Have you ever heard of a house of cards? It is a structure that will eventually collapse when it can no longer sustain itself. We fear that high drug prices could soon cause the collapse of our entire health care system. That’s because hospitals, nursing homes, patients and insurance companies will no longer be able to afford the incredible costs of crucial medicines. What makes it even more bizarre is that no one seems to understand the pricing system. The cost of your medicines is as clear as mud.
Why No One Understands How High Drug Prices Are Created:
Imagine shopping for groceries in a store that doesn’t post prices. The only way to find out how much you will owe for a dozen eggs, a half-gallon of milk and a loaf of bread is to take your cart to the checkout line.
But wait, it gets even more ridiculous. You don’t get to determine what you want to eat. You have to go to a health professional who “prescribes” your food choices. Once you have collected the items that you have been told you must eat, you go to the checkout counter and the clerk rings you up. If the bill is $586 you are stuck. And quite possibly your “insurance” won’t cover what the food doctor prescribed.
Most people would not accept such an approach to buying groceries. Why don’t they object when it comes to prescription drugs?
Some Doctors Understand That High Drug Prices Are NOT Sustainable!
An article in the Annals of Internal Medicine (March 22, 2022) calls for “A Patient Price Guide for Prescription Medication.” The authors describe the situation this way:
“In most industries, consumers make informed choices that include price considerations. With prescription drugs, the physician doesn’t know the price to the patient when prescribing, and the patient may discover the out-of-pocket price only when checking out at the pharmacy.”
Even the pharmacist may not have a clue how much a particular medicine will cost until they check the patient’s insurance coverage. This means that prescription drug costs are highly variable and not necessarily rational.
Valsartan Cost Confusion!
There is nothing like an example to demonstrate the confusion behind high drug prices. One reader, who we will call George, shared this confusing price scenario. He had been taking the high blood pressure medicine valsartan (Diovan) for years.
In June of 2022 when he went to pick up his prescription he was told that a three-month supply of this generic BP medicine had a price of $198. This was at a familiar chain drugstore. Shocked, he asked the pharmacist why it was so pricey. The pharmacist mumbled something about George’s insurance company and the deductible that had not yet been met.
George had watched commercials for GoodRx. When he looked up the price for three months’ worth of valsartan at the very same pharmacy chain, he discovered that the identical 90-day supply of the medicine would have been $83 with a coupon. But wait, it gets even more confusing. The lowest price with a GoodRx coupon was just $26 for three months of valsartan at a different pharmacy.
Valsartan is a generic blood pressure medicine. Perhaps you remember that a few years back there was quite a scandal about the nitrosamine contamination of many valsartan products. Here is a link to learn more about that disaster.
George is a bit skeptical about the FDA’s ability to guarantee quality generic drugs. If he opts for brand name Diovan instead of generic valsartan, the cash cost, according to GoodRx, would be $940 for a three-month’s supply. With a GoodRx coupon, it would “only” be about $747.
The Insurance Company Wins!
The insurance company is happy to see George use a coupon. It means that George is no longer using his insurance to buy pharmaceuticals. The bottom line seems to be that the insurance company is in a win-win situation.
By having a high drug deductible it makes George do some cost comparisons. He discovers that he can save money by using a coupon and giving up on his drug insurance. But what if he has to take a really expensive medication…one that costs thousands of dollars? He will have to “swallow” the deductible of $500 or more to get the insurance company to start paying. And he will still have a pricey co-pay on his very expensive drug.
What About High Drug Prices for Antidepressants?
Let’s now consider the brand name antidepressant Wellbutrin XL 300. In the United States this medication would cost over $2,000 a month. Very few insurance companies are likely to cover the brand name product.
The generic buproprion XL 300 carries a $90 price tag according to GoodRx. With one of the coupons from the website, though, the cost could be as low as $11 for a month’s supply.
This might seem like a no-brainer, except for one thing. Many readers of this column report that some generic bupropion products do not work as well as the brand name. In addition, some people describe side effects from certain bupropion generic formulations.
The same exact brand name Wellbutrin XL 300 that costs more than $2,000 in the US could be purchased in Canada for under $60. Confused? So are many other people, including physicians and pharmacists.
Really HIGH Drug Prices:
You may think $2,000 for brand name Wellbutrin XL 300 to treat depression is pricey. Hang on to your wallet! Look no further than FDA’s approval of the Alzheimer’s drug aducanumab (Aduhelm) to understand the severity of this crisis.
The Cost of Aduhelm:
When Biogen introduced its new medication the price was set at $56,000 a year for its Alzheimer’s medicine. Keep in mind that this new drug has not been demonstrated to slow the progression of dementia. There are no data to suggest that it will keep people out of nursing homes.
Perhaps because of the controversy, Biogen announced a price reduction at the end of last year. Instead of $56,000 the manufacturer stated that:
“For a patient of average weight (74 kg), the yearly cost at the maintenance dose (10 mg/kg) will be $28,200.”
That cost does not include the essential screening PET scan before patients can start on the intravenous administration of the medicine. Let’s not forget the cost of doctor visits, infusions and periodic MRI scans during treatment. That’s because the drug can cause brain swelling in a third of patients. There is also the risk for micro-hemorrhaging. These small brain bleeds must be tracked by additional scans, which will add even more money to the total costs of this drug.
An Effective Treatment for Alzheimer’s Disease?
Imagine for a moment a highly effective drug treatment against Alzheimer’s disease. If a Pharma company developed a medicine to restore memory, improve cognitive capabilities and keep people out of nursing homes it would be a huge breakthrough. If people could resume their normal activities, recognize grandchildren and even go back to work, it would change the world.
According to the latest analyses, six million Americans now suffer from Alzheimer’s disease. They and their loved ones are desperate for a drug that does something to reverse this horrific brain ailment. What if a drug company accomplished such a medical miracle. How much might it charge?
If Biogen can charge $28,200 for a drug that has not proved to reverse this disease, another company could easily charge $100,000 or more a year for something that is proven to do what patients and families really want.
How High Drug Prices Could Collapse Healthcare:
Let’s do some math. If you multiply $100,000 times six million people you end up with $600,000,000,000. Too many zeroes for you to manage? That represents a cost of $600 billion annually. What would that do to Medicare and the insurance industry? Remember, you pay for Medicare and insurance premiums.
Comparing High Drug Prices:
Let’s put our hypothetical Alzheimer’s drug up against existing expensive medicines. The most expensive drugs Medicare covered in 2018 (the most recent data available) were the anticoagulant Eliquis at $5 billion and the anti-cancer medicine, Revlimid at $4 billion. Overall, ultra-expensive drugs have been increasing in the Medicare formulary (Health Affairs, June, 2021).
Aduhelm is given by intravenous infusion. That makes it a Medicare Part B medicine. In 2018:
“…the total Medicare expenditure for all Part B drugs was $35 billion” (JAMA Internal Medicine, July 13, 2021).
Aduhelm alone would undermine that budget at an estimated $28 billion annually for:
“only 1 million of the estimated 5.8 million Medicare members with Alzheimer disease.”
High Drug Prices vs. Cancer:
Most of us have a hard time wrapping our brains around a number with 11 zeroes after it. That’s why personal stories are so compelling.
We recently met a delightful woman in her early 70s who is living with metastatic breast cancer. Her oncologist has determined that Ibrance (palbociclib) is the best medicine for her cancer.
The list price for this medication can be over $15,000 a month. Even for people with Medicare coverage, there can be hefty co-pays. Our new friend mentioned thousands of dollars a month out of pocket, which she cannot afford. She is currently relying on a foundation to help her with this life-saving medicine, but she worries that it may not be willing to continue indefinitely.
The exact same brand-name Ibrance medicine costs less than half as much in Canada. That doesn’t mean it’s affordable, but it demonstrates that countries can negotiate lower drug prices.
If Congress changes the law, Medicare could negotiate drug prices the way other countries do. That would almost assuredly result in savings for American taxpayers and older citizens. We doubt that is likely to happen, however. Republicans and Democrats are equal opportunity money grubbers. The pharmaceutical industry spends a lot of money convincing these people not to mess with their high drug prices.
It’s NOT Just Cancer and Alzheimer’s Disease:
The medicine called Xeljanz XR (tofacitinib) is prescribed for rheumatoid arthritis, psoriatic arthritis and ulcerative colitis. The average retail price, according to www.GoodRx.com, is $8,000 for a month’s supply.
Orphan drugs are the name of the game in the pharmaceutical industry. You will discover what they are and why the original good idea behind such medicines has become corrupted. But first, I would like you to understand the way things used to be in the drug biz.
Volume: The Old Business Model
Not very long ago the pharmaceutical industry made money based on how many pills it sold. The big money makers were brands like Lipitor, Nexium, Prilosec, Prozac, Valium, Xanax, Zantac and Zoloft. Many became household names.
The business model for drug companies was to first choose a health condition such as nervousness, insomnia, depression, heartburn or high cholesterol that affects millions of people. Then they developed a medication to help control that problem. If doctors would keep prescribing the drug for a really long time to millions of patients, the dollars would come in like the tide.
The marketing plan was to get as many people as possible taking these frequently prescribed medicines for as long as possible. Millions of individuals stayed on such drugs for years or even decades.
If stopping an anti-anxiety agent, antidepressant or heartburn drug suddenly led to uncomfortable symptoms, many people would choose to stay on the medicine indefinitely. Drug companies didn’t do a lot of research on withdrawal complaints and rarely offered providers clear guidelines on how to help patients taper off such medications. Why would they? The more people taking their pills the better!
The Edge of the Cliff:
Needless to say, big brand name drug makers worried about losing patent protection on their best sellers. That’s because once such drugs went off patent, generic companies jumped in to make copies that could be sold for a fraction of the cost.
Here are just a few examples based on data from GoodRx.com. The generic prices are with coupons from GoodRx.
A One Month Supply of:
Valium = $164-$198 Generic diazepam = $6.60-$19
Nexium = $305-$323 Generic esomeprazole = $9.30-$215
Prozac = $572-$639 Generic fluoxetine = $3.30-$23
It’s hardly any wonder that most people opt for generics. That’s especially true since insurance companies often refuse to pay for pricey brands. Not surprisingly, sales of branded drugs plummet once a generic version becomes available.
Why Are High Drug Prices Ravaging Healthcare?
To keep its shareholders happy, the pharmaceutical industry has had to come up with a new model. Instead of seeking common conditions, drug companies began searching for niche markets and charging extremely high prices.
Treatments for relatively rare diseases are known as orphan drugs and get special treatment from the FDA. When Congress passed the orphan drug legislation in 1983, it didn’t envision that pharmaceutical companies would make much money on these medications. Drug companies were given tax breaks and other incentives to develop such medicines. Orphan drugs were referred to as:
“significant drugs of limited commercial value”
High Drug Prices for Orphans:
Now, however, the prices of many orphan drugs are stratospheric. The last time we checked, the price of Actimmune, used to treat a rare immunodeficiency disease, was up to $55,000 a month.
Gaucher disease is a genetic condition that can become fatal if untreated. When last we searched, we found the cost could be $300,000 or more annually.
Spinraza, to treat spinal muscular atrophy, costs approximately $750,000 for the initial year of treatment.
A drug for Duchenne muscular dystrophy, Exondys 51, has an annual price tag of $300,000 after discounts, though some experts project anywhere from $750,000 to $1.5 million (New York Times, June 22, 2017).
Making Billions from Orphan Drugs:
Nowadays, instead of “limited commercial value,” orphan drugs have become bonanzas. Some of them, like Humira, Enbrel, Remicade and Revlimid, are among the top-selling drugs by dollar value. We are talking billions of dollars annually for each drug.
Cancer medications may also earn orphan drug designations. And that can mean that they earn big bucks as well. Some of the newer cancer medicines, such as Keytruda or Opdivo, can cost $100,000 or more annually.
The hottest new immunotherapy for cancer involves personalized CAR-T treatment. You can learn more about chimeric antigen receptor T cell therapy at this link.
And the use of CAR-T for B cell lymphoma patients at this link:
The total cost including hospitalization can exceed $500,000.
High Drug Prices = the New Pharmaceutical Model:
Instead of millions of people paying a modest monthly price for their medicine, the recent Pharma model has relied on a few hundred or a few thousand individuals paying huge amounts of money for an essential or life-saving medication.
This more or less works, as long as people have good health insurance. If, however, the insurance has a high deductible or if someone is uninsured, access to a life-saving treatment could easily be out of reach.
Insurance companies are beginning to balk at the high cost of some new medicines. Drugs for hepatitis C can cost over $1,000 a pill. Even though such medicines are less toxic than older alternatives, some insurance plans require patients to “fail” less expensive treatments before they will cover the newer drugs.
Can Insurance Companies Survive?
We have no great love for insurance companies. That said, we cannot imagine that they can continue to pay extraordinarily high drug prices. Even the government can’t manage to cover the kind of high drug prices we anticipate in coming years.
The authors of the article in the Annals of Internal Medicine (March 22, 2022) point out that:
“The roots of irrational drug pricing are complex and varied. Sources include deals in which drug companies provide rebates to a health plan in exchange for a more favorable position on the plan’s formulary, and incentives within the patent and regulatory systems that encourage marginal changes in a drug’s dosage or delivery system to extend intellectual property protection.”
They conclude that:
“A price guide for prescription medicine would go a long way toward injecting a dose of sanity into the process.”
We agree that a price guide would give both physicians and patients some idea of what drug prices actually are. It won’t, however, solve the problem of unsustainable high drug prices. It isn’t clear to us how that can be resolved. In the United States, drug companies can charge whatever the market will bear. The question is, what will the pharmaceutical industry do if it breaks the health care system?
You can learn more about this mess and get some practical information in our eGuide to Saving Money on Medicine. This online resource can be found under the tab in our Health eGuide section of this website.
