What's Driving The Cost of Prescription Drugs & Why Do Americans Pay More?

Jan 2, 2017

Pharmaceutical executives have been in the hot seat, recently facing Congressional outrage over the cost of life-saving drugs, and President-elect Donald Trump has promised action. What is behind these price tags? And if government intervened to lower them, would there be un-intended consequences?


GUESTS:

  • Sarah Kliff - Senior editor at Vox.com, where she oversees health, medicine, and education coverage. She is a former reporter with the Washington Post.
  • Sydney Lupkin - Correspondent for Kaiser Health News, covering drug prices and specializing in data reporting. She is a former health reporter for ABCNews.com.

SHOW HIGHLIGHTS: 

THE TRADEOFF: INNOVATION VS. ACCESS

Americans pay much more for the same drugs than patients in other countries, where governmental bodies negotiate drug prices. What would happen if the U.S. government did the same?

Sarah Kliff:  "We’re pretty high on the innovation side now and pretty low on the access side. The United States shoulders the world’s research and development budget... We are paying those prices into higher pharmaceutical profits that make pharmaceuticals a more lucrative investment industry. But to be clear we are  shouldering this burden for the rest of the world. If the United states did decide to price regulate the way other countries do, you would likely see less innovation. I don’t know if other countries would step up and charge more so there would be more money going into the industry. But there would be a trade off there,  and it would be a less desirable industry for investors in America and abroad to put their money into." 

GENERICS TO THE RESCUE? 

Under the Affordable Care Act, the pharmaceutical industry won a major victory, thwarting generic drugs: A 12-year monopoly for biologic drugs, an expensive new group of cell-based therapies, before they have to face competition from generic-type drugs. The pharmaceutical industry is routinely the top lobbying group in the country. 

In addition, Sydney Lupkin, said, "The FDA takes a very long time to approve generic drugs. As soon as there are two generic drugs on the market, that lowers the cost of the drug by 55% and then the more generics there are, the lower the price gets."   

State laws can also  affect affordability, said Lupkin: 

"Twenty-six state laws that have rules against substituting with generics without explicit orders from doctors or consent of patients," she said.  "In New Hampshire, if your doctor wants to prescribe a brand name, they have to write on a prescription, 'medically necessary.'  But they allow substitutions with generics.  Some states in New England require switching to generics if the drugs cost less."

COUPONS: HIDDEN COSTS, HIDDEN AGENDAS?  

Kliff: Companies offer you coupons to purchase their drug. And this can work in really confusing and maddening ways: A patented drug is about to come off patent. But they want people to keep buying their more expensive drug vs. a generic competitor. So they will issue coupons saying, 'If you buy this brand-name drug, we’ll cover your co-pay or your co-insurance. This makes it less expensive for the consumer but more expensive for everyone else because on the back end your insurance company is still paying those higher prices for the brand name drug." 

THOSE LONG COMMERCIALS THAT SPELL OUT ALL THOSE  SIDE EFFECTS...ARE THEY INFLATING THE COST OF DRUGS?

Kliff: "Research is mixed as to whether advertising affects drug prices. In some cases, advertising may have a beneficial effect.  Some studies of recent ads for the HPV vaccine Gardasil suggested that the ads did increase patients talking to doctors about Gardasil. It’s kind of a fine line of what is good public health and what encourages patients to go to doctors for drugs they may not need."

More concerning, said Kliff, is the advertising that targets doctors. This kind of aggressive marketing has been linked to the opioid epidemic. 

DRUGS AS A PUBLIC UTILITY? NOT LIKELY IN THE U.S.

Kliff: In most other countries drugs are seen as a utility. We don’t do that. We don’t tell drug manufacturers what they can charge and as a result you get a lot of drugs that get priced out of affordability for most Americans. If there’s an expensive car we think it's fine -- we don’t think all Americans can afford a BMW. But there’s a lot more on the line when Americans can’t afford certain life-saving medications."

Barring expensive drugs, however, can have a cost. 

Kliff: When you want to sell drug in Australia, a committee must approve it for safety and effectiveness....But in Australia, you'll see criticism when the government won't allow a drug to be sold there because it’s too expensive."   

Catch guest Sarah Kliff from Vox.com interview President Obama live Friday at 11:

Read more about this issue:

"Trump Used to Rail Against Drug Prices.  Now the Industry's Allies Are Helping Shape His Agenda" from the LA Times. 

"Prescription Drug Costs Still Rising in New Hampshire" from Pharmacy Today. 

"Hospitals Say They're Being Slammed By Drug Price Hikes" from Kaiser Health News. 

"EpiPen Controversy Fuels Concerns Over Generic Drug Approval Backlog" from Kaiser Health News. 

"The True Story of America's Sky-High Prescription Drug Prices" from Vox.