Is there a cure for high drug prices?

Anyone who takes medication realizes how much the cost has risen. 
Bernie Sanders gave CR's article "A Must Read" designation on his website.

Consumer Reports / updated July 29, 2016

The cost of prescription drugs for tens of millions of Americans rose $2 billion last year, and all signs point to a continued rise. At stake is nothing less than the ability of Americans to afford the medicines they need. Can we stop the madness?

Last August, Martin Shkreli, then the CEO of Turing Pharmaceuticals, did something considered so reprehensible that he was dubbed “the most hated man in America.” What caused the outrage? He increased the price of a little-known but important drug called Daraprim from $13.50 to $750 per pill. Daraprim is the best treatment for toxoplasmosis, an infection to which those with HIV/AIDs or cancer are susceptible.

The story went viral, and calls came from around the country, including from U.S. Rep. Elijah Cummings, D-Md., to stop drug entrepreneurs from gouging consumers for pure profit. Overnight, Shkreli became the poster child of pharmaceutical greed. And yet raising the price of a drug by that much is 100 percent legal.

What makes the case of Daraprim so important is that it brought a serious—and growing—healthcare problem out into the open: America spends a tremendous amount of money for prescription drugs—$424 billion last year alone before discounts, according to a new report by IMS Institute for Healthcare Informatics, a firm that tracks the pharmaceutical industry. And that number is rising fast with no sign of slowing down. What’s more, there are few regulations that shield consumers from the Martin Shkrelis of the world, or from drug companies that decide to raise prices to astronomical levels.

The Rampant Rise of Drug Prices

The practice of raising drug prices on new—and old—medications is common and widespread. From a nationally representative telephone poll conducted by Consumer Reports Best Buy Drugs in March, we learned that three in 10 Americans (about 32 million people) were hit with price hikes within the previous 12 months, costing them an average of $63 more for a drug they routinely take—and a few paid $500 or more. We also found price increases on everything from longtime generics used to treat common conditions such as diabetes, high blood pressure, and high cholesterol to new treatments for diseases such as hepatitis C. Our poll shows that when people were hit with higher drug costs, they were more likely to take unhealthy measures such as skipping doctor appointments, tests, or procedures, or not filling their prescriptions or taking them as directed.T

Take the case of Marlene Condon, a nature writer living in Crozet, Va. Two years ago she paid about $32 for 180 tablets of hydroxychloroquine (a generic available for almost two decades) to treat her rheumatoid arthritis. When the drug’s price more than doubled to $75, Condon says she was annoyed but paid the bill anyway. Then, last September, the price of her drug skyrocketed, costing her $500 out of pocket. Condon panicked and did what thousands of Americans do under those circumstances: She stopped taking the drug. Her arthritis pain grew much worse. Walking and doing simple household chores such as washing the dishes became almost impossible.

The Forces of Profit

Our analysis suggests that high prices for generic and brand-name drugs stem in part from a battle over profit between mammoth industries—big pharma and insurance companies—with consumers caught in the middle. On the one hand, pharmaceutical companies blame insurance companies for passing along high costs to consumers. And insurance companies point to very high-priced drugs for which there are few or no alternatives, which ultimately affects how much insurance coverage people receive and how much they must pay out of their pockets.

“Even as more patients have health insurance coverage, many more are facing high pharmacy deductibles and rising out-of-pocket costs, and other barriers to care, putting their ability to stay on needed therapy at risk,” says Holly Campbell, a representative at PhRMA, an industry association that represents pharmaceutical manufacturers.

“If there’s one treatment and there’s no alternative and no competition, then that’s where the challenge is,” says Matt Eyles, executive vice president of policy and regulatory affairs at America’s Health Insurance Plans (AHIP), a national trade organization for the insurance industry.

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• Reason 1: Drug Companies Can Charge Whatever Price They Want
• Reason 2: Insurance Companies Are Also Charging You More
Reason 3: Old Drugs Are Reformulated as Costly ‘New’ Drugs
• Reason 4: Generic Drug Shortages Can Trigger Massive Price Increases
• Reason 5: Specialty Drugs Are Costing All of Us

What the Government Can Do

Consumers are looking to the government to take action to control drug prices. In our CR Best Buy Drugs poll, 77 percent of people taking a medication said the government should allow more generics onto the market sooner; 74 percent want the government to pressure drug companies to charge less. Seventy-nine percent say insurers should pressure pharmaceutical companies to lower drug prices; 81 percent said consumers should do the same.

More specific steps that could help control costs include asking the government to:

• Set a limit on out-of-pocket costs. That would ensure that consumers have some protection against very high costs or sudden large spikes in prices. For example, last year California enacted a law so that a consumer won’t pay more than $250 for a single prescription drug per month, or $500 for certain high-deductible plans.
• Approve more generic versions of common drugs. Currently, 4,300 generic drug applications await an FDA decision. The agency says it’s working to review new applications within 15 months.
• Allow limited importation of drugs from legitimate Canadian and European sources, which currently is illegal under U.S. law. The ability to import drugs from countries that have a regulatory system similar to that of the U.S. could alleviate shortages or moderate prices.
• Use government’s existing “march-in” rights. It works like this: If there is a problem with the public’s access to a drug (a supply shortage or an exorbitant price), and if a drug was developed using taxpayer money, the Department of Health and Human Services has the right to force the company to allow another manufacturer to make generic versions that are cheaper for the consumer.

What Drug Companies Can Do

The most obvious help pharmaceutical makers can provide is to charge less—or at least slow the pace of price increases. There is a precedent: Rising drug prices in the 1990s led to public outcry and congressional hearings. And fearing price controls, nine drug companies, led by Merck, made a pledge to keep price increases at or below increases in inflation.

“Pharma has a right to make a profit,” says Riley of the ACP, but it also has a “moral obligation” to be transparent about its pricing because it benefits greatly from government-funded research. “The American taxpayer has been providing the venture capital to fund their products,” he says. “The public deserves to realize a return on that investment in the form of medications they can afford.” But pharmaceutical industry representatives think the focus on price alone is misguided and threatens “to squander our opportunity to usher in the next wave of medical progress,” says Campbell at PhRMA. States are starting to fight back. This past June, Vermont passed the first legislation in the U.S. that requires drug companies to justify high costs and price increases, and to calculate the financial effect on insurance premiums with a select set of drugs. California is currently considering a similar bill.

What Consumers Can Do

Although much of drug pricing is out of consumers’ hands, consider these tips to find the best deals at the pharmacy:

• Talk to your doctor about the cost of the drug she is prescribing. For less expensive alternatives,ask about generics, which can cost up to 90 percent less. Your doctor might consider “therapeutic substitution”—a different drug that works as well. If your insurance drops or reduces coverage of a drug, your doctor can also help by appealing to your insurance company for an exception to cover the drug anyway. The administrative process for filing the exception is different with each insurance company and can take a few weeks before a decision is made.
• Shop around and negotiate. Consumer Reports’ secret shoppers have found that retail drug prices can vary widely, even within the same ZIP code. Our shoppers also found that asking, “Is this your lowest price?” could get you further discounts.
• Check online. If you pay out of pocket, check GoodRx to learn a drug’s “fair price.” You can also fill a prescription with a low-cost online pharmacy based in the U.S., such as HealthWarehouse.com. Be careful of fraudulent websites: Use only an online retailer that operates within the U.S. and displays the VIPPS symbol to show that it’s a Verified Internet Pharmacy Practice Site.
• Choose a plan that covers the medications you need. Compare plans during your open-enrollment period because coverage may change from year to year. Keep in mind that high-deductible plans have lower premiums but require you to pay a larger chunk of your drug costs.

Consumer Reports Is Working to Lower Drug Costs

You are outraged by rising drug costs, and we’ve listened. Because we do not accept money from the pharmaceutical industry, we can call it like it is. If a drug is too risky or a poor value, we are not afraid to say so. We want your voice to be heard by industry and government. We are advocating for a range of evidence-based solutions for lowering consumers’ out-of-pocket costs, ensuring access to essential medicines, and getting better value for our country’s prescription-drug spending—without sacrificing safety or effectiveness. See ConsumerReports.org/drugprices for more.

Editor's Note: This article also appeared in the August 2016 issue of Consumer Reports magazine.

Funding for the preparation of this article was provided in part by the Atlantic Philanthropies and by a grant from the state Attorney General Consumer and Prescriber Education Grant Program, which is funded by the multistate settlement of consumerfraud claims regarding the marketing of the prescription drug Neurontin (gabapentin).

*Clarification, July 29, 2016: An earlier version of this article indicated that Woodard’s injection lasts about a week. He gives himself a daily injection from a pen that lasts about a week.

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