcompetition.Together,thesefactors
generategovernmentgrantedmonopolyrightsforadefinedperiod.Initialregulatoryexclusivityisawarded
atFDAapproval.Newsmallmoleculedrugproductsautomaticallyearnaguaranteedperiodof5to7years
beforeagenericcompetitorcanbesold, 29andnewbiologicdrugsareprotectedfromcompetitionfor12
years. 30Thesecondtypeofmarketprotectionispatentrelatedexclusivitybecausemanufacturerscanreceive
patentslasting20yearsormorefortheirinventions. 31TheUSPatentandTrademarkOfficeissuesthis
intellectualpropertyrightoriginallywrittenintotheUSConstitutiontoencourageinnovationfor
inventionsthatarenovel,useful,andnonobvious.32
Althoughregulatoryexclusivitiesoftensetalowerbounddurationformarketexclusivity,theactuallength
ofsuchexclusivityismostcommonlydictatedbypatenttime.Becauseinitialpatentsprotectingtheactive
ingredientareusuallyobtainedwhenadrugisfirstsynthesized,andtheclinicaltrialandFDAreview
processusuallytakesonaverage6to8years,onlyhalfofthepatentperiodmaybeleftbythedrugapproval
date. 33However,acompanycanapplytohavethisperiodextendedbyupto5yearstoaccountforthetime
spentduringregulatoryreviewandhalfthetimeinclinicaltrials(patenttermrestoration),toamaximum
of14years. 34Inaddition,sponsorscanalsoearn6moremonthsofmarketexclusivitybytestingtheir
productsinchildren, 35anincentiveearnedbymorethan200drugssincelegislationcreatedthepediatric
exclusivityprogramin1997. 36Overall,themedianlengthofpostapprovalmarketexclusivityis12.5yearsfor
widelyuseddrugs(interquartilerange,8.514.8years)and14.5yearsforhighlyinnovative,firstinclass
drugs(interquartilerange,13.315.8years). 37,38
Duringthatexclusivityperiod,theavailabilityoftreatmentalternativesmightbeexpectedtoexertpressureto
reducethepriceofadrug. 39Forexample,approximatelyayearafterGileadintroducedsofosbuvir,AbbVie
receivedapprovalfora4drug,directacting,antiviralregimenthatachievedsimilarclinicalresponserates
againstthehepatitisCvirus,leadingsomepayerstonegotiatesofosbuvirdiscountsofmorethan40%. 40
Inpractice,however,competitionbetween2ormorebrandnamemanufacturerssellingdrugsinthesame
classdoesnotusuallyresultinsubstantialpricereductions. 41Forexample,ofthe8cholesterollowering
statinsthattheFDAhasapproved,2haveuntilrecentlyremainedpatented:rosuvastatin(Crestor)and
pitavastatin(Livalo).Despitethesimilarperformanceofthesedrugsindecreasinglowdensitylipoprotein
cholesteroltootheroffpatentstatins, 42thepriceofrosuvastatinincreased91%between2007and2012,
43
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from$112to$214perprescription. 43Duringthesametime,thepriceofthecomparablyeffective
atorvastatindecreasedfrom$127to$26perprescriptionowingtotheexpirationofitspatentprotectionin
2011. 44Similareffectshavebeenobservedforotherdrugclasses. 45
Onefactorthatunderminescompetitionamongtreatmentalternativesistheseparaterolesofpatients,
prescribers,andpayers:physicianswriteprescriptions,pharmacistssellmedications,andpatientsortheir
insurerspayforthem. 46Thisseparationhastraditionallyinsulatedphysiciansfromknowingaboutdrug
pricesorconsideringthosepricesintheirclinicaldecisionmaking47 andcansimilarlyremovemany
patientswithgooddrugcoveragefromconsideringthepriceofthemedicationstheypurchase.
Theonlyformofcompetitionthatconsistentlyandsubstantiallydecreasesprescriptiondrugpricesoccurs
withtheavailabilityofgenericdrugs,whichemergeafterthemonopolyperiodends.WithFDAapproval,
theseproductscanbesubstitutedforbioequivalentbrandnamedrugsbythepharmacistunderstatedrug
productselectionlaws.Instateswithlessrestrictivedrugproductselectionlaws,genericproductscomprise
upto90%ofadrugssaleswithinayearafterfullgenericentry. 48 Drugpricesdeclinetoapproximately55%
ofbrandnamedrugpriceswith2genericmanufacturersmakingtheproduct,33%with5manufacturers,
and13%with15manufacturers. 49In2012,theUSGovernmentAccountabilityOfficeestimatedthatgeneric
drugsaccountedforapproximately86%ofallfilledprescriptionsandsavedtheUShealthcaresystem$1
trillionduringthepreviousdecade. 50
Entryofgenericdrugsintothemarket,however,isoftendelayed.Forpharmaceuticalmanufacturers,
productlifecyclemanagementinvolvespreventinggenericcompetitionandmaintaininghighpricesby
extendingadrugsmarketexclusivity.Thiscanbeachievedbyobtainingadditionalpatentsonotheraspects
ofadrug,includingitscoating,saltmoiety,formulation, 51andmethodofadministration. 52,53Inan
exampleofthisstrategy,themanufactureroftheprotonpumpinhibitoromeprazole(Prilosec)receivedan
additionalpatentonthedrugsSisomer,despitetheabsenceofanycompellingpharmacologicdifference.
Thisledtothecreationofesomeprazole(Nexium)asanewlybrandedproductthatwassoldfor$4apill,a
600%markupovertheoverthecounterversionofomeprazole. 54
BecausepermissiveUSPatentandTrademarkOfficestandardsfornoveltyorusefulnessmakeitrelatively
easytopatentmanynontherapeuticaspectsofadrug,companiescanstrategicallypatentsmallchangesand
trytoinfluenceprescribersandpatientstotransitionfromonelinkedproducttothenext,sometimes
discontinuingproductionofolderversionsofthedrug.Fortheirpart,genericmanufacturershaveengaged
inlitigationwithbrandnamemanufacturersthatcouldleadtothepatentsbeinginvalidated,butthesesuits
arefrequentlysettled. 55Historically,brandnamemanufacturershaveofferedsubstantialfinancial
inducementsaspartofthesesettlementstogenericmanufacturerstodelayorevenabortgeneric
introduction. 48 Settlementsinvolvinglargecashtransfersarecalledpayfordelayforexample,inapatent
challengecaserelatedtotheantibioticciprofloxacin(Cipro),thepotentialgenericmanufacturerreceived
upfrontandquarterlypaymentstotaling$398millionaspartofthesettlementandagreedtowaituntil
patentexpirationtomarketitsproduct. 56
Otherfactorsaffecttheavailabilityofgenericversionsofbrandnameproducts. 57 Applicationbacklogsat
theFDAOfficeofGenericDrugshavemeantdelaysof34yearsbeforeagenericmanufacturercanreceive
approvaltomakeadrugnotprotectedbyanypatents.Afterthe2012FDASafetyandInnovationActrequired
userfeestobepaidbygenericdrugmanufacturersforsuchreview,theFDAnowreportsbeingableto
provideaninitialresponseinapproximately15months. 58 Someinnovatorcompanieshaverefusedto
providethesamplesoftheirproductsneededforthepotentialgenericmanufacturerstoconduct
bioequivalencestudies,slowingorblockingtheprocess. 59Directcompetitionamongbiologicdrugshas
beenrarebecausenopathwayexistedtofacilitateentryofcompetingproducts.In2010,theBiologicsPrice
CompetitionandInnovationActcreatedtheframeworkforsuchanexpeditedpathwayforsocalledfollow
onbiologics,versionsoforiginatorbiologicdrugsmadebydifferentmanufacturers, 60buthasledtoonly2
followonbiologicapprovalsinthelast5years.
Oncegenericaccesstothemarkethasbeenachieved,thenumberofgenericmanufacturersforaparticular
smallmolecule(nonbiologic)productdependsonavarietyoffactors,includingtheavailabilityofraw
ingredients,mergersintheindustry,andtherelativeattractivenessofaparticularmarket.Inthecaseof
pyrimethamine,thesmallnumberofpatientswithtoxoplasmosisintheUnitedStatesdidnotattractother
potentialgenericcompetitors,leavingTuringwithamonopolythatitwasabletoexploitwitha50foldprice
increase.
Notwithstandinghighgenericdruguserates,problemsatthestatelevelcandiminishthecapacityofgeneric
drugstohelpcontaincosts.Thirtystateshavedrugproductselectionlawsthatallowbutdonotrequire
pharmaciststoperformgenericsubstitutionin26states,pharmacistsmustsecurepatientconsentbefore
substitutingagenericversionofthesamemolecule. 61Thelatterobligationwasestimatedtohavecost
Medicaid$19.8millionin2006forsimvastatin(Zocor)alone. 62Inaddition,allstatesallowphysiciansto
issuedispenseaswrittenprescriptionsthatpharmacistscannotsubstitutewithagenericproduct,further
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contributingtohundredsofmillionsofdollarsinspendingonbrandeddrugsforwhichgenericversionsare
available. 63
Evenwellintentionedgovernmentpoliciescaninadvertentlyreducegenericcompetition.Inattemptingto
requireformalapprovalofdrugspredatingthemodernnewdrugreviewprocessinitiatedinthe1960s,the
FDAmadeitpossibleforsomecompaniestoassertmarketexclusivityanddemandhighpricesforonce
inexpensiveolddrugs,includingcolchicine,whichunderwenta5000%priceincrease. 64Similarly,a
governmentmandatedswitchtochlorofluorocarbonfreeinhalersforpatientswithasthmaledtonew,far
costlierpatentedchlorofluorocarbonfreesprayformulations,eventhoughtheconstituentmedicationshad
beenoffpatentforalongtime. 65,66
TheRoleofPublicandPrivatePayers
Duringadrugsmarketexclusivityperiod,theprimarycounterweightagainstexcessivepricingisthe
negotiatingpowerofthepayer.Amongpublicpayers,Medicarecoversapproximately40millionadults,
mostaged65yearsandolder,foroutpatient(PartD)andinpatient(PartB)drugcosts. 67 Medicaid,the
federalandstatefundedhealthinsuranceprogramforlowincomeindividuals,coversprescriptiondrug
costsforanother72millionAmericans. 68 OtherpublicpayersincludetheVeteransHealthAdministration,
theDepartmentofDefensehealthcaresystem,stateprisonsystems,andthefederalemployeehealth
benefitsprogram.Incontrast,privatepayersprovideinsurancecoverageto177millionpersonsinthe
UnitedStates. 69Thisisoftenaccomplishedthrough3largepharmaceuticalbenefitsmanagement
companies:ExpressScripts,Caremark,andUnitedHealthcare. 70Approximately29millionAmericanshave
nopublicorprivateprescriptiondrugcoveragearatefarhigherthaninnearlyallotherindustrialized
countries. 71
SeveralfeaturesoftheUSmarketplaceconstraintheabilityofpublicandprivatepayerstonegotiatelower
drugprices.Medicare,forexample,accountsfor29%ofthenationsprescriptiondrugexpenditure, 72but
federallawpreventsitfromleveragingitsconsiderablepurchasingpowertosecurelowerdrugpriceswhile
requiringittoprovidebroadcoverage,includingallproductsinsometherapeuticcategories,suchas
oncology.Basedinpartonconsiderablelobbyingandargumentsthatgovernmentnegotiatingpowercould
decreaserevenuesforthepharmaceuticalindustry, 73Congressincludedaprovisioninthelawthatcreated
theMedicaredrugbenefitprogram,prohibitingtheCentersforMedicare&MedicaidServicesfrom
negotiatingdrugpricesorfrominterferingwithnegotiationsbetweenindividualPartDvendorsanddrug
companies. 74ThismadeprescriptiondrugsunderPartDoneofthefewaspectsofhealthcareforwhich
CentersforMedicare&MedicaidServicesdoesnotnegotiateorsetprices.
Similarly,stateMedicaidprogramsaregenerallyrequiredbylawtocoverallFDAapproveddrugs,evenifa
particularmedicationhasalternativesthataresafer,aremoreeffective,oroffergreatereconomicvalue.
However,Medicaidisalsoentitledtoreceivearebateofatleast23.1%oftheaveragemanufacturerpricefor
mostbrandedmedicationsandisprotectedfrompriceincreasesexceedinginflation. 75,76Incontrast,the
VeteransHealthAdministration,whichprovideshealthcareforveteransandtheirdependents, 77 isentitled
toarebateofatleast24%oftheaveragepriceandalsohasbroadauthoritytoexcludeproductsfromits
formulary.Asaresult,particularlyfordrugsforwhichformularyalternativesareavailable,itachieves
additionaldiscountsbelowwhattheMedicaredrugprogramandstateMedicaidplanspay. 7881
Similarissuesaffecttheprivatesector.Inthe1990s,prescriptionbenefitmanagementcompaniesbecame
prominentintermediarieswhoserolewouldbetohelpemployersorinsurerspromoteappropriate
prescriptiondruguseanddecreaseitscost.Therehavebeensomerecentisolatedexamplesinwhich
pharmacybenefitmanagershavedonesoforspecificdrugs(mostprominentlyfordrugstreatinghepatitisC
ortheproproteinconvertasesubtilisin/kexintype9inhibitorstoreducecholesterollevels). 82However,
aggressivepricenegotiationisnotthenorm.Thisisnotsurprisingbecausepartofpharmacybenefit
managersannualfeesarebasedonagivenpayersspendingondrugs.Althoughthedetailsofsuch
paymentsarerarelydisclosed,whenoneofthelargestpharmacybenefitmanagersbecameapubliclytraded
entity,itwasobligedtodiscloseitsbusinessmodel,muchofwhichdependedonpaymentsfromdrugmakers
forshiftingmarketsharetotheirproductsfromothersinitsclass. 83
Evenlarge,selfinsuredemployershaveavoidedaggressiveattemptstonegotiatepricesdirectlywithdrug
suppliersortocurtailtheirformulariestoavoidpayingforprescriptionsthatarelesscosteffective.A
commonreasonforthisreluctanceisthatbecausepharmacybenefitshavetraditionallycomprisedlessthan
15%ofhealthcarebudgets,theorganizationalconcernthatcouldbecausedbydenyingpaymenttoan
employeeorretireeforaparticulardrugwasseenasoverwhelmingthemodestsavingsthatcouldbe
realized.Thismaychangeasdrugpricesincrease,particularlyforwidelyusedproducts,andasdrug
spendingconsumesagreatershareofhealthbudgets.AsillustratedinFigure2,thebeginningsofsucha
trendappearpresentforretailspendingondrugs(excludinghospitalorphysicianadministeredproducts)
forallmajorpayersexcepttheVeteransHealthAdministration.
Figure2.
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PayerSpecificRetailSpendingonPrescriptionDrugsOverTimeintheUnited
States
DataarederivedfromtheHenryJ.KaiserFamilyFoundationandNationalHealthExpenditure
Accounts,officialestimatesofpayerandcategoryspecifichealthcareexpendituresintheUnitedStates,
publishedannuallybytheCentersforMedicare&MedicaidServices.Valuesincorporateestimated
rebates.ThereductionforMedicaidin2006reflectstheadoptionofmuchofthesecostsbytheMedicare
drugbenefitprogram.
ViewLarge|SaveFigure|DownloadSlide(.ppt)
JUSTIFICATIONSFORHIGHDRUGPRICES
Thepharmaceuticalindustryhasmaintainedthathighdrugpricesreflecttheresearchanddevelopment
costsacompanyincurredtodevelopthedrug,arenecessarytopayforfutureresearchcoststodevelopnew
drugs,orboth.Itistruethatindustryoftenmakesexpensiveinvestmentsindrugdevelopmentand
commercialization,particularlythroughlatestageclinicaltrials,whichcanbecostly. 84Theseassertions
havebeenusedtojustifyhighpricesonthegroundsthatifdrugpricesareconstrained,thepipelineofnew
medicationswillbeadverselyaffected.Someeconomicanalysesfavoredbythepharmaceuticalindustry
contendthatitcosts$2.6billiontodevelopanewdrugthatmakesittomarket. 85However,therigorofthis
widelycitednumberhasbeendisputed. 86,87
Anumberoffactorsweighagainsttheserationalesforhighdrugprices.First,importantinnovationthat
leadstonewdrugproductsisoftenperformedinacademicinstitutionsandsupportedbyinvestmentfrom
publicsourcessuchastheNationalInstitutesofHealth.Arecentanalysisofthemosttransformativedrugs
ofthelast25yearsfoundthatmorethanhalfofthe26productsorproductclassesidentifiedhadtheir
originsinpubliclyfundedresearchinsuchnonprofitcenters. 88 Otheranalyseshavehighlightedthe
importanceofsmallcompanies,manyfundedbyventurecapital. 89,90Thesebiotechstartupsfrequentlytake
earlystagedrugdevelopmentresearchthatmayhaveitsoriginsinacademiclaboratoriesandcontinueit
untiltheproductandthecompanycanbeacquiredbyalargemanufacturer,asoccurredwithsofosbuvir.
Argumentsindefenseofmaintaininghighdrugpricestoprotectthestrengthofthedrugindustrymisstate
itsvulnerability.Thebiotechnologyandpharmaceuticalsectorshaveforyearsbeenamongtheverybest
performingsectorsintheUSeconomy.Theproportionofrevenueoflargepharmaceuticalcompaniesthatis
investedinresearchanddevelopmentisjust10%to20%(Table4)ifonlyinnovativeproductdevelopmentis
considered,thatproportionisconsiderablylower. 91Thecontentionthathighprescriptiondrugspendingin
theUnitedStatesisrequiredtospurdomesticinnovationhasnotbeenborneoutinseveralanalyses. 92A
morerelevantpolicyopportunitywouldbetoaddressthestringencyofcongressionalfundingforthe
NationalInstitutesofHealth,suchthatitsbudgethasbarelykeptupwithinflationformostofthelast
decade.Giventheevidenceofthecentralroleplayedbypubliclyfundedresearchingeneratingdiscoveries
thatleadtonewtherapeuticapproaches,thisisoneobviousareaofpotentialinterventiontoaddress
concernsaboutthreatstoinnovationindrugdiscovery.
Table4.SalesandResearchandDevelopmentExpendituresofthe10LargestPharmaceutical
Companiesin2014a
93
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Thus,thereislittleevidenceofanassociationbetweenresearchanddevelopmentcostsanddrugprices93
rather,prescriptiondrugsarepricedintheUnitedStatesprimarilyonthebasisofwhatthemarketwillbear.
Thisexplanationalsohelpstoaccountforseveralhighprofilecasestudies,includinghighpricednew
brandedproducts94andexorbitantlypricedgenericdrugsdescribedabove. 95Inpreparationforrecent
hearingsonthistopic,theUSHouseCommitteeonOversightandGovernmentReformsubpoenaedinternal
correspondencefromTuringandValeantPharmaceuticals,whichhadsharplyincreasedthepricesofolder
drugsthecompanieshadacquired.Theinvestigationrevealed,forexample,thatTuringreceivedno
pushbackfrompayorswhenitincreasedChenodalprice5x...[Thiola]price21x...[andDaraprim]price
43x.96Similarly,Gileadspent$11billiontopurchasesofosbuvirfromPharmasset,asmallbiotechnology
firmthatdevelopedthedrug,basedinpartonfederallyfundedresearchledbyaninvestigatoratEmory
University. 97 Gileadrecoupedalmostallofthiscostinthefirstyearthatsofosbuvirwasonthemarket,
recordingsalesof$10.3billionin2014. 98 InDecember2015,theUSSenateCommitteeonFinancereleased
adetailedreportbasedonitsaccesstointernalcompanydocumentsonGileadsstrategiestomaximizethe
pricesitcouldchargeforboththatdruganditsplannedsuccessor,whichthecompanyalsoowned. 99Inthe
currentsystemfordrugpaymentintheUnitedStates,fewoptionsexisttocounterthisapproach.
Companiesshouldofcourseberewardedfairlyfortheresearchinnovationstheymakethathelpgenerate
newdrugproductsandfortheircostlytrialworkthatfacilitatestheassessmentandavailabilityofnew
medications.Butprovidingthemwithlargeincentivestodotheoppositeiscounterproductive.
CLINICALCONSEQUENCESOFHIGHDRUGPRICES
ThehighcostofprescriptiondrugsintheUnitedStateshasclinicalaswellaseconomic
consequences. 100,101EventhoughmoreAmericanshavedrugcoverageasaresultoftheMedicaredrug
benefitplanandthePatientProtectionandAffordableCareAct,costcontainmentstrategiesinrecentyears
haveshiftedanincreasingshareofdrugexpensestopatients. 102Privateinsurershaveincreased
deductibles103andmostcopayments,andaddedanewpaymenttierforcertainspecialtydrugsinwhich
patientsmustpaycoinsuranceoftenbetween20%and33%ofthetotaldrugpriceratherthanasimpleco
payment. 104Althoughsuchcostshiftingmeasureshavehelpedbendthecostcurveforemployersand
payers,theycanreduceuseofeffectivemedications. 105,106Almostaquarterof648respondentstoa2015
pollreportedthattheyoranotherfamilymemberdidnotfillaprescriptioninthelastyearbecauseofcost. 107
Inotherstudies,patientswhowereprescribedacostlybrandedproductratherthanamoreaffordable
genericalternativewerefoundtoadheretotheirregimenlesswellthanthosereceivingasimilargeneric
drug12andtohaveworsehealthoutcomes. 108 Nonadherenceduetoallcauseshasbeenestimatedto
contributeto$105billioninavoidablehealthcarecostsannually. 109
Insomecases,manufacturershaveattemptedtocircumventhighercopaymentsbyprovidingpatientswith
couponsthatreimbursetheiroutofpocketexpenses. 110Couponscanbeusefulforpatientswithnoother
option,buttheyleavetheinsurerobligedtopaythemuchlargeramountofeachprescriptionscosts,thereby
increasinghealthcarespending.Thisapproachhasbecomecommonforbrandeddrugsthathave
comparablebutmuchlessexpensivealternatives. 111
Facedwithfixedhealthcarebudgets,stateswithhigherdrugcostsfortheirMedicaidprogramshavehadto
reduceotherservicesorincreasehealthcareeligibilityrequirements. 112SeveralstateMedicaidprograms,for
example,haveimposednonevidencebasedpoliciestorestrictsofosbuvir,includingdenyingcoverageto
usersofalcoholorotherdrugs. 113,114
POSSIBLESOLUTIONS
VariousapproacheshavebeenproposedtomitigatetheeffectsofincreasingdrugpricesintheUnitedStates
whilestillprovidinganadequatereturnoninvestmentandmaintainingincentivesformeaningful
innovationbypharmaceuticalandbiotechnologycompanies(Box). 115,116Theseapproachesinclude
improvingthecompetitivenessofthemarketplace,enhancinggovernmentinvolvementinnegotiating
pharmaceuticalprices,andprovidingmoreguidanceforphysiciansandconsumersinmakingmedication
usedecisions.
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Box. PossibleStrategiestoLimittheEffectsofHighDrugPrices
Federal
Patenting:Limitsecondarypatentsfortrivialchangesofapatentedmolecule(eg,heightening
patentingstandardstorequireshowingenhancedsafetyoreffectivenessoverpreviouslypatentedversion
ofthemolecule)
Anticompetitivestrategies:Aggressivelypoliceanticompetitivebusinesspractices(eg,payfor
delay,producthopping)
Pricenegotiation:EnableMedicaretonegotiatedrugpricesforindividualPartDplansandto
excludecoverageforexpensiveproductsthataddlimitedclinicalbenefitexperimentwithvaluebased
drugpricingandrationalprescribingreimbursementmodelsforMedicare
Addressingextraordinaryshortageorpricingproblems:Invokemarchinrightsor
governmentroyaltyfreelicenserightsonexcessivelycostlyproductsthatweredevelopedinlargepart
withgovernmentfunding
Genericdrugpolicies:AllocategreaterresourcesattheFDAforreviewinggenericdrug
applicationstofacilitatecompetitionintheeventofashortageofmanufacturers,acceleratereviewof
drugapplicationsandauthorizetemporarydrugimportationfromwellregulatedpharmaceutical
marketsmandatebrandnamedrugsamplesharingwithgenericmanufacturers
Followonbiologicpolicies:AllocategreaterresourcestotheFDAforreviewingfollowon
biologicapplicationspromulgateproductspecificguidanceondemonstratinginterchangeability
conductrigorouspostapprovalsurveillanceoffollowonbiologicstoensurethesafetyandeffectiveness
oftheseproducts
State
Drugproductselectionlaws:Convertpermissivegenericsubstitutionpoliciestomandatory
substitutionpolicieseliminatepatientconsentrequirementsforgenericsubstitutionlimitcarveouts
thatmakeitmoredifficulttosubstituteincertainclinicalcategories(eg,antiepileptics,followon
biologics)
Pricenegotiation:Testvaluebaseddrugpricingandrationalprescribingreimbursementmodelsfor
Medicaid
HealthCareOrganizations
Pricenegotiation:Developvaluebasedformulariesandcopaymentplansthatencouragepatients
tomakebetterchoicesbutdonotpenalizethemandhamperadherence
Informationdissemination:Initiateacademicdetailingprogramstomarketthebestcomparative
evidencetoprescribersandpolicymakers
ImprovingCompetition
Onepossiblestrategytocontaindrugcostswouldbebetteroversightofapproachesusedbymanufacturersto
extendmarketexclusivity.Forexample,changesinhowtheUSPatentandTrademarkOfficeinterprets
noveltyandnonobviousnesswhenissuingpatentscouldhelpavoidnewsecondarypatentsbasedon
clinicallyirrelevantchangestoactivedrugproducts.Inrecentyears,aseriesofSupremeCourtdecisions
haveforcedtheUSPatentandTrademarkOfficeandfederalcourtstoreconsidertheirpreviouspermissive
approachtothepatentabilityofDNAsequences, 117 combinationproducts, 118 diagnostictests, 119and
businessmethods. 120Reexaminationofwhetherpatentsshouldbeawardedtodrugisomersorcrystal
structuresshouldfollowincasesinwhichthereisnoevidenceofanyclinicaldifferenceindrugeffect.In
India,currentpolicyrequiresthatacompanyproposingtopatentamodificationtoapreviouslypatented
moleculeshowenhancedeffectiveness. 121
Betterenforcementofexistinglawsandpoliciescouldalsohelpcontaindrugcosts.In2013,theSupreme
Courtruledthatsocalledpayfordelaysettlementswithgenericmanufacturerscouldconstituteanantitrust
violation. 122Nonetheless,numerousnoncashbasedsettlementsremainlegal. 123Inonecontroversialcase,
ForestLaboratoriesintroducedanextendedreleaseversionofitsAlzheimerdiseasedrugmemantine
(Namenda)shortlybeforetheendofthemarketexclusivityperiodfortheoriginalproduct,whichitthen
attemptedtodiscontinue. 124Thisproducthopwouldhaveforcedpatientsreceivingtheoriginaldrugto
switchtotheextendedreleaseproductbeforecompetitionfromgenericproductsoccurred.Litigationfiledby
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theNewYorkAttorneyGeneralhelpedunderminethestrategy,avertinganestimated$6billiondollarsin
increasedMedicaredrugspending. 125Strongergovernmentoversightofantitrustorinappropriatebusiness
practicesintendedtostiflecompetitioncanavertsimilarepisodes.Greaterrigorinthisareacouldactually
increaseimportantinnovationbecauseitwouldrequiremanufacturerstoearnrevenuefromnew
medicationsthatofferaclinicaladvantage,ratherthanfromsimplyextendingpatentprotectiononexisting
products.
Anotherapproachtoreducecostswouldbetodecreaseindustryexpenses.Reviewshavepointedtothe
increasingexpendituresfordrugresearchanddevelopment,withthesuggestionthatstepsbetakentomake
companiesinvestmentsmoreefficient. 126Asecondareaofspendingthatcouldbelimitedisindrug
promotion,particularlyrelatedtodirecttoconsumeradvertising, 127 whichispermittedonlyintheUnited
StatesandNewZealandamonghighincomenations. 128,129However,recentexpansionsofmanufacturers
commercialspeechrightsundertheFirstAmendmentdimtheprospectsoflegislativerestrictionsinthis
areaandinfactcouldleadtoanincreaseinpromotionalspendingonmarketingofproductsfornonFDA
approved(offlabel)indications. 130
Increasedattentiontothegenericdrugmarketplaceislikewiseneeded. 131Legislationrecentlyproposedin
Congresswouldforbidbrandnamemanufacturersfromrefusingtosharesamplesoftheirproductswith
genericdrugmanufacturersfornecessarybioequivalencestudies. 132Dedicationofgreaterresourcestothe
OfficeofGenericDrugsinthefirstrenewalofgenericdruguserfeesexpectedin2017couldfurtherreduce
applicationreviewtimes.Inadditiontoaddressingitsbacklog,theFDAhasestablishedanexpresslane
forpotentialfirstgenericsthatfacilitatestheirpromptauthorization. 58 Toextendthisprogress,theFDA
couldbeauthorizedtoaccelerateitsreviewofnewgenericproductsandtemporarilyauthorizelargescale
importsfromCanada,Europe,andotherwellregulatedpharmaceuticalmarketswhenthenumberofgeneric
suppliersofadrugdecreasesbelowacriticallevelthisiscurrentlypermittedwhentheFDAidentifiesa
shortageofaparticulardrug. 133Reciprocalrecognitionofgenericproductsalreadyapprovedbyother
stringentregulatoryagencies(suchastheEuropeanMedicinesAgency)couldmakemanywell
manufacturedmedicationsavailabletotheUSmarketevenbeforethecurrentFDAapprovalbacklogisfully
addressed.
Atthestatelevel,lawspermittingsubstitutionofclinicallysimilardrugswithinthesameclass(ie,
therapeuticasopposedtogenericsubstitution)incarefullyselectedcircumstancescouldalsobeaneffective
meansofprovidingpatientswiththesameclinicalbenefitatlowercost.Forexample,givendataonthe
interchangeabilityofdifferentprotonpumpinhibitorsordifferentversionsofthesamesteroidcream,
therapeuticsubstitutioncouldallowpatientsprescribedabrandnamedrugtoreceiveatherapeutically
equivalentgenericdruginitsplaceevenifnoexactgenericequivalentisyetavailable. 134
Intheincreasinglyimportantareaofbiologicproducts,whichaccountforagrowingproportionofdrug
expenditures,enhancedcompetitionfromclinicallyequivalentfollowonbiologicproductscouldhelpreduce
pricesfororiginatorbiologicproductsthatlackpatentsorothermarketexclusivities. 135,136Pricereductions
causedbyfollowonbiologicsareunlikelytoreachthesamelevelsasgenericsmallmoleculedrugsbecause
theformerarecostliertomanufacture,andfewercompanieshavethecapacitytodevelopthem.Because
mostfollowonbiologicswillnotbecompletelyidenticaltotheoriginatorbiologic,theseproductsmayalso
requiregreaterinvestmentincommunicationtoencourageusebyphysicianswhenappropriate.
Nonetheless,meaningfulpricereductionsarestillpossible.Thefirstfollowonbiologicintroducedintothe
USmarketinSeptember2015,abiosimilarversionofthecolonystimulatingfactorfilgrastim(Neupogen),
offereda15%discountontheoriginatorsprice. 137 IntheEuropeanUnion,inwhich21followonbiologics
areavailable, 138 themedianpricesavingsforbiosimilarepoetinalfa(Epogen)is35%,rangingfrom6%to
79%,dependingonthecountryanditspricenegotiatingpower. 139Furtherfollowonbiologicapprovalscan
befacilitatedwithgreaterguidancefromtheFDAaboutwhatlevelsofsimilaritywillberequiredtoobtain
approvalviathenewBiologicsPriceCompetitionandInnovationActpathway.Astrongpostmarketsafety
surveillancesystemcouldassesssafetyandeffectivenesscontinually,particularlyrelatedtothepossibility
thatpatientswillswitchamongdifferentapprovedfollowonbiologicproducts.
GovernmentEffortstoReduceDrugPrices
Intheory,themosteffectivewayforagovernmenttoreducedrugpriceswouldbeforittosetthemforthe
entiremarketplace,ascentralgovernmentsdoincountriessuchasSweden, 140ortoengageininternational
referencepricingandsetpricesatlevelssimilartothoseofothercountries.TakingsuchastepintheUnited
Stateswouldhavemajormarketplaceramificationsandisnotatpresentpoliticallyfeasible,inpartbecause
ofthepowerofthepharmaceuticallobbyinWashington,DC. 141Nonetheless,theUSgovernmentcanstill
takestepstohelpcontrolexcessivedrugprices142,143byreassessingsomeexistingunusualandoverly
permissivepolicies.
First,althoughthelikelihoodoflegislativechangeissliminthecurrentpoliticalenvironment,Congress
couldauthorizeMedicaretonegotiatethepricesofdrugspaidforbyMedicarePartDplans,asitdoesfor
nearlyallothergoodsandservices.SuchachangewouldrequirereorganizationoftheMedicaredrug
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benefit,whichiscurrentlymanagedthroughdecentralizedPartDplanadministrators.Greatersavings
wouldbepossibleifMedicareandMedicaidhadgreaterlatitudeinmakingclinicallyappropriateformulary
choices,similartotheleveragetheVeteransHealthAdministrationdrugprogramhas.Medicareprice
reductionsarelikelytohaveeffectsondrugpricinginprivatemarkets,whichtendtofollowCentersfor
Medicare&MedicaidServicessetpricesinotherhealthservices.Theextentofsucheffectsshouldbe
monitoredtoensurethatsuchchoicesareclinicallyreasonableandthatpricesforcertainessentialproducts
donotdecreasetoofar,ashasoccurredinsomepartsofthegenericdrugmarketplace,leadingtoshortages.
CentersforMedicare&MedicaidServicesrecentlyannounceditsintentiontotestvariousapproachesto
reducingprescriptiondrugspendingwithintheMedicarePartBprogram,whichcoversdrugsadministered
inoutpatientclinicsorphysiciansoffices,suchasalteringpaymentlevelsaccordingtotheeffectivenessfor
thepurposesforwhichdrugsareused(indicationspecificpricing)144orreimbursingdrugsoffering
comparablebenefitsatthelevelofthelesscostlyagent(referencepricing). 145147 Thisapproachwouldalso
accomplishmuchtowardreducingthelargeeconomicincentivesprovidedthroughgenerousmarkupsthat
encourageprescriberstousethecostliestdrugs.
Asecondwaythegovernmentcouldhelpreduceprescriptiondrugpricesisbyhelpingtogenerateand
disseminatebetterinformationaboutthecomparativeclinicalandeconomicvalueofdrugs.IntheUnited
Kingdom,Germany,Australia,Canada,andseveralothercountries,governmentfundedtechnology
assessmentactivitiesprovidesupportforcomparativeeffectivenessstudiesandevaluatenewproductsin
lightofcomparativecosteffectivenessanalysis. 148 Theinformationthusgeneratedcouldbeusedby
governmentandprivatepayerstohelpthemrespondtocompanysetprices,makedeterminationsabout
formularyrulesandexclusions,andeducatephysiciansandpatientsaboutthevalueofmedication
choices. 149
ThePatientCenteredOutcomesResearchInstitutehadbeenexpectedtoserveinthisrole.Itwashailedatits
inceptionasavehicletopromoterobustcomparativeeffectivenessresearch,butCongressprecludeditfrom
consideringdrugcostsasacentralfocusofitswork, 150,151shiftinginsteadtopatientengagementand
decisionaids.Theinstitutesreauthorizationin2019willprovideanotheropportunitytorevisitits
mission. 152
Inthemeantime,patients,physicians,andpayerscanturntonongovernmentalorganizations,suchasthe
InstituteforClinicalandEconomicReview, 153TheMedicalLetter, 154theIndependentDrugInformation
Service, 155OregonsDrugEffectivenessReviewProject, 156andConsumerReportsBestBuyDrugs, 157
whichprovideinformationonvaluebasedchoicesforselectmedications. 158160Otherinstitutions,suchas
theAmericanSocietyofClinicalOncologyandtheMemorialSloanKetteringCancerCenter,haveorganized
approachestoestablishvalueframeworksforcancercare. 161,162Thedatageneratedbythesegroupscan
supportlowerdrugpricesbyhelpingpayersorganizetheirformulariesandnegotiateappropriaterebates,as
wellasguideprescribersandpatientstowardmoreappropriatedrugusedecisions.
Pharmaceuticalmanufacturershavealsoexperimentedwithperformancebasedpricingprograms,suchas
offeringreimbursementsforpatientswhodonotrespondtoaparticulardrugtherapy.Forexample,the
manufacturersoftheproproteinconvertasesubtilisin/kexintype9inhibitorcholesterolloweringdrugs
recentlyagreedtoreimburseatleast1privatepayeriflowdensitylipoproteincholesterolloweringoutcomes
didnotreachthelevelsobservedinclinicaltrialsofthesedrugs. 163Itistoosoontoknowwhetherthese
pilotprogramswillhavemeaningfuleffects. 164
Inaddition,pathwayscurrentlyexistfortheUSgovernmenttointervenewhenpricesforessentialmedicines
areconsideredtobeunreasonablyhigh.Onefederallawallowsthegovernmenttousepatentedproductsin
exchangeforreasonableandentirecompensation, 165similartothegovernmentseminentdomainrightsin
regardtoland.Ifappliedtohighcostessentialmedicines,thislawsinvocationwouldallowthe
governmenttomakeaneededdrugavailablewidelyatclosetothecostofproductionwhilestillproviding
manufacturerswithadequaterevenuestiedtotheiramountofinvestmentandriskoffailure. 166Another
possibilityisforthegovernmenttomoreactivelyinvokeitsroyaltyfreelicenseorpatentmarchinrights
forhighcostprescriptiondrugproductsthatweredevelopedinpartwithgovernmentalfundingunderthe
BayhDoleAct. 167 However,theUSgovernmenthasneverimplementedtheseexistingrightsandonlyonce
evenindicatedthatitmightdosowhenthegovernmentsoughttostockpileciprofloxacinamidconcern
overwidespreadweaponizeduseofanthraxshortlyaftertheSeptember11,2001,terroristattacks.The
manufacturerofciprofloxacin,Bayer,reportedlyincreasedthedrugspriceduringthisaddeddemand,and
thegovernmentsthreattousethepatentedproductanywaysecureda50%discount. 168 Opportunitiesto
invokemarchinrightstoaddresstheunavailabilityorunaffordabilityofotherdrugshavebeendeclinedby
NationalInstitutesofHealththisoptionisalsoavailableonlyfordrugsthathaveaclearlinktofederal
fundingonalloftheirFDAlistedpatents. 169
PhysicianandPatientLevelSolutions
Actionbybothphysiciansandpatientscanalsoplayaroleincontainingexcessivedrugexpenditures.Many
physiciansdonotknowthecostofthedrugsthattheyprescribe47 anddonotdiscussdrugcostswith
170
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patients. 170Otherpracticessuchaswritingdispenseaswrittenprescriptionstoavoidgenericdrugsor
usingfreesamplesofbrandedproductsleftbypharmaceuticalsalesrepresentativesalsoincreasedemandfor
costlyproducts.Moreeducationaboutdrugcostsandvaluebasedprescribingcouldbeintegratedinto
physiciansinitialandcontinuingeducationsuchinformationcanalsobeprovidedthroughelectronic
medicalrecordpointofcarereminders.
Academicdetailingisanapproachinwhichevidencebasedinformationonappropriateprescribingis
broughttophysiciansintheirofficesbyspeciallytrainednoncommercialoutreacheducators,usually
pharmacistsornurses. 171Thisapproachhasbeenfoundtobeeffectiveinreducingsuboptimalmedication
choicesinareviewofmorethan60randomizedcontrolledtrials172andiscurrentlyinplaceinseveralstates
andlargehealthcaresystems. 173
Anotherpotentialmodeltoengagemorephysiciansinconsideringthecostsandvalueofthedrugsthey
prescribewouldbetointegratedrugcostsintotheirpaymentmodels. 174,175Thecostsofprescriptiondrugs
arenowlargelyseparatedfromthecostsofotherhealthservices.However,emerginghealthcaresystems
suchasaccountablecareorganizationscanprovideanopportunitytolinkhealthservicescostsanddrug
costssothatphysicianscanberewardedforprescribingdrugsoptimally.Suchprogramsoughttofocus
exclusivelyonthequalityofprescribing,notmerelyitscostearlierexperimentspenalizingphysiciansfor
expensiveprescribingservedmerelytodiscouragetheircaringforpatientswithpotentiallycostlydiseases,
suchascancerandAIDS.
Somemarketorientedadvocatesofpatientlevelsolutionshavearguedforshiftingmoreofthecostsofdrugs
topatientstomakethemmoreactiveconsumersandensurethattheyavoiddrugsthatdonotprovide
adequatevalue.However,costshiftingcanbehighlyproblematicbecausepatientsoftenhaveinsufficient
informationaboutthevalueofdrugstoinformtheirdecisionssuchapproachesalsodiscriminateagainst
sickerandpoorerpatients. 176Incontrast,programsthatreducepatientseconomicexposuretocopayments
havebeenshowntoimproveadherence177 andevenpatientoutcomes. 178 Effectiveinterventionswillrequire
greaterattentiontotheclinicalandethicalissuesinvolved.
CONCLUSIONS
Highdrugpricesaretheresultoftheincreasingcostandcomplexityofdrugdevelopmentbutalsoarisein
largepartfromtheapproachtheUnitedStateshastakentothegrantingofgovernmentprotected
monopoliestodrugmanufacturers,combinedwithrestrictionofpricenegotiationatalevelnotobservedin
otherindustrializednations.Opportunitiestoaddresstheseproblemsincludepayinggreaterattentionto
potentiallyunjustifiedgrantingandextensionofpatentexclusivity,enhancingcompetitionbyensuring
timelygenericdrugavailability,providinggreateropportunitiesforpricenegotiationbygovernmental
payers,generatingmoreevidenceaboutcomparativecosteffectivenessoftherapeuticalternatives,and
activelyeducatingphysiciansandpatientsaboutsuchchoicestopromotemorevaluebaseddecision
making.Thereislittleevidencethatsuchpolicieswouldhamperinnovation,andtheycouldevendrivethe
developmentofmorevaluablenewtherapiesratherthanrewardingthepersistenceofolderones.
Medicationsarethemostcommonhealthcareinterventionandcanhaveamajorbenefitonthehealthof
individuals,aswellasofpopulations,butunnecessarilyhighpriceslimittheabilityofpatientsandhealth
caresystemstobenefitfullyfromthesevitalproducts.
ARTICLEINFORMATION
CorrespondingAuthor:AaronS.Kesselheim,MD,JD,MPH,ProgramOnRegulation,Therapeutics,
AndLaw(PORTAL),DivisionofPharmacoepidemiologyandPharmacoeconomics,Departmentof
Medicine,BrighamandWomensHospitalandHarvardMedicalSchool,1620TremontSt,Ste3030,
Boston,MA02120(akesselheim@partners.org).
AuthorContributions:DrKesselheimhadfullaccesstoallofthedatainthestudyandtakes
responsibilityfortheintegrityofthedataandtheaccuracyofthedataanalysis.
Conceptanddesign:Allauthors.
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Acquisition,analysis,orinterpretationofdata:Allauthors.
Draftingofthemanuscript:Kesselheim,Sarpatwari.
Criticalrevisionofthemanuscriptforimportantintellectualcontent:Allauthors.
Obtainingfunding:Kesselheim.
Administrative,technical,ormaterialsupport:Avorn.
Studysupervision:Avorn,Sarpatwari.
ConflictofInterestDisclosures:AllauthorshavecompletedandsubmittedtheICMJEFormfor
DisclosureofPotentialConflictsofInterest.DrKesselheimisaGreenwallFacultyScholarinBioethicsand
issupportedbytheHarvardPrograminTherapeuticScience.HealsoreportsreceivinggrantsfromtheFDA
OfficeofGenericDrugsandDivisionofHealthCommunication,theLauraandJohnArnoldFoundation,
andtheEngelbergFoundation.DrSarpatwariissupportedbytheGreenwallFoundationandtheRobert
WoodJohnsonPublicHealthLawResearchProgram.HealsoreportsreceivingagrantfromtheLauraand
JohnArnoldFoundationandfeesforconsultingondrugpricingpoliciesfromLeerinkPartners.Noother
disclosureswerereported.
Funding/Support:ThisworkwasfundedbyagrantfromtheLauraandJohnArnoldFoundation.
AdditionalsupportwasprovidedbytheEngelbergFoundation.
RoleoftheFunder/Sponsor:Nofundingorganizationshadanyroleinthedesignandconductofthe
studycollection,management,analysis,andinterpretationofthedatapreparation,review,orapprovalof
themanuscriptanddecisiontosubmitthemanuscriptforpublication.
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