Two stories surfaced this week that provide more examples of how increasing drug prices have gotten totally out of hand.

In the first one, a study in the medical journal Neurology tracked prices for multiple sclerosis (MS) medications during the past dozen years and uncovered an "alarming rise" that was substantially higher than even the overall price increases for prescription drugs.

If anyone still needs a demonstration that drug prices reflect an oligopoly insulated from a competitive market, it appears in the study's finding that in the same period, prices for older MS medications -- those introduced between 1993 and 1996 -- also rose substantially after newer, more convenient medications starting appearing in 2002.  As one of the study's co-authors told the Wall Street Journal's Ed Silverman, "You would think [with a competitive market] more new drugs would lower the rate of the increases, but that didn't happen."

Among the newer MS meds launched after 2002, the study reported that three of them were originally priced between $8,000 and $11,000 annually.  By the time of publication, their annual per patient cost climbed to approximately $60,000.  Those price increases amounted to 21% to 36% per year.

Another interesting finding concerned the prices paid by various purchasing entities.  So for example, Medicaid receives legally mandated discounts but it still paid 36% more than the Veterans Administration which uses its purchasing power to negotiate favorable prices.  Yet both the VA and Medicaid paid more than the national health plans in the UK, Canada and Australia.  In the case of Medicaid, that price differential was 70% more than Canada/UK/Australia.  Medicare, of course, paid considerably more than even Medicaid.

Also this week, the Journal's Silverman and his colleague, Jonathan Rockoff, reported that, "More pharmaceutical companies are buying drugs...[and/or the companies that make them], then raising the prices."  Combined with tactics where pharmas regularly raise "the prices of their own older medicines and...[launch] new treatments at once unheard of sums," the practice has produced a 127% increase in branded-drug prices since 2008, even though the consumer price index rose by just 11% during the same period.

Silverman and Rockoff provide two in-your-face examples of this price gouging to make the point.  On February 10 of this year, Valeant bought a stable of older drugs from Marathon pharmaceuticals of Northbrook, Illinois.  Included in the transaction were Nitropress, a injectable approved by the FDA in 1988 for relieving acute hypertension, and Isuprel, an oral medication for congestive heart failure that relaxes blood vessels and helps the heart pump blood more efficiently.  The FDA approved Isuprel in 1999.

On that same February day it acquired those two drugs, Valeant raised their list prices by 525% and 212%, respectively.

A Valeant spokesperson recited the boilerplate, Chicago School meme for the Journal reporters, stating that, "Our duty is to our shareholders and to maximize the value."

For people whose sense of duty extends to stopping pharma's exploitation of American consumers, taxpayers and companies outside the industry, two trends are starting to gain support.

The first appeared last Friday when the Office of the Inspector General (OIG) at the Department of Health and Human Services released results of a study comparing Medicare and Medicaid rebates for brand drugs.  Similar to what it found in a 2011 study, OIG again saw substantial differences between drug prices paid by the two agencies.  The agency this time concluded by encouraging "CMS and Congress to explore the costs and benefits of obtaining additional rebates under [Medicare] Part D."

While it appears most unlikely that the Republican-controlled Congress would do anything to displease their pharma contributors, some action to control this source of Medicare expense may occur in 2017 and afterward.  The November 2016 elections will determine whether Congress and the next president seek to give Medicare negotiating rights that would save taxpayers billions of dollars they now bestow on drug companies.

Meanwhile, the private market is making its own noises about the need to rein in pharma's abusive pricing.

In recent years pharma companies have used brand co-pay assistance cards to defeat efforts by payer's aimed at controlling drug costs.  Insurer's, employers and other payers rely on drug formularies to cost-effectively manage the prescription benefits they offer and the co-pay cards are pharma's "formulary busters."

So-called "open formularies," those that permit their covered members access to all or nearly all approved medications, maintain only limited ability to encourage the use of cost-effective products.  If plans with open formularies demand higher co-payments to discourage members from filling prescriptions for unjustly expensive brands, the manufacturer can frustrate the payer's effort by covering that out-of-pocket cost for the patient.

In an effort to combat the cost escalation created co-pay cards, some pharmacy benefit managers (PBMs) such as Express Scrips have moved during the past eighteen months toward closed formularies that totally exclude overpriced brands from coverage.

Currently only a minority of people in the U.S. have drug plans containing closed formularies.  Observers of the private coverage scene predict the percentage of closed plans will rise substantially in the next couple of years because they represent an effective way to control rising premiums and employee contributions.

PBMs now strongly encourage their employer clients to adopt closed formularies.  The fact that generics constitute the overwhelming percentage (more than 85%) of all prescriptions makes it feasible for closed formularies to still offer a broad line of prescription coverage.

So exorbitant drug pricing in the U.S. remains a source of corporate banditry, forcing some people to choose between food, medication and rent.  Allowing Medicare to negotiate drug prices and moving more health care plans to closed drug formularies will help the situation, although other sources of outrageous cost and checkered quality will remain endemic in this country's for-profit, health care system.

Until public outcry can demand corrections to those larger factors, effective formulary management, together with granting Medicare the ability to negotiate drug prices, can at least help prevent overnight increases of 525%.


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