- A US House committee found that list prices for several drugs, including insulin, continue to rise.
- But experts say drug companies aren’t the only cause of the high prices.
- Intermediaries, including wholesalers, health insurers, pharmacies and drug benefit managers, can also impact drug costs.
Drugmakers use practices that are “unsustainable, unjustified and unfair to patients and taxpayers,” according to the findings of a December report by the U.S. House of Representatives Oversight and Reform Committee. .
As a result, millions of Americans have been “unable to afford lifesaving medicines,” according to the report.
According to an October 2021 Kaiser Family Foundation survey, about 3 in 10 Americans say they did not take their medications as prescribed due to cost concerns.
The survey also found that the majority of Americans — across all parties — say drugmaker profits are a major factor in high prescription drug prices.
But experts say it’s not just drug companies behind the price hike. Intermediaries, including wholesalers, health insurers, pharmacies and drug benefit managers, can also impact drug costs.
The 269-page House report is the result of a nearly 3-year investigation that involved a review of more than 1.5 million pages of internal drug company documents and five congressional hearings.
“The survey provided rare insight into the decision-making of many of the world’s most profitable pharmaceutical companies,” Rep. Carolyn B. Maloney (D-NY) wrote in a preamble to the report.
Three of the drugs included in the report are insulin products, whose high prices have long made the drug unaffordable for many people with diabetes.
The listed price of Humalog (Eli Lilly) has risen 1,219% since its launch, Lantus (Sanofi) by 715% and NovoLog (Novo Nordisk) by 627%, according to the report.
According to the report, these three companies control approximately 90% of the global insulin market, which was
Medicare, the government health insurance program for Americans 65 and older, is currently not allowed to negotiate price reductions with drug companies.
If so, the program could have saved more than $16.7 billion on insulin products from 2011 to 2017, according to the report.
Other prescription drugs included in the report that saw their list prices increase significantly include Mallinckrodt’s HP Acthar (over 100,000%), Teva’s Copaxone (825%), Amgen’s Enbrel (486%), Humira from AbbVie (471%) and Lyrica from Pfizer (420 percent).
Collectively, the companies raised the prices of the 12 drugs included in the report more than 250 times.
Drugmakers have “raised prices with abandon,” the report said, particularly when they are able to delay or block competition, such as cheaper generic versions of their drug.
Amgen and Mallinckrodt declined to comment. AbbVie, Pfizer and Teva had no immediate comment.
Pharmaceutical companies point to the patient assistance programs they offer, which help offset out-of-pocket drug costs.
Spokespeople for Sanofi and Eli Lilly both pointed to the companies’ patient assistance programs, which are available to both insured and uninsured people.
However, the Chamber report claims that these tools are designed to “create positive public relations, increase sales and increase revenue.”
Dr. Mariana Socal, associate scientist in health policy and management at the Johns Hopkins Bloomberg School of Public Health, said patient assistance programs are an example of pharmaceutical companies stepping in “to solve the problem that they helped to create”.
While patient assistance programs give manufacturers a good image, they’re also good for business bottom lines.
“We’ve known for a long time that a drugmaker having a patient assistance program is actually an investment of the company,” Socal said. “And one that has a high return on investment.”
If an insured person cannot afford their co-payments or coinsurance for a drug and does not buy it, the pharmaceutical company does not make any money.
On the other hand, if a manufacturer offsets a person’s out-of-pocket expenses, that person might end up paying nothing for the drug. But the insurance company will still pay its share of the cost of the drug.
“So the drugmaker will always make more money, compared to when the patient doesn’t get the drug because they can’t afford it,” Socal said.
The amount pharmaceutical companies spend on patient assistance programs is often only a small fraction of what they make from the drug.
For example, Pfizer’s spending on its Lyrica-related patient assistance programs from 2015 to 2017 was less than a tenth of one percent of the amount it earned in the United States for the drug during the same period, according to the House report. .
The report highlighted a number of industry practices used by companies to drive higher bottom line profits.
For the pain drug Lyrica, the report says its maker, Pfizer, has used patent protection, market exclusivities and other tactics to fend off competition from cheaper generic drugs.
For example, according to the report, the company has obtained clearance from the Food and Drug Administration (FDA) to market the drug exclusively for pediatric use. Documents reviewed by the House committee show the company estimated it would generate $1.6 billion in additional revenue.
Companies have also used “product hopping” to extend their drug monopoly, a practice in which a company makes minor changes to a drug’s formulation in order to obtain a new patent.
This prevents cheaper generic versions of the drug from entering the market. Patients are then switched to the reformulated and more expensive drug.
AbbVie, Pfizer, Sanofi and Teva have all committed to the product jump, according to the report.
The pharmaceutical industry argues that focusing on list drug prices is misleading.
The list price is higher than the net price. The net price of a medicine is equal to its list price less all discounts, rebates and fees.
Since 2012, the net price of insulins produced by Sanofi has fallen by 53%, according to a company spokesperson. Additionally, the net price of Lantus for commercial and Medicare Part D plans fell nearly 45%.
However, the House report found that the net prices of many of the 12 drugs examined by the House committee are “significantly higher” than when the drug was introduced.
The list price doesn’t always reflect what people are paying out of pocket, especially if they are insured. Health insurers — other than Medicare — will negotiate lower prices for many drugs.
A spokesperson for Eli Lilly said the average monthly spend for the company’s insulin product has fallen 27% over the past four years.
Socal said high list prices can still be a problem for policyholders if the insurer charges them a percentage of the drug cost, known as coinsurance.
“The reason these drugs are so unaffordable for patients is that these percentages are calculated on the list price of the drug, or something very close to the list price,” she said, “and not on the price negotiated drug”.
People who pay coinsurance for a drug are also vulnerable to price fluctuations. If the cost of a drug rises sharply during the year, so does the amount paid by an insured person.
In contrast, people who have a fixed co-payment for the drug are “protected from price fluctuations that may occur,” Socal said.
Although the House report focuses primarily on the role of pharmaceutical companies, drugs do not just move from manufacturer to patient.
There are a number of other players along the way, including wholesalers, health insurers, pharmacies, and pharmacy benefit managers (PBMs).
The pharmaceutical industry and other critics have pointed to PBMs as one of the main reasons for the sharp increase in drug spending in the United States. These intermediaries manage drug benefits on behalf of Medicare drug plans, private insurers, and other payers.
“The information contained in the [House] the committee’s report reflects a limited picture of the efforts of our company and other companies to manage [drug] access to the form,” a NovoNordisk spokesperson said, adding that “too often health insurance fails people with chronic conditions.”
The Republicans on the House Oversight Committee released their own report focused on the role of PBMs in driving up drug costs, saying PBMs “use their leverage in the market to increase profits, not reduce costs to consumers”.
Some research shows that PBMs and other intermediaries have an impact on prescription drug spending.
In one such study, Karen Van Nuys, PhD, executive director of the Value of Life Sciences Innovation research program at the USC Schaeffer Center for Health Policy & Economics, and her colleagues looked at spending on insulin between 2014 and 2018.
Their research was published last year in
They found that although the list price of insulin increased between 2014 and 2018, the total amount spent on insulin in the United States remained relatively stable over those 5 years.
However, the net price received by drug manufacturers decreased by 31% during this period. In contrast, intermediaries, such as PBMs and pharmacies, earned a larger share of overall insulin spending.
For every $100 spent on insulin in 2014, manufacturers received $70 and supply chain intermediaries received $30. By 2018, the share received by manufacturers had fallen to $47, with intermediaries now receiving $53.
“It’s a very different story than where you just focus on manufacturers and wholesale acquisition cost. [or list price]said Van Nuys. “Manufacturers are actually taking a lot less in 2018 than they did in 2014 to produce the same [insulin] product.”
“And the middlemen take a lot more of it, to the point that in 2018 more than half of what we spend on insulin doesn’t go to the manufacturer, but actually goes to the middlemen.”
Van Nuys said finding a long-term solution to high drug costs in the United States requires a more holistic approach than the House committee’s report, which focuses primarily on manufacturers.
“They weren’t even looking for problems in the rest of the supply chain,” she said. “But if you only focus on one agent, you’re going to miss half the problem.”