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Living in America with a chronic disease: Drug prices here and why they are so high.

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By: Mohor Sengupta Ph.D.

Image by Liz Masoner from Pixabay 

The USA has the highest average prices on drugs compared to all other developed nations across the globe. The average expenditure on drugs per person is around $1200 per year in the U.S., while it is roughly $750 in Canada, according to a 2014 survey. Let us look at a specific example. Nexium is a drug that helps reduce stomach acidity. It is manufactured by AstraZeneca in Sweden and sold to customers in the U.S., Canada, U.K., Australia, New Zealand, India and Turkey. The 40 mg pill costs $3.37 in Canada, $2.21 in the U.K., Australia and New Zealand, less than 37 cents in India and Turkey and $7.78 in the U.S. Specialty medicines, like those used for cancer can cost $10,000 a month in the U.S

Fred Smith, whom I interviewed recently, is a 26-year-old freelance musician and trumpet instructor. Shortly after his 26thbirthday, his health insurance coverage under his mother’s provider plan ended. He went on to buy his medical insurance from the private provider Blue Cross Blue Shield only to realize that he had to pay nine times the cost for each of two medicines, Vyvanse and Viibryd, and 18 times the cost for a third medicine, Adderall, compared to the amount paid while on his mother’s insurance. 

So why do Americans pay more for their medicines? 

  • Drug manufacturers in the U.S. can set the price of their products. 

While this is not the norm elsewhere in the world, federal law in the U.S. does not allow FDA or public insurance providers to negotiate drug prices with manufacturers. Medicare Part D is a 2003 legislation that prevents the nation’s largest single-payer health system from negotiating drug prices. Medicaid, which is the public healthcare program for people with limited income and resources, must cover all FDA-approved drugs, irrespective of the cost. However, drug makers must provide rebates to the government for drugs billed to Medicaid. In general, the biggest cost of medicines is borne by Medicare and private insurers. Private insurance providers do not usually negotiate prices with drug manufacturers. This is because middlemen or third-party pharmacy benefits managers that administer prescription drugs, such as CVS Health, receive payments from drug companies to shift market share in favor of these insurers. These deals also leave consumers with a limited choice. 

Drug makers in the U.S. not only set their own prices but they are also authorized to raise prices. Martin Shkreli became the “most hated man in America” overnight when he raised the price of a generic anti-parasitic drug Daraprim from $13.5 a pill to $750 a pill, a 5000% increase. Mr. Shkreli explained to critics that the hike was warranted because Daraprim is a highly specialized medicine and likened it to an Aston Martin previously sold at the price of a bicycle. He added that the profits from the price increase would go into improving the 62-year-old recipe of the drug. 

Deflazacort, a steroid used to treat Duchenne muscular dystrophy, is a generic compound that has been available worldwide for decades and costs $1000-$2000 per year. Yet, Illinois-based Marathon Pharmaceuticals acquired FDA approval to sell deflazacort under the brand-name Emflaza at $89,000 per year. 

Speaking of generic drugs, here is the next big reason for unaffordable brand-name medicines. 

  • Government-protected monopolies for certain drugs prevent cheaper generics from entering the market. 

The U.S. has a patent system that allows brand-name drug makers to retain exclusive selling rights for 20 years or more. Makers of drugs for rare diseases can also enjoy indefinite monopoly of sale. Moreover, these rare drug makers can extend their solo market dominance by making minor and non-therapeutic modifications to the patented product, like changing the dye component in the coating. They also often pay generic manufacturers to delay their products from entering the market. 

Additionally, FDA approval of generics following expiration of brand-name drug patents can be a long process; it can take up to 3-4 years for generic drug manufacturers to get FDA approval. It is estimated that prices of generic medicines fall to 55% of the brand-name medicine price once two generics enter the market and 33% of the brand-name cost when five generics become available. 

However, why would a brand-name manufacturer applying for a patent cite an unaffordable price to begin with?

  • Unjustified cost of research and development are cited by drug makers. 

It is generally agreed among critics that drug makers put an unjust price on their product citing the research that went into producing it. Because most of the R&D is funded by the National Institutes of Health via federal grants or by venture capital, the cost of research cited by the drug makers is above exaggeration. In reality, companies spend no more that 10-20 percent of their revenue on the research. 

Sofosbuvir was made by Michael Sofia, a scientist with a Princeton-based pharmaceutical company called Pharmasset. He even received the 2016 Lasker-DeBakey Clinical Medical Research Award for inventing it. Sofosbuvir is recommended for management of hepatitis C. After Gilead Sciences acquired Pharmasset for $11 billion in 2011, it applied to FDA for a new drug combining Sofosbuvir and Ribavirin, first made in 1972 by scientists at International Chemical and Nuclear Corporation (currently Canada-based Bausch Health Companies). Gilead priced their product at $84,000 for a single course of treatment in the U.S. The pricing caused a huge controversy when patients on Medicaid were denied the drug until becoming seriously ill. Moreover, generic licensing agreements to produce Sofosbuvir in 91 developing countries, which bear the burden of more than half the world population with hepatitis C, came under fire when Gilead asked for prices unaffordable by consumers in these countries. 

This brings us to the final cause of high drug prices. 

Doctors are often unaware that their prescriptions could be cheaper for their patients if they purchased two generic medicines instead of the brand-name prescription drug that is just a combination of the two. Vimovo, manufactured by Horizon Pharma, is a drug used to treat symptoms of osteoarthritis, rheumatoid arthritis, and ankylosing spondylitis. It is a combination of two generic medicines, naproxen (brand-name Aleve) and esomeprazole (brand-name Nexium). Naproxen is the anti-inflammatory component (NSAID) and esomeprazole is the aforementioned stomach-acidity reducer. It is added to the combination to reduce side effects of the NSAID. Whereas a month’s supply of Aleve and Nexium cost one patient $40, his insurance company was billed $3252 for the same supply of Vimovo. Moreover, not everyone who uses NSAIDs experiences stomach problems and do not need the additional esomeprazole component. 

Several Americans do not fill their prescriptions because they cannot afford to. Data show that 36 million Americans between the ages of 18 to 65 did not fill their prescriptions in 2016. Many resort to buying medicines online from foreign sellers or get them imported. Both routes are illegal and therefore we do not know the exact percentage of the population participating in these practices. 

I interviewed Tammy Connor, who regularly gets her medications from abroad. Tammy takes Synthroid, a brand-name drug, which is used to manage symptoms of hypothyroidism. She has been procuring it from Canada at 1/3rd its U.S. price for many years. In the middle of 2018, the U.S. began blocking drug purchases from Canada, preventing her from continuing this cost-saving practice. Eventually, she got a referral to a U.K.-based drug company called Medix Pharmacy, where she pays 1/3rd the amount that she would have to pay if she purchased Synthroid from the U.S. “Ironically, Medix gets its Synthroid supply from Canada”, Tammy said.

Big Pharma” is a major lobbying group in the U.S. This is a group of a few gigantic pharmaceutical companies which have together kept their profit margins rising amidst public outcry of drug unaffordability. Big Pharma also includes corporations that push overpriced drugs to customers. With their deep pockets, they can spend astronomical amounts on advertising and lobbying. 

Unaffordable prices of life-saving medicines cause many people to skip taking necessary medications, thanks to the Big Pharma. Now, more than ever, is the time that something was done about this. 

Recommended links: 

  1. http://money.com/money/4462919/prescription-drug-prices-too-high/
  2. https://jamanetwork.com/journals/jama/article-abstract/2545691
  3. https://www.cnbc.com/2017/05/10/americas-10-most-expensive-prescription-drugs.html
  4. https://www.renalandurologynews.com/home/news/almost-1-in-10-americans-cant-afford-medications-says-cdc/

Have an interesting science policy link? Share it in the comments!

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Written by sciencepolicyforall

May 9, 2019 at 4:23 pm

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