Healthy Skepticism Library item: 19260

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Silverman E
What To Do About Drug Prices? Three Suggestions…
Pharmalot 2010 Dec 2
http://www.pharmalot.com/2010/12/what-to-do-about-drug-prices-three-suggestions/

Full text:

Health care reform may eventually solve some problems, but the price of medications may not be on the list. Consequently, drug pricing is likely to remain a contentious topic for the forseeable future. Consider that prices may continue to rise, even though drugmakers are required to offer new discounts and pay a new tax, prices may well continue to rise.
In the 12-month run-up to passage of The Patient Protection and Affordable Care Act, there was a 9.7 percent average price hike on widely used meds*. Then there’s the steep cost of so-called specialty drugs – those bank-account draining biologics. In 1995, just eight cost more than $10,000 annually; now, there are 48. And what is really known about behind-the-scenes rebates?
And so the deep thinkers at Deloitte, the consulting firm, are offering up three suggestions that are likely to engender some debate, if only because they appear designed to be provocative. First up – disclosing the average manufacturer’s price. Why? The idea is that drugmakers and payers begin negotiations with more knowledge about what their respective competitors are doing, which should improve trust and reduce pricing variability.
“A reduction in variability could decrease the need for the negotiation function at PBMs and potentially result in lower admin fees for insurers. While PBMs still would be able to pool demand in an attempt to negotiate lower pricing, health plans would have better access to information and an increased ability to negotiate without third-party assistance. The reimbursement and contracting process would be more efficient and there would be operational savings. Industry revenue and average pricing would most likely be unaffected,” the Deloitte pontificators write.
What else do they propose? Expand the mandate of the newly created Patient-Centered Outcomes Research Institute to include issuing reimbursement guidance to payers. This would follow the UK model that uses comparative effectiveness and cost effectiveness, such as quality-adjusted life years, or QALY. In theory, this would lower co-pays and coinsurance, and maybe improve patient outcomes. Then again, there is the ‘r’ word: rationing, which this suggests to some folks.
Their last notion is to adopt international price benchmarking, in which US prices would be capped at the same level at which drugs are sold in a group of comparable countries. Presumably, this would flatten the disparities, but that is just a theory. As the Deloitte wags note, this could trigger a trade dispute or two. Then, again they believe their ideas are preferable to direct government price negotiations, fllat pricing and drug importation. In short, there’s something for everyone to dislike (you can read the full report here). What do you think?
Which, if any, suggestion do you like?
Comparative effectiveness? (36%, 45 Votes)
Disclosing the average manufacturer’s price? (29%, 36 Votes)
None of the above (20%, 25 Votes)
International price benchmarking? (18%, 23 Votes)
Total Voters: 125
UPDATE: A day later, PhRMA decided to send us this statement: “Deloitte’s report is off-base, claiming a ‘crisis’ and implying that the costs of new medicines are the key driver of health care costs. In fact, Deloitte’s own forecast shows revenues for US brand-name medicines will be more than 5 percent lower in 2015 than in 2009. Further, government data show that drug costs are growing at historically low levels. Moreover, Deloitte relies exclusively on price trend data that has been strongly refuted by leading economists for fundamentally distorting the truth about drug prices. We have serious concerns about Deloitte’s policy recommendations as we believe they would reduce patients’ access to lifesaving medicines and hurt innovation. It would be more constructive for Deloitte to focus on solutions that address the real crisis: the rise of avoidable chronic diseases and the need to reform our system to deliver better, more coordinated care.”

• ANOTHER UPDATE: We should note that the November 2009 AARP report cited by Deloitte was criticized for not incorporating manufacturer discounts and rebates, a methodology that AARP subsequently corrected in a more recent report issued in August 2010, which you can read here.