Prescription Drugs -- Outlandish Pricing, Part 2

Posted by Stephen Weinberg, MD FACC FACP

As a followup from the previous post, there are a few other reasons we in the US pay significantly more for drugs than any other country.

Keep in mind that we essentially pay for all of the world's research and development with our inflated prices of drugs!

The FDA has had a significant backlog of generic drug filings to deal with. Any company that wants to produce a generic drug must go through FDA approval to be sure the factory meets acceptable standards and the drug produced is equivalent to the non-generic version. Recent information indicates that the backlog is about 47 months compared to Europe of less than one year. If more generic drugs were approved and on the market, competition would reduce the price. More money and resources need to be expended to improve the approval thru-put.

Finally, there are "orphan drugs" that are for diseases that have less than 200,000 patients. The government encourages the development of these drugs for humanitarian reasons and the drug companies can charge any "reasonable" amount. The government can certainly encourage competition in this area, but it is a small part of the problem and not worth dealing with at this time.

A recent article in the Washington Post, dated December 9, 20018, speaks about price fixing and collusion among numerous generic drug makers which has increased the cost of at least 300 generic drugs in the recent past. An anti-trust lawsuit has been filed and the justice department in Washington has launched an investigation into the matter. We all have and know of generic drugs that have experienced enormous price increases in the past few years for no good reason. I encourage you to read this article. 
Generic Drug Price Fixing.
In my opinion, there should be substantial jail time for those CEO's and others in their organizations that have participated in these schemes.

So what can be done to reduce the cost of prescription medications in the US?

First, we should support the ongoing justice department investigation and the anti-trust lawsuit that is under way.

In looking back to the prior post, the first issue was the establishment of a national panel to determine if a new drug is really any better than existing drugs and whether it is worth the cost. Given our open market philosophy and capitalism, it is unlikely that panels which exist in other countries would be adopted here. On the other hand, we could certainly have, as part of the FDA review, a comprehensive statement about the differences between the new drug and existing ones in the same category and a discussion about pricing and value.

The second point raised was the issue of the prohibition of negotiating pricing from manufacturers as a country or as Medicare or as a large coalition of buyers (such as the American Hospital Association) for the drugs. Allowing a larger buying population to negotiate prices would drastically bring down costs.  The prohibition from 2003 should be eliminated.

The third issue was the illegality of importing drugs from other countries. We should be allowed to shop around for drugs in other countries to obtain a more reasonable price. Since most industrialized countries purchase brand name meds from the same manufacturer and they are deemed safe by the FDA, we should be allowed to buy them from outside the US. Obviously, it is important to be sure that the pharmacy from which the drug is purchased is reputable, but this can be done through licensing. This is called "parallel trade" and can actually be done on a country to country basis. The US could by a drug from say Italy at a much lower price than we can get it from the same manufacturer and Italy could make some money on a markup. Medicare could do the same thing as could other buying cooperatives. Once again, this prohibition was part of the deal when Medicare Part D was established and should be eliminated.

The fourth issue was the $40B rebates that are paid by the manufacturers to the pharmacy intermediaries. This rebate should be passed on to the consumer as lower pricing. At the very least, it should be made public and allow all of us to see who is getting paid to sell which medication. It is unconscionable that this type of bribery is ongoing.

Fifth, it is unreasonable to allow a drug company to extend or renew a patent in a situation where they produce an extended release or combination version of the medication. It is highly likely that they have had this idea on the "shelf" since the drug was discovered and are only putting it forth to extend the patent and period of exclusivity. This practice should be eliminated or at least modified to allow the company to have some means of recouping the cost of producing this variation for the good of the patient.

The sixth issue regarding the payment of a generic manufacturer to not produce a drug coming off patent should be made illegal. In addition, the purchasing of a generic drug manufacturer by the manufacturer of the patented medication should be illegal. This is also clearly done to prevent competition and needs to be prosecuted.

As can be seen by the various issues above, there are numerous problems that can be solved to reduce the cost of prescription medications. To the extent that these companies have the highest profit of any other industry and they often engage in practices that are illegal and certainly unethical, we should expect the federal government to step in and make the industry adhere to the law. We should also expect the federal government to produce an environment that will enhance competition to produce needed drugs at a more reasonable cost. We need to communicate to our congressmen/women that this is a priority!!