Healthy Skepticism Library item: 17032

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Publication type: news

Taylor L
US govt study probes “extraordinary” Rx price rises
Pharma Times 2010 Jan 12
http://www.pharmatimes.com/WorldNews/article.aspx?id=17194

Full text:

Limited competition and a lack of therapeutically-equivalent drugs may be contributing to “extraordinary price rises” for branded medicines, a US government report claimed yesterday.

From 2000 to 2008, 416 brand-name medicines representing 321 different brands experienced “extraordinary” price rises, mainly ranging between 100%-499%, and during this period the number of such increases more than doubled every year, says the report, by Government Accountability Office (GAO) investigators.

28 brand-name drugs had extraordinary price increases in 2000, but for 2007 and 2008 the numbers were 74 and 71, respectively, and some products experienced several such increases. For 26 products, the price rises during 2000-2008 were greater than 1,000%, while the prices of seven went up by 500% or more “multiple times” during 2000-2008. The largest price increase revealed in the study was around 4,200%.

The 416 products represented just 0.5% of all brand-name drugs, and 52% of them were in just three therapeutic classes – central nervous system, anti-infective and cardiovascular, says the study.

The GAO conducted the report for Democratic Senators Charles Schumer and Amy Klobuchar, who serve on the House/Senate Joint Economic Committee – Sen Schumer is vice chairman – following a 2008 hearing by the Committee which drew attention to a number of small-market prescription drugs whose prices had risen by 100% or more at a single point in time.

The investigators’ findings suggest that factors contributing to extraordinary price increases may include a lack of therapeutically-equivalent drugs – resulting from patent protection and market exclusivity, and the size of the drug’s market – plus limited competition, says the report.

However, it also found that about half of the extraordinary price increases studied were for brand-name products that had been purchased from manufacturers or wholesalers and then repackaged and resold in smaller packages to hospitals, physicians and other providers. Moreover, 95% of repackaged drugs had an extraordinary price increase without a corresponding rise by the manufacturer for the identical nonrepackaged drug, says the report, although it adds: “some drug repackagers serve a niche in the drug market and therefore may have a small share of the market in a therapeutic class.”

The investigators also point out that 96% of products with extraordinary price increases had cost less than $25 per unit prior to the rise, but a full course of treatment for some of these drugs could total several thousand dollars.

“One of the drugs we reviewed that is used to treat a rare cancer cost $390 for a full course of treatment prior to the extraordinary price increase. After two extraordinary price increases, the full cost of a course of treatment rose to more than $3,000,” they say.

Commenting on the findings in a letter to the Senators, GAO health care director John Dickson says that extraordinary price increases can lead to substantially higher spending for public and private insurance plans, hospitals and other providers, and may also contribute to overall drug spending, which has gone up about 10% a year since 2000. Moreover, patients “may also face higher out-of-pocket costs and reduced access to medically-necessary and sometimes life-saving drugs,” he adds.

However, the Pharmaceutical Research and Manufacturers of America (PhRMA) says the GAO has focused only on a small number of selected brand medicines rather than the entire market. 2008 national health care spending data released recently by the Centers for Medicare and Medicaid Services (CMS) shows 3.2% growth in prescription drug spending, the lowest growth rate in 47 years and well below the overall health care growth rate, said PhRMA senior vice president Ken Johnson, who also pointed to the study’s finding that over half of the extraordinary price rises were “attributable to middlemen.”

“Pharmaceutical research companies make price adjustments independently as a result of market forces, which include everything from patent expirations to the huge, sunk R&D costs which typically exceed $1 billion for a single medicine, as well as the ability of powerful purchasers to obtain large savings, benefiting patients,” said Mr Johnson.

“Today, prescription medicines account for only 10% of health care spending – the same as it was back in 1960. Unfortunately, medicines are always looked at as a cost and never seen as a savings, even though medicines often reduce unnecessary hospitalizations, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases,” he added.