Policy makers looking to combat rising prescription drug prices

As prescription drug prices have spiked in recent years, policy makers at the state level are looking for new ways to combat this issue.

“Advances in developments in drug treatments bring the potential for improved treatment and improved cures to serious diseases; however, the rising costs of these drugs raises questions of access and sustainability,” said Sam Austin, director of the Evidence Based Health Policy Project.

He spoke Thursday at a panel discussion in the Capitol, where moderator Rep. Debra Kolste and a group of expert panelists helped shed some light on this complex subject.

“In 1960, the U.S. spent about 5 percent of its money on health care, which is about $150 per person,” said Kevin Look, an assistant professor in the UW School of Pharmacy. “Today, that number is closer to 18 percent, or about $11,000 per person.”

He says this trend shows no signs of slowing, with various factors contributing to soaring costs for health care in general. He allowed inflation does play a role, but added “the rising cost of health care has outpaced general inflation in nearly every year over the past decade.”

Manufacturers of prescription drugs determine price based on several factors: cost of production, research and development; taxes and fees; and some level of profit. Those producers create a “list price,” a published price that is available in a database containing other current drug information.

One issue with this system, according to Look, is these list prices “do not accurately reflect the true cost of these medications.”

He pointed to cases of states, including Wisconsin, bringing successful lawsuits to prescription drug manufacturers for “allegedly inflating their list prices in order to increase reimbursement from state Medicaid programs.”

These manufacturers have also drawn criticism for allegedly including marketing and advertising costs in their research and development budgets to “hide how much is actually being spent on these activities,” Look said.

Many cases of pharmaceutical companies inflating prices have come into the public eye recently. One such case involved Marathon Pharmaceuticals hiking prices for one of its drugs, Deflazacort, from about $1,200 when it had been available outside of the U.S., to $89,000 when the company attempted to introduce it here.

Rachel Currans-Henry, director of the Medicaid Bureau of Benefits Management for Wisconsin DHS, told how her office has been fighting to keep drug costs down.

“On a per-member, per-month basis, we are actually spending less per-member, per-month at managing the pharmacy program for the Medicaid population in 2016 than we did in 2009,” she said. “We are bringing down cost in our program.”

She said the bureau leveraged its “preferred drug list” to pit members of Big Pharma against one another.

“I would note today we have seen about a 50 percent reduction in the cost of the Hepatitis C drugs for the Medicaid program over the past three years based on those efforts,” Currans-Henry said. “Some of the tools where there is competition in the market, the Medicaid program is able to use our purchasing power to bring down cost.”

The National Academy for State Health Policy’s Pharmacy Costs Workgroup October 2016 report included strategies for combatting the rising cost of pharmaceuticals.

The 25-page report offers 11 different suggestions for what states can do to buck the trend. They include: increasing drug pricing transparency; bulk-purchasing drugs; re-importing affordable drugs from Canada; going after misleading advertisement through consumer protection laws; and creating a public utility model to oversee prices for particular medications.

“It serves a public good to have certain drugs available in reasonable ways that need to be overseen,” said Eileen Mallow, deputy director for the Office of Strategic Health Policy in the Wisconsin Department of Employee Trust Funds. “Some of the drugs you see are things like the Hepatitis C drug; there’s a public health reason to have that controlled.”

Mallow, who helped put together the NASHP report, will be heading to Washington, D.C. in about two weeks to start drafting RFP’s for state assistance.

“We are starting to work on being able to reallocate some money from NASHP to help states improve their purchasing policies,” she said.

–By Alex Moe