Is Relief Coming for the Rapid Increase in Drug Prices?

By Brian Passarelle, J.D. Class of 2018 Touro Law Review Junior Staff Member

Opioid use has exploded throughout America. This increase has also increased the use of the lifesaving drugs that work to counter the effects of opioid use. Sadly, as simple economics suggest, when demand goes up, prices go up with it, even when the product is a lifesaving treatment.[1] Pharmaceutical companies will continue to reap unwarranted benefits from this epidemic due to the relaxed drug pricing laws.[2] For instance, Kaleo, a pharmaceutical company in Virginia, that produces a medicine called Evzio, has increased the cost from $690.00 for a twin-pack to an astonishing price tag of $4,500.[3] Evzio is used to deliver naloxone, a life-saving antidote for overdoses related to opioids. [4]

Naloxone, which has been on the market since 1971, is the latest drug to have a big new price tag.[5] Senator Bernie Sanders, an adamant oppositionist to big pharma stated that, “the greed of the pharmaceutical industry is killing America.”[6] Also, President Trump has made it clear that he thinks drug prices are too high and that the pharmaceutical industry, as he put it at a news conference this month, is “getting away with murder.” [7] Indeed, experts say Evzio’s price surge is way out of step with production costs, and a needless drain on health-care resources.[8]

American drug-pricing is set up in a way that makes it relatively easy for companies to charge what they want.[9] America has continually taken a free market approach to pharmaceuticals.[10] Drug companies dicker separately over drug prices with a variety of private insurers across the country.[11] Meanwhile, Medicare, the government health program for those over sixty-five, which is also the nation’s largest buyer of drugs, is barred from negotiating drug prices.[12]

This approach is drastically different in many other countries. In England, for example, the government has an agency that negotiates directly with drug makers.[13] The government sets a maximum price that it will pay for a drug, and if companies don’t agree, “they simply lose out on the entire market.”[14] This puts drug makers at a disadvantage, driving down the price of drugs.[15] This enigma has been addressed by President Trump, as he wants to force drug makers to bid for the right to sell their products to Medicare beneficiaries.[16] However, this has repeatedly failed to attract enough support in Congress, especially among his fellow Republicans.[17]

Many states have taken it upon themselves to deter these radical price increases. In New York, lawmakers are trying to combat these staggering prices through drug price transparency legislation.[18] Senate Bill S5338A, currently in committee, enacts the pharmaceutical cost transparency act requiring prescription drug manufacturers to file a report disclosing certain financial information pertaining to prescription drugs which have a wholesale acquisition cost of $10,000 or more annually or per course of treatment.[19] Pharmaceuticals will be required to report the cost of clinical trials, research, and development, marketing, acquisitions or licensing, manufacturing, advertising to consumers and physicians, and patient assistance programs.[20] The impetus behind such efforts is the idea that the price of a drug should reflect not only an assessment of its clinical benefit — represented by its cost-effectiveness or economic value — but also the effort and resources expended in its creation.[21]

Proponents of the bill argue that customers have a right to know how a drug’s current price relates to these factors and that this information will assist policymakers in determining when a price is reasonable.[22] Additionally, it is suggested that these laws will encourage manufacturers to invest more heavily in research, whereas reviews have found that only about fifteen percent of pharmaceutical company revenues are currently invested in research and development, which is substantially less than is spent on marketing. [23]

Though these transparency laws have the potential to provide some additional information for state policymakers in a relatively secret industry, there is speculation that it will have no real impact on cost.[24] Some suggest that the drug companies will avoid explaining price spikes by raising prices below the thresholds stipulated ($10,000 in New York).[25] This is a step in the right direction but pharmaceutical company resistance and political realities may deter the ability to use drug pricing law’s to lower drug prices.[26] It shall be interesting to see if President Trump is able to muster up a movement in Congress to combat the prices.

[1] As Price Goes Up, So Does Demand, The Economist (July 18, 2007), http://www.economist.com/blogs/freeexchange/2007/07/as_price_goes_up_so_does_deman.

[2] See Julia Belluz, A Drug Company Hiked the Price of a Lifesaving Opioid Overdose Antidote by 500 Percent, Vox, http://www.vox.com/2017/2/3/14490804/kaleo-evzio-price-hike-opioid-epidemic (last visited Feb. 3, 2017).

[3] Id.

[4] Id.

[5] Sarah Karlin-Smith, Price Spikes of Life-Saving Drug, Politico (May 16, 2016), http://www.politico.com/story/2016/05/drug-prices-addiction-223192.

[6] Id.

[7] Katie Thomas, The Fight Trump Faces Over Drug Prices, New York Times (Jan. 23, 2017), https://www.nytimes.com/2017/01/23/health/the-fight-trump-faces-over-drug-prices.html.

[8] Shefali Luthra, Massive Price Hike for Life-Saving Opioid Overdose Antidote, Scientific American (Feb. 2, 2017), https://www.scientificamerican.com/article/massive-price-hike-for-lifesaving-opioid-overdose-antidote1/.

[9] Belluz, supra note 2.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Belluz, supra note 2.

[15] Id.

[16] Thomas, supra note 7.

[17] Id.

[18] See Ameet Sarpatwari et. al., State Initiatives to Control Medication Costs — Can Transparency Legislation Help?, The New England Journal of Medicine (June 16, 2016) , http://www.nejm.org/doi/full/10.1056/NEJMp1605100#t=article.

[19] S. 5338A, 2015-2016 Reg. Sess. (2015).

[20] Id.

[21] Sarpatwari et. al., supra note 18.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Sarpatwari et. al., supra note 18.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s