Prescription costs an issue with many factors and a long history
GRAND FORKS — For some, driving hours or even across an international border is easier than paying high prices for prescription medication.
“I have some patients who drive up to Canada to get insulin because it is cheaper there. They pay for it in cash,” said Dr. Eric Johnson, the assistant medical director at the Altru Diabetes Center.
When it comes to the cost of medication, some blame it on a lack of price regulation in the U.S., others claim corporate greed and even more say high prescription drug costs are just the inevitable price of research and development.
The Commonwealth Fund, a nonprofit conducting independent research on U.S. health care topics, attributed price hikes in 2014 and 2015 to the "introduction of several expensive specialty drugs to treat hepatitis C, cystic fibrosis, and other conditions,” along with an increase in health care coverage due to the Affordable Care Act.
The same Commonwealth Fund study found U.S. drug spending exceeded $1,000 per person. It was also 30 percent to 190 percent higher than in the other nine countries the Commonwealth Fund looked at, all in Europe except for Australia.
“This issue is multifactorial,” said Johnson, who added he’s especially familiar with the struggles his patients go through because he has type 1 diabetes.
“My care and my supplies are costly,” Johnson said. “Sometimes there are vacations we don’t take, and I make a good living.”
Not a new topic
Elected officials and the press have been eyeing rising prescription drug costs since at least the mid-1950s, during a series of hearings led by U.S. Sen. Estes Kefauver, D-Tenn.
“He basically accused the drug industry of increasing the costs of drugs, or listing the price of drugs 7,000 percent more than what it really cost to produce them,” said Dominique Tobbell, associate professor for the University of Minnesota’s History of Medicine program. Tobbell also authored the 2012 book “Pills, Power, and Policy: The Struggle for Drug Reform in Cold War America.”
“(Kefauver) said that the drug industry was really racking up prices because of the patent system that drug companies had,” Tobbell said.
When Kefauver introduced a bill to the Senate in 1962, ultimately amending the Federal Food, Drug and Cosmetic Act to approve drugs based on their effectiveness, his legislative attempts to control drug prices failed as a result of lobbying efforts from the pharmaceutical industry, Tobbell said.
A process with many players
Things have changed in the decades since, with more players in the pharmaceutical industry and a larger number of approved drugs than ever before.
Today, there are several stops a drug makes before ending up in the hands of a consumer, and each has a role in contributing to a drug’s final cost.
The process begins with manufacturers, who create the drug and set its price. Wholesalers distribute those drugs to dispensers, like pharmacies and insurance companies, while pharmacy benefit managers, or PBMs, are responsible for negotiating lower prices from manufacturers and pharmacies for beneficiaries on an insurance plan. The more clients a PBM serves, the more successful it can be in achieving its mission.
A University of Southern California study found, using 2015 data from the U.S. Securities and Exchange Commission, that for $100 spent on pharmaceuticals in the U.S., the players involved make a net profit of $23, $15 of which goes to manufacturers and the remaining $8 to insurers, PBMs and wholesalers.
“The manufacturer is keeping the lion’s share of the product costs, is keeping the lion’s share of the product revenue, for this portion of the drug,” said David Root, vice president of government affairs for Prime Therapeutics, a Minnesota-based PBM serving employers and insurance companies like Blue Cross Blue Shield, which owns the group.
PBMs establish which drugs a prescription plan will cover using formulary committees made of independent pharmaceutical and medical experts who Root said select medication based on safety and effectiveness.
“These are people who have a deep understanding and usually a lifelong career commitment to understanding the creation and utilization of drugs and new drugs and how they work,” Root said.
Drugs not included on a formulary are more expensive for the consumer.