An article by STAT journalist Rebecca Robbins on drug pricing could use a lot of re-editing for balance and depth. Or maybe should could find another job.
She contrasts public ‘outrage’ (as represented by some well-dressed protestors) about drug pricing with an orgy of greedy indifference on the part of biotech CEOs.
Public anger at drug companies is “an abomination,” Ron Cohen, chairman of the big industry group BIO (my note: you see, even a trade group of small, money losing companies spending billions on medical research is now BIG as in powerful and dangerous), said at the Biotech Showcase. All the talk about pharma profiteering, Cohen said, is “a perversion of reality.”
Which can also describe Ms. Robbins reporting because of what is NOT included.
She follows Cohen’s comments (which were taken out of context: Cohen actually said that to smear everyone in the biopharma industry as all being “greedy profiteeers” is an abomination and perverse) with context free narrative about drug prices:
“Many drug makers have raised prices in the past year. And a slew of new drugs have (sic) hit the market with eye-popping price tags: cancer drugs at more than $11,000 a month; cholesterol drugs at more than $14,000 a year. Then there’s Martin Shkreli, the pharma executive who bought up a decades-old drug and hiked the price 5,000 percent, turning himself into a target of nationwide protests before he was arrested last month on securities fraud charges.”
Yes, linking Turing turd Shkreli who used the Daraprim price hike to short biotech stocks for the sake of his own portfolio, is now lumped in with companies developing new and important medicines that save lives, reduces health care costs and increase well-being is now part of the narrative.
Robbins is not alone in this perversion of reality. The WSJ’ Peter Loftus runs a me-too story that portrays price hikes as disregarding “mounting criticisms of prescription costs in the U.S”
Loftus claims companies “have raised U.S. prices for dozens of branded drugs since late December, with many of the increases between 9% and 10%, according to equity analysts. The increases are on list prices, before any discounts or rebates that manufacturers sometimes provide insurers and other payers. Some of the increases add thousands of dollars to the cost of already expensive drugs, and come on top of repeated price hikes in recent years.”
Let’s look at the price ‘hike’ in context. I will limit this discussion to the deceptive way in which prices are used. I won’t discuss the fact that neither writer discusses the value of new treatments relative to existing therapies for payers and patients.
Since Ron Cohen , CEO of Acorda Therapeutics,Inc. is one of the main characters of these stories, let’s look at how Loftus reports on the pricing of it’s main product Ampyra, which is used to help multiple-sclerosis patients improve walking. Loftus reports that Acorda raised Ampyra’s price by 11% on Jan. 1, to an annual cost of more than $23,650 a patient.
Ampyra revenues (unaudited) in 2015 were about $ 436 million.
When discounts and rebates to PBMs etc are taken into account, Accorda will gain only about 60% of the price increase.
That does NOT take into account that Acorda provides 2 months of free drug to people with new prescriptions, through our First Step program. At this point, 75% of all new prescriptions are First Step (and a higher percent of all commercial Rxs, as we are not allowed by law to give First Step to Medicare/Medicaid patients). The 10-K notes that 38-43% of patients respond to the treamtment, so First Step ensures the physicians and patients have determined that the patient is a true responder before asking the system to pay for the drug.
It also provides a generous PAP program, giving free drug to a significant portion of the population who are uninsured or underinsured
It also provides co-pay assistance so that no commercially insured patient pays more than $40 for an Rx.
All this an Acorda is not yet not profitable as a company since it is investing 1/3 of net sales n 6 clinical programs for innovative drugs to treat, Parkinson’s, epilepsy, stroke, MS and migraine.
Which means that the money given to PBMs and insurers aren't spent on more R&D. Yet neither Loftus or Robbins acknowledge that PBMs and insurers pocket the rebated portion of these prices. Nor do they note that these organizations then force patients pay to up to 30 percent of the price of the drug which is often marked up by insurers and such pharmacy benefit firms as Express Scripts. Payers know that companies will – after forking over rebates – also pay a big share of the patient’s drug bill. (Which explains why per patient sales are way below list price in many cases.) Indeed, Acorda's copay assistance is provided regardless of where insurers price the drug to patients.
Robbins points to a Senate report claiming Gilead priced drugs so that many people and Medicaid programs could not afford Solvaldi. In fact, payers were pocketing the rebates and deny access to the drugs. The Senate report notes a Gilead memo that states: “While many payers responded to these discounts by opening access broadly, some payers have continued to restrict access despite the discounts. “
Moreover, the Senate report, like Robbins and Loftus, ignored the rebates to the states. A report based on Medicaid data showed that Medicaid rebates for HCV brand medications “typically increased over time and averaged roughly 60% during 2014 across all brand medications.”
Medicaid requires companies to provide rebates (to states) of at least “23.1 % of the Average Manufacturer Price (AMP) per unit” or “the difference between the AMP and the best price per unit” to commercial payers if that rakes in more rebates.
On average, AMP is 59 percent lower than Average Wholesale Price, the so-called ‘retail’ price journalists like Robbins and Loftus use. That means the price used to calculate Sovaldi rebates is $49560 per patient. ($84000 x 59%). Gilead then provided rebates of 33 percent of that price according to the Senate report. That comes out to $33205 per person which is a 60 percent cut from retail price. Which means that drug prices are a vehicle for redistributing income to private and public payers.
Finally, neither Robbins or Loftus put drug price increases (net price or otherwise) into perspective. Loftus states that U.S. prescription-drug spending rose 12.2% in 2014, accelerating from 2.4% growth in 2013. But “price increases for protected brands increased spending by $26.3 billion, contributing 8.2% to total market growth on an invoice price basis; estimated net price growth was substantially lower as rising off-invoice discounts and rebates offset incremental price growth and reduced net price contribution to growth to 3.1%.”
That’s an increase in spending of about $7.1 billion. Total US health care spending increased by $100 billion from 2013-2014. So brand drugs were 7 percent of that amount.
I believe the incremental benefit of this spending is, a Donald Trump would say, huge. But first things first. Reporters should not report on drug prices in a context free zone. Doing so, especially since the factual context is easily available, is a deliberate perversion of reality.