OPINION:
Why are prescription drug prices skyrocketing out of control? Because America doesn’t have an even playing field between patients and pharmaceutical companies.
In a free and fair market, drugs should be affordable for everyone who needs them. But in the United States, some drugs can cost upward of $100,000 per year, even though manufacturing them costs a fraction of that. That makes access difficult to impossible for all too many people in need.
There’s no question that developing and testing drugs (including “biologics,” which are complex molecules based on molecules found in the human body) and bringing them to market can cost billions of dollars. Pharmaceutical companies seek to recoup their investments and to fund further research — and these, in and of themselves, are legitimate goals.
But what’s not legitimate is to manipulate legal processes and pricing mechanisms to suppress competition and unreasonably to extend the time in which patent protection effectively allows manufacturers to charge more for drugs than would be the case if generic or branded competitors were available.
Unfortunately, some pharmaceutical companies are behaving manipulatively, and they have partners in that endeavor.
The “real” price of prescription drugs is a secret known only to the pharmaceutical manufacturers and a select group of companies known as pharmacy benefit managers, or PBMs. Just three PBMs control about 80% of the market, giving them enormous power over both prices and access because they can effectively dictate which drugs are covered by most insurance plans.
Many observers are concerned that PBMs can use that power to enrich themselves rather than to save consumers hard-earned and much-needed money in their own pockets.
Among those who lose out in the PBM/pharmaceutical system are the uninsured and those on self-funded health plans, including many union members and employees of midsize businesses. They’re the ones who are stuck paying inflated prices for drugs.
Here’s how it works, according to a class-action lawsuit filed against AbbVie based on the pricing structure it uses to make outsize profits on its blockbuster drug Humira (generic name: adalimumab), which is used to treat Crohn’s disease, rheumatoid arthritis, and other autoimmune conditions.
First, the pharmaceutical company slaps a high sticker price on a new drug that will be in high demand, anticipating that insurers and the government (via Medicare, Medicaid, and Department of Defense/Veterans Affairs health care programs) will cover it — and even if they don’t fully cover the desired price, it’s so inflated that the drug will still be lucrative, even at a discount.
Next, the PBMs, which determine which drugs are covered by the nation’s largest insurance companies and to what extent, extort a massive “rebate” (the size of which is treated as a “trade secret”) from the manufacturer as a condition for covering the drug. Remember, the price stated by the manufacturer is so high that such “rebates” don’t hurt profits.
Insurance companies, whose size gives them significant economies of scale, pay the inflated price of the drugs, setting premiums high enough to cover these expenses — raising costs artificially for everyone paying for insurance, regardless of their need for a drug like Humira.
Uninsured patients are at an even greater disadvantage, learning that a life-changing or lifesaving medication will cost far more — for example, $6,000 per month — than they can possibly afford. Pharmaceutical giants purport to remedy this terrible disparity by setting up “charitable” foundations to administer patient assistance programs. The sad truth, though, is that such programs can be difficult to access and that these foundations in effect allow manufacturers to take tax deductions for keeping drug prices unreasonably high.
As bad as this is, the people who suffer the most from the Big Pharma/PBM scheme are those with self-funded health plans, typically set up by medium-sized employers and labor unions and funded by contributions allocated on behalf of the members. Employers pay the contributions, which ultimately come from workers’ paychecks.
Without the scale of the major insurance companies or the rebates paid to the PBMs, self-funded health plans are left to pay the sky-high sticker price for prescription drugs that their members need. That’s both unfair and harmful.
The class-action suit against AbbVie’s Humira pricing scheme aims to allow all Americans to enjoy the blessings of innovation and competition that make possible the best health care in the world. A country capable of groundbreaking cures must also be capable of making them accessible and affordable — by stopping the behind-the-scenes manipulation of the pharmaceutical marketplace.
• Dr. Nan Hayworth is the first female physician to have been elected to a full term as a member of Congress, representing New York’s 19th District from 2011 to 2013.
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