Tag: drug prices

Why does Trump want foreign countries to set Medicare drug prices?

September 14th, 2020 by
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Trump put us in charge!

Does anyone else find it ironic that the “America First” president has issued an Executive Order that says foreign countries will set drug prices for the US? President Trump has ordered Medicare to literally cede drug price decisions to France, Germany, Japan or New Zealand –where prices are dramatically lower than here. Yes, the idea is to take the lowest price that any of the other rich countries negotiate and use that as Medicare’s price.

What’s next? Will the EPA adopt France’s emission standards? Will the SEC let Italy set the rules for Wall Street? Will Medicare chip in to fund the cost of comparative effectiveness research and negotiations currently borne by foreign governments? Of course not.

So how do we understand this apparent transfer of power overseas? Two ways:

  • First, the president is trying to find any path he can to get an achievement on drug prices before the election. This one is simplistic, understandable and dramatic.
  • Second, it’s not really about following the lead of other countries. Rather it’s about forcing drug companies to raise prices in other countries in order to avoid losing out on the big US market. It is distinctly Trumpian in that it punishes our allies and blames them for “freeloading.”

It does make sense for US payers, including Medicare, to employ value based pricing mechanisms like those developed by the Institute for Clinical and Economic Review (ICER) and to negotiate prices. But we should reward true innovation and be willing to pay up for breakthroughs -yes, even paying hundreds of thousands or millions per patient for great products. I don’t want the US to leave those decisions to anyone else.


By healthcare business consultant David E. Williams, president of Health Business Group

PCSK9 experience shows drug market isn't completely broken

November 1st, 2016 by

 

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Why isn’t this thing growing?

Everyone knows that the market mechanisms that make most of the US economy efficient are lacking in healthcare. That’s especially true for pharmaceuticals, where drug companies can raise prices at will, and only the government can step in with price controls to put things right. At least that’s what we’ve been hearing in the press and on the campaign trail for the last year or more.

So I read with interest a recent STAT article These pricey cholesterol drugs aren’t selling. And that has the biotech industry sweating, about how the market is blocking high-priced drugs –and preventing pharma companies from doing all the things we’ve been told they can do at will.

No one disputes that the new drugs, Repatha and Praluent, are excellent at lowering bad cholesterol, or LDL. They often succeed where the traditional treatment — an inexpensive class of drugs called statins — fails. The problem boils down to doctors who are reluctant to write prescriptions, insurers who are unwilling to pay for them, and drug companies that have failed to understand a fast-changing marketplace.

The failures could send a chill through the still-booming biotech business, which relies on the idea that the risky, expensive process of developing new drugs can one day pay off big.

Contrary to the views expressed in the STAT article, I think the market is actually doing an ok job here. There are two main reasons why the drugs haven’t sold well:

  • First and foremost, while they are proven to lower cholesterol they are not proven to reduce heart attacks or strokes or to lower death rates
  • Second, most patients do just fine with generic statins, which are inexpensive and have a long track record, compared with the new drugs that have list prices of about $14,000 per year

The result is that doctors who want to prescribe the drugs have to jump through a lot of hoops to get insurance company approval. That’s a hassle and it’s expensive and time consuming, so I sympathize. But by the way, before we get mad at the PBMs and insurers, consider that the experience for prescribers might not be that different under a fully capitated payment model since health system administrators would still be worried about their budgets.

The companies that make these drugs are conducting studies of the impact on outcomes that people really care about: heart attack, stroke, death. If they demonstrate that the drugs are effective on these measures, they will have no problem generating prescriptions or charging premium prices –at least in the United States.

Image courtesy of iosphere at FreeDigitalPhotos.net

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By healthcare business consultant David E. Williams, president of Health Business Group.

 

 

 

Should Medicare negotiate drug prices? Probably not

February 11th, 2016 by
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A popular idea, but not a good one

It’s nice that the vast majority of Democrats (93%) and Republicans (74%) have found something to agree upon. Too bad it’s the overrated idea of having Medicare negotiate drug prices.

Prescription drug costs are rising again after years of flat or modest growth. New, expensive products are hitting the market while drug makers have also found ways to boost the prices of older products, even generics. There’s been a lot of ink (and electrons) spilled by people complaining about “the $1000 pill” and other outrages, like bad boy drug exec and price gouger Martin Shkreli. On the other hand, many Hepatitis C patients have been cured and the need for liver transplants and cancer treatment averted. That should be worth something.

Why do people think Medicare would be such a good negotiator? Private sector Part D drug plans already do a good job of price negotiation. Executives’ bonuses and stock options depend on getting good deals from the drug makers. Meanwhile, if Medicare tried to negotiate it would have to be willing to say “no” to certain drugs and to impose restrictions such as prior authorization and high co-pays. No doubt many in the vast majorities cited above would be quick to complain about those tactics, making it hard for Medicare to be the bad guy.

It’s a whole different ballgame if we’re talking about Medicare simply dictating the price it will pay or requiring rebates as Medicaid does. But that’s not negotiation.

In fact Medicare should do something about drug spending. Something more innovative than squeezing unit price. Medicare should develop and test full-fledged value-based medication reimbursement programs that reward manufacturers financially if their drugs work well and lower overall medical costs (not just drug costs). Only Medicare is big enough to get the attention of all the drug makers.

Medicare has done a good job testing out new payment models with providers (think Accountable Care Organizations and bundled payments), which set precedents that private payers can follow and improve upon. It should take the same approach with drugs –setting up innovative programs that can be tested and then implemented widely.

I want drug companies to have the potential to make a lot of money when they cure patients, improve quality of life, or lower medical costs. That’s good for patients, families, investors, private payers and the public purse. Outcomes based payment approaches led by Medicare could get us there. Medicare price negotiation or price regulation just won’t do the trick.

Image courtesy of Master isolated images at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

Cancer drugs: Why the high and rising prices?

April 7th, 2015 by
Cancer drugs. Good stuff cheap?
Cancer drugs. Good stuff cheap?

When Americans talk, pharmaceutical companies listen. And what they’ve heard is that initiatives to contain or regulate medical costs get labeled as “rationing,” a word with very un-American connotations.

While politicians wring their hands, pricing strategists at pharma and biotech companies take action by charging high and rising prices for products for life-threatening illnesses. Cancer is Exhibit A, with many drugs costing more than $100,000 per year of treatment. A JAMA Oncology paper reviewed wholesale prices for cancer drugs approved over the past five years and found that prices are not correlated with a drug’s novelty or efficacy.

The authors conclude:

“Our results suggest that current pricing models are not rational but simply reflect what the market will bear.”

Now it’s possible that there is a greater correlation between actual negotiated prices and novelty or efficacy that isn’t showing up in the researchers’ data on wholesale prices. Still, the main conclusions are likely to stand, and spending on cancer drugs is sure to grow as more drug developers respond to market signals and develop new products.

If those who pay the bills, including private insurers, employers, and the government want to do something about cancer drug prices, they’ll need to embrace objective ways to measure cost effectiveness, and not be afraid of an opponent throwing around the “rationing” word. They’ll have to couple that approach with a commitment to personalized (or “precision”) medicine so that individuals get the specific drugs that are most effective for them, even if they don’t work as well for the general population.

The outcry over Sovaldi pricing for Hepatitis C has shown that there is at least some appetite to take on drug prices, but I don’t expect any dramatic clampdown on cancer drug prices in the near term.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.