Rod St. Aubyn: Is It Time To Regulate Drug Prices?

I am generally opposed to price controls.  I am a firm believer that competition controls prices for goods and services.  But several recent situations brings me to reconsider my position.  My sister has been successfully battling breast cancer for a couple of years.  Her cancer, though incurable, can be controlled with the right treatment, assuming that the choice of medications continue to work for her.  Cancers are a strange disease.  A friend of hers had the exact same type of cancer.  While medications may be effective for one person, the same cannot be said for all people.  Her friend’s medications never seemed to work as effectively for her as they did for my sister.  Sadly, her friend passed away a few months ago.

Originally my sister’s medical regimen include a daily oral medication and monthly infusions.  Her “cancer markers” continued to improve to the point that the doctor reduced the infusions to every 3 months.  Later those cancer markers showed some deterioration.  After running several tests, the doctor recommended a new oral cancer drug.  My sister found out that the price of the drug was $10,000 a month.  My sister jokingly said, “Ok, what is the second option?”  She was advised to see if her insurance would cover the drug.  She is on a separate drug plan through Medicare and discovered that they do not cover that particular new drug.  She was then advised that many times the drug manufacturer will provide the drug for a reduced cost or for free.  My sister inquired and after completing reams of forms, she was recently informed that the company would provide the drug free until the end of December.  They will then review her financial information again at that time to determine if she is eligible for continuation of the free drug.

Unfortunately my sister is not alone in this situation.  Drug manufacturers are continually developing new drugs for the treatment of numerous medical conditions.  This is a wonderful thing.  The Wall Street Journal has had several stories about the new costly drugs being brought to market to treat some cancers and MS.  According to that article, under Medicare these drugs accounted for 26% of total spending but just 1% of claims.  Bringing a new drug to market is no easy task.  It takes a lot of time and money and numerous trials before getting final approval from the FDA.  Once it goes to market, it also comes with patent protections (normally 20 years).  As a result there is NO true competition.  So these drug manufacturers can charge whatever they wish.

Drug manufacturers are finding ways to keep generic drugs out of the market place once their patents are due to expire.  They modify their drugs and apply for new patents to keep generics out of the hands of consumers.

Once the patent time has expired, other companies are free to market generics which are “therapeutically equivalent.”  That is when you start to see true competition bring down the costs of medicines.  It is not unusual to see generics 70 percent cheaper than the brand name drug.  Americans spend $145 billion per year on prescription drugs according to a May 1, 2015, ABC News report.

A troubling trend has been noted.  Drug manufacturers are finding ways to keep generic drugs out of the market place once their patents are due to expire.  They modify their drugs and apply for new patents to keep generics out of the hands of consumers.  I was informed by a pharmacist that drug manufacturers are now buying companies that manufacture generics to also control the market.

And if you believe that drugs are not a big business, just look at “direct to consumer” drug advertisements we are bombarded with on TV and in magazines.  One doctor relayed to me a situation several years ago when Claritin was not available in generic form and was heavily advertised on TV.  A patient came to see him and demanded to be prescribed Claritin.  He said that she didn’t have any allergies.   She said, “I know, but I saw Joan Lunden on TV and she said Claritin helped change her life and I also want a change in my life.”

Many of these drugs are cheaper in other countries because they refuse to pay all of the costs associated with these drugs, such as research and development, lobbying, etc.  So now Americans are paying extra to subsidize these other countries.

And look at the drug manufacturer’s and related companies lobbying efforts in Congress and in the states.  It was recently reported that the Pharmacy Research and Manufacturers of America (PhRMA) was again in the top 10 spenders for lobbying in DC.  These top 10 lobbying entities combined in the first 3 months of this year to spend over $64 million to influence federal policies.  According to OpenSecrets, these drug manufacturers spent $230,932,063 in 2014.  I don’t have the dollars spent in ND, but according to the Secretary of State’s web site, 20 lobbyists registered in 2015 representing 10 drug companies or other affiliated entities.  Some of these lobbyists represent more than one of those companies.  I am not aware of any other entity that has such a large lobbying force in ND.

Another ploy that the drug manufacturers have done is to provide funding for advocacy associations to push for legislative changes to help sell pharmaceuticals.  That way, the drug manufacturers can stay behind the scenes but still get the legislative changes that they desire.  Drug manufacturers are active in “wining and dining” legislators when they attend national legislative conferences.  Efforts to make this type of information more transparent during the last legislative session was defeated in several bills.

One bill passed during the last legislative session will definitely shift drug costs from the patient to the health insurance companies.  On the surface that may look okay, but in reality we will all pay for it in higher insurance premiums.

Insurance premiums are regulated by the Insurance Department.  But who regulates the prices for pharmaceuticals that are protected by government patents?  Congress and our state legislators need to take notice.  Is a $10,000 a month drug price reasonable?  Who determines that? – the “free market”, the government, or the drug manufacturer?

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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