Latest Drugwonks' Blog

Opioids Auth-orization

  • 05.05.2016
  • Peter Pitts
Yesterday I had the pleasure of attending and participating at the joint meeting of the FDA’s Drug Safety & Risk Management and Anesthetic and Analgesic Drug Products advisory committees.

The topics under discussion were the successes and failures of REMS programs for extended release (ER) and long-acting (LA) opioids. Many important presentations and discussion. Two statements that stood out as directional:

“REMS modifications shouldn’t unduly restrict patient access.” (Doris Auth, REMS Assessment Team Leader, Division of Risk Management, CDER)

“Education is not an event, it is a process.” (Graham McMahon, President & CEO, Accreditation Council for Continuing Medical Education)

In short – it’s important to move forward, weighing the risks and benefits of REMS programs not just for prescribers – but for patient too. Bravo.

I was chosen to offer public testimony, and here’s what I had to say:

To paraphrase Peter Drucker, the information revolution will shift -- from the generation of data, to figuring out the meaning and purpose of the data with the patient’s perspective in mind.

Nowhere is this more pertinent than in the discussion of the future of opioid pain medicine and the role of the FDA – and advancing both the science and regulatory approaches to appropriate pain care management. But cutting the Gordian Knot of what “appropriate” means demands more than current REMS programs. It requires working with the providers of continuing medical education to develop better curricula. It means ever better-validated risk evaluation and mitigation strategies with more thoughtful purpose.

 It means enhanced and validated reporting tools for post-marketing surveillance. It means using real world data to provide real world advice. And it means using the tools of the 21st century century such as patient and physician apps.

The FDA can play an important role in working to develop and share (with a broad constituency) validated tools for physicians to use in determining which patients may be more prone to slide into abuse so they can choose their therapeutic recommendations more precisely.

One improvement will be to improve the accessibility of the ER/LA Opioid Analgesics REMS website, so that interested healthcare providers can more easily access accredited REMS-compliant material.

We must also work to continue expanding the to include the extended healthcare team. Education of team members beyond analgesic prescribers is critical for implementation of REMS learnings.

We should revise the FDA Blueprint for Prescriber Education to reflect stakeholder input and feedback

We should link Schedule II and Schedule III Narcotics DEA registration and re-registration to either completion of prescription opioid education or other acknowledgements, such as board certification in pain medicine. We should include IR opioids in the REMS modification discussion. It’s where the overwhelming volume is.
With the data collected from REMS programs, a logical next step is to utilize that real world data to amend product-specific labeling to indicate lessons learned outside of the rarified world of the randomized clinical trial environment to assist physicians in using the right product for the right patient. Real world evidence doesn’t just mean recognizing new risks, but also communicating new benefits learned through patient outcomes. And such evidence is both available and exciting.
Beyond the REMS programs discussed during the course of this meeting, the FDA has required all sponsors of brand name products with approved abuse-deterrent labeling to conduct long-term epidemiological studies to assess their effectiveness in reducing abuse in practice.

And then there’s the thorny question of FDA labeling. Product labeling is the basis for articulating the value proposition of a product. As you are aware, data definition and generation are very much still a work-in-progress – as is their relationship to clinical relevance. No absolute magnitude of effect can be set for establishing product characteristics. And the FDA continues to talk about the ambiguous totality of evidence standard – which really means using their best regulatory judgment.

One crucial question that deserves more conversation is the nature of the evidence used to decide whether or not a given product “works” to reduce abuse in the “real world.” Given the data challenges, it may be almost impossible to ever demonstrate a causal link between a new formulation and an impact on patient abuse – but is that because the product didn’t have an effect or our current measurement methodologies and data systems are inadequate to detect it?

The path forward is unclear. Is real world data reliable and robust enough? Should the FDA define and then assign various statistical weights to comparison and population studies? At the end of the day, the agency can’t only look to REMS for risk mitigation but must also seek out data that supports more aggressive labeling language.

Obviously, more work needs to be done in order to refine optimal data sources, study design, statistical methods, and epidemiologic outcomes of interest to developers, physicians, patients … and regulators. No one group can do it by themselves. We need a more, aggressive, creative, and collegial approach to the pain management ecosystem.

At the end of the meeting, the joint committee recommended mandating continuing education for doctors who prescribe opioids, ignoring American Medical Association calls for such requirements to be voluntary. The committee, which held no formal vote on the issue, also urged FDA to update its education materials by incorporating the new CDC guidelines on opioid prescribing and other material on alternative pain treatments. The committee suggested education be required for doctors seeking DEA registration to prescribe controlled substances.

The committee also urged the agency to update its risk evaluation and mitigation strategy to include shorter-acting opioids, amid criticism from some members that opioid manufacturers have too much influence over the strategy. The committee voted 30-0 to urge FDA to make changes to its entire opioid drug safety program. Some of the advisers said there was little evidence the current safety plan has had any effect, adding that it needed a greater emphasis on the drugs' risks.

Francis Bacon was perhaps the first scholar to note that we are all guilty of confirmation bias. He observed that “the human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it.”
Confirmation bias explains the synergistic relationship between so-called studies that look at drug pricing, the media attention paid to these articles and the virtual absence of reporting on studies looking at the ecosystem for treating cancer.
Two articles on the price of oral cancer drugs – one in JAMA and the other in Health Affairs  are examples of this disease.
The articles look only at the list price of cancer drugs over 10 years. 
They could have looked at the increase in the list price of non-drug cancer care (which has increased as well) but they didn’t. 
Nor will you find any discussion of the fact the over the time periods studied, increased use of oral cancer drugs was associated with a decline in hospitalization and outpatient spending associated with increased use in oral oncology.  
There are hundreds of articles reporting on these studies that with rare exception (Ed Silverman at STAT) note that the ‘studies’ do consider drug prices in context.  In particular, confirmation bias has lead researchers and reporters alike to ignore other economic and clinical factors impacting the cost – and – value of cancer drugs:
A recent IMS Oncology report – largely ignored by the same journalists writing about the two articles -- found that utilization, not price, was the main driver of spending on cancer drugs with longevity of patients a key driver of use. 
Targeted therapies (not including rebates, patient assistance support, etc. ) now account for almost 50% of total spending and they have been growing at a compound average growth rate of 14.6% over the past five years
Overall therapy treatment costs per month have increased 39% over the past ten years in in inflation- adjusted terms, similar to the 42% increase in overall response rates and 45% increase in months that patients are on therapy, which also contribute to higher overall spending levels associated with improved survival rates.
2.   The increase in use of targeted therapies w diagnostics are associated with  an increase in duration of response and survival.  In fact, the use of oral cancer drugs is associated with a 150 percent increase in treatment duration.

3.   Neither article accounts for the fact that newest oral cancer drugs are targeting smaller groups of patients based on tumor subtype and mutational status.

4.  Neither article noted that over the same period they were obsessing about drug prices, cancer costs increased at the same rate as overall health spending.  Another well-ignored Milliman study found
Over the entire 2004 to 2014 study period, the average annual increase in cost was essentially the same in the actively treated cancer population and the non-cancer population.

Cancer prevalence increased from 2004 to 2014 more than the contribution of cancer patients’ cost to the total population spend.

For patients being actively treated, the portion of spending for cancer-directed pharmaceuticals increased from 2004 to 2014 while the portion of spending for inpatient care declined. 
 Finally, the articles ignored yet another study showing the increase in rebates as a percent of price increases. The chart below shows the rebates as a percent of gross sales for Bristol Myers as it introduced immunotherapies for cancer.

“As people's opportunities to succumb to confirmation bias increases online - only seeking out information that confirms their prejudices - ignorance, extremism and close-mindedness have continued to rise unabated.” Maajid Nawaz

I’ve just returned from a cold, blustery and wet London where I attended the annual Pharma Access Leaders Forum.

But the meeting was hot.

In fact, piping hot when you consider the tectonic changes being felt in the world of healthcare technology assessment (HTA) and their implications on both patient access and innovation. And the linkages couldn’t be more profound.

Wither HTA in the EU? A key red thread through a series of potent discussions was real world evidence (aka, “outcomes data”). Head honcho HTA officials from across Europe (including England and Scotland – both still in Europe as of last report) returned again and again to the value of outcomes not just for the evolving world of Risk Sharing Agreements, but for the acceleration of reimbursement science.

Reimbursement science? In July 2012, when Sir Michael Rawlins was chairman of NICE, he told the House of Commons that value, “is based on the collective judgment of the health economists we have approached across the country. “It is,” Sir Michael said, elusive.”

When it comes to HTA – the times they are a-changin'.

One key insight came from Finn Børlum Kristensen, Chairman of the Executive Committee, European Network for HTA (EUnetHTA), who reminded the conference of JM Eisenberg’s advice, “Globalize the evidence, localize the decision.”

Just as we’ve finally come to realize the urgency of regulatory science (adaptive clinical pathways, imaging, bioinformatics, biomarker validation, 21st century bioequivalence, etc.) to the future of healthcare, so too must we understand and encourage the development of reimbursement science. And high up on the list of items to consider is the validity and utility of outcomes data. We’ve come a long way from the 2007 NICE/Velcade risk-sharing arrangement. Today the stakes are higher and the battle has ratcheted up to a higher level.

When it comes to reimbursement science, we are still in early days. For example, while many HTA bodies in Europe have moved beyond accepting evidence exclusively “the old fashioned way” (via the traditional RCT “gold standard”), there are exceptions – such as Germany. As Detlef Parow (Head of Care Management at DAK-Gesundheit) pointed out, IQWiG will only look at outcomes data “only in exceptional cases.” (This is in keeping with the IQWiG “Principle of Prohibition,” where “Everything is forbidden if it is not expressly permitted.”)

The always-insightful Francois Meyer (Advisor to the President, Director of International Affairs for HAS -- France’s Haute Autorité de Santé) wisely suggested more formal early dialogues on scientific advice – similar to the regulatory science initiatives that drive the conversations between FDA and innovators. This would give HTA bodies the opportunity to identify key issues and receive draft company positions, discuss divergent views and try to reach consensus before any final submissions or decisions are made. Sometimes the most common-sense recommendations are the toughest to implement.
But, as with FDA and the advancement of regulatory science, much depends on willingness and ability to implement based on infrastructure, capabilities, and trust. The end goal is the same for all stakeholders -- ensuring optimal use of resources for healthcare systems; improving access to value-adding medicines for patients; and appropriate reward for innovation.
In a 2009 white paper, I wrote, “We need to develop proposals that modernize the information used in the evaluation of the value of treatments. Just as the key scientific insights guiding the FDA Critical Path program are genetic variations and biomedical informatics that predict and inform individual responses to treatment, we must establish a science-based process that incorporates the knowledge and tools of personalized medicine in reimbursement decisions: true evidence-based, patient-centric medicine.”

Today, right now, we need a Critical Path for Healthcare Technology Assessment to begin the process of developing a similar list of ways new discoveries and tools (such as electronic patient records) can be used to improve the predictive and prospective nature of clinical outcomes. In an era of personalized medicine, one-size-fits-all treatments and reimbursement strategies are dangerously outdated. Accepting real world evidence does not mean discarding the randomized “gold standard” – it means augmenting it.
It’s a complicated proposition—but such a goal is as simple as it is essential -- cost must never be allowed to trump care, and short-term savings must not be allowed to trump long-term outcomes. Just as we need new and better tools for drug development, so too do we need them for HTA.
A health technology assessment model for the 21st Century should reflect and measure individual response to treatment based on the combination of genetic, clinical, and demographic factors that indicate what keep people healthy, improve their health, and prevent disease. A rapidly aging society demands a new healthcare paradigm capable of providing for its needs in the 21st Century. Equality of care must be matched with quality of care.

Buffalo Wings

  • 04.28.2016
  • Peter Pitts
From the pages of the Buffalo News:

Insurers have incentive to keep plans affordable

A recent editorial called the provision that prohibits the government from negotiating Medicare Part D drug prices “a ruinously bad decision.” (“Panel offers a blueprint for dealing with ruinous cost of prescription drugs,” April 22 News.)

Yet keeping the feds out of price negotiations between private insurers and drug companies has worked wonders. Surveys indicate nine out of 10 seniors are satisfied with their Part D coverage; 96 percent report that their coverage works well. And because insurers have a financial incentive to attract enrollees by keeping plans affordable, the program cost $349 billion less than initially projected during its first decade.

With satisfaction and savings like that, it’s a shame the government doesn’t make “ruinously bad decisions” more often.

Peter J. Pitts
President, Center for Medicine in the Public Interest; Former Associate Commissioner, FDA
If you’re interested in pocketing billions more in drug price rebates what do you do?  Fund a front group that claims to make prescription drug prices affordable and propose policies that would give a cartel of PBMs, health plans and unions control over the development, pricing and access of new medicines.   Call for transparency but then refuse to share how those rebates are generated and distributed and how they fatten your profit margins. 

The Coalition for Sustainable Drug Pricing -- an offshoot of the National Healthcare Coalition -- will once again propose 'market-based' solutions to reduce drug prices.   These proposals are actually slightly reworked versions of proposals made by the Center for American Progress, as well as Bernie Sanders.  

The Coalition is once again waving the red herring of speciality drug costs.  It's expert panel is silent about all the rebates being pocketed by their institutions.  

The Coalition is actually a front group for health plans, PBMs and the Washington offices of many liberal interest groups who are all interested in reducing pharmaceutical and biotech profits.  The proposals would do that by transferring even bigger rebates to the aforementioned insurers and PBMs and giving these groups more control over access to new medicines, which in turn would increase their short term profit margins. 

Here's what the Coalition is calling for today:

•    It would force drug companies to a minimum percentage of their revenue in R&D. Companies failing to do so would be subject to fines and possible federal prosecution
•    A price that exceeds a price set by federal advisory committee by more than 20 percent would be presumed to be unreasonable and to harm public health.  Under current law, designating something or someone a public health threat the government has the power to immediately seize products, patents, set prices and throw people in prison for price gouging, just like in Venezuela. 
•    It would allow government health plans, private insurers, hospitals, union health programs and prescription drug benefit companies like CVS to form a cartel set ‘fair’ prices and decide which patients get what medicines based on how much the ‘private’ panel decided how much our lives are worth and how much more should be spent on drugs each year. Drug companies that fail to comply with the prices would be prohibited from sell all of it’s products to any government program. 
•    It allows the same cartel to keep $100 billion in rebates that are supposed to go to patients but instead are pocketed by these special interests

It also wants to weaken and eliminate FDA regulations established to protect patients against serious and life threatening adverse events from the use of new medicines.  

The Coalition also claims that their policies will actually increase innovation by forcing companies to only invest in truly innovative drugs.  Instead is asserts that R and D is an essential expense for a drug company, not an optional investment, if at some point it doesn’t invest in research and development, it won’t be a drug company anymore.

That’s like saying health insurers will have to stay in business even if they can’t raise premiums because otherwise it wouldn't be a health plan anymore.   Ask United Healthcare how that business model would work.  

Nobody's going to offer health insurance if they'll lose money selling it. The same goes for life saving medicines.  

There are better ways to make medicines more valuable by making them more affordable.  The first is to use rebate money to reduce out of pocket cost sharing of actual patients.

The second is to cut the time, cost and risk of bringing new medicines to market.  We can do that by building on proposals included in the 21st Cures Act and on efforts developed by the FDA and groups such as Friends of Cancer Research.   Bringing more medicines to patients more quickly at lower cost will increase competition and encourage innovators to shift investment into more discovery.  

We should all be on the same side in fighting against disease.    Stoking populist anger in order to fatten short term profits doesn't advance that alliance.  
Is telling just some of the facts to make a point contradicted by all of the facts good journalism?  Is it honest?

Here's the headline from Adam Feurstein:

Ignoring Criticism, Drug Companies Still Raising Prices, Making More Money 

"Everyone is screaming about drug prices. They're too damn high! Drug spending is going to bankrupt the health care system. Raising the price of drugs multiple times per year is unconscionable and unsustainable.

How are biotech and pharmaceutical companies responding to all the criticism? They're raising drug prices even more.

And increasingly, nearly all of the surplus revenue generated from those price hikes is staying with the drug companies instead of being extracted by insurers and pharmacy benefits managers in the form of higher rebates, said Leerink Partners analyst Geoff Porges.

"The price increases for established brands across our coverage have been substantial indeed. To the surprise of many investors, it now appears these price increases are likely to flow through to actual sales growth, with such growth more than offsetting any volume weakness in 1Q, and resulting in significant positive revenue surprises for these companies when they report 1Q results," Porges wrote in a research note Wednesday.

In other words: Take that, Hillary Clinton!

Porges analyzed J&J's first-quarter sales results, particularly for its specialty pharmaceutical drugs Simponi, Stelara and Remicade, and found 70%-90% of list price increases taken over the past year are flowing through to reported sales. In some cases, J&J captured 100% of the price increase as sales.

In other words, efforts by insurers and PBMs to negotiate higher discounts or rebates on specialty pharmaceutical products isn't keeping pace with the price increases pushed through by drug and biotech companies. Likewise, politicians ranting about outrageously high drug prices aren't having a moderating effect on industry practices -- at least not yet.

The net result should be better-than-expected sales, Porges said...."

Here's the rest of the story.

If Remicade is reporting 70 percent sales, that's a 30 percent rebate.  Pretty, pretty good considering the drug didn't face biosimilar competition until this year.  Neat trick to turn the percentages around but still 30 percent is a lot.  


Then there is the Remicade rebate picture 

On top of that, as my last blog demonstrated industry-wide a big chunk of revenues -- $100 billion or so -- goes to PBMs, insurers, hospitals, employers. Everyone but patients.

There's a reason for the phrase, "the truth, the whole truth and nothing but the truth."  You see, telling the truth, but not the whole truth and nothing but is considered lying.  


Wither "Cures?"

  • 04.18.2016
  • Peter Pitts
When a man says he approves of something in principle, it means he hasn't the slightest intention of putting it into practice. -- Otto von Bismarck

Is the cure worse than the disease?

A thoughtful and comprehensive overview in BioCentury (by one of our favorite industry cognoscenti, Steve Usdin), Can “Cures” be Cured, presents a blunt appraisal for either measured optimism or realpolitk pessimism.

Some tantalizing snippets:

After almost two years of effort, it is still not clear whether a path can be cleared to put a 21st Century Cures bill on President Obama’s desk, or what measures would be included if and when legislation is turned into law.

It is certain that anything that could get through Congress would not come close to matching promises made by the legislation’s sponsors to radically transform the way medicines are discovered and to dramatically accelerate the creation of cures.

According to Usdin, Cures legislation, would be a disappointment to anyone hoping Congress will attempt to squeeze more science from the tens of billions taxpayers provide to NIH, or for fundamental changes in the kinds of science NIH supports and conducts.

The Cures bills do not address concerns about the effectiveness of NIH’s translational research, perceptions that NIH’s peer-review process rewards consensus science rather than innovation, or the inefficiency of allowing hundreds of millions of dollars to be siphoned off research grants for “indirect” costs such as administrative support and facilities.

The White House Statement of Administration Policy released in July noted the “new responsibilities for FDA outlined in H.R. 6 exceed the resources provided in the bill and the President’s FY 2016 Budget and as such, FDA will be unable to fully implement the programs established in the bill, while maintaining its current performance levels.”

FDA also thinks H.R. 6 would unleash a flood of applications for qualification of biomarkers and other drug development tools, and it estimates that reviewing these applications would cost $940 million over five years.

In the absence of a substantial increase in FDA funding, the administration, congressional Democrats and regulated industries are likely to push to have many of the FDA provisions stripped from the 21st Century Cures Act.

As the window for passing a bill in the Senate and negotiating a final version narrows, pharmaceutical industry lobbyists who worked hard to shape H.R. 6 and Senate Cures legislation are now sitting on the sidelines.

Pharma companies are unwilling to push for legislation they feel does little to benefit their companies, and they are cautious about supporting a political process that could exacerbate battles over pricing. At the same time, the industry doesn’t want to be seen throwing sand in the gears. Public opposition to Cures legislation would antagonize powerful members of Congress, along with influential patient advocates who have invested immense amounts of time in the Cures process.

Industry and FDA will call for a “clean” reauthorization of PDUFA, but Congress is unlikely to resist the temptation to attach legislation to PDUFA VI. If Cures legislation is enacted this year, any FDA elements that were considered but didn’t make the final cut will be in play as a PDUFA companion bill is drafted.

If Cures doesn’t pass, there will be strong political pressure to include the measures that would have made it into a final bill, along with some of those that were discarded, plus mandatory funding for NIH and FDA.

Ladies and Gentlemen, place your bets.
Most of the Increase in Drug Spending Pocketed By PBMs and Insurers:
What the Media Missed in Covering The IMS Drug Cost Study

By Robert Goldberg, PhD

Media coverage of the The IMS Institute for Health Informatics study: “Medicines Use and Spending in the U.S. – A Review of 2015 and Outlook to 2020” focused mainly at the change in top-line drug spending from 2014-2015.  That approach, as I have suggested in the past, is uniquely unrevealing. 

Spending on drugs in the outpatient, hospital and nursing homes was $425 billion.  However, the drug and biotech companies made $310 billion of that total.  Where did the other $125 billion go?  The vast majority of articles don’t tell.  

In fact, that spread – which has gotten larger in both total dollars and as a percentage of the increase in drug spending flows directly to insurers, pharmacy benefit managers, hospitals and other large customers, not the patient.

Follow the Money and the Prices 

To find out why such rebates aren’t going directly to the consumer, you have to follow the money and the difference in prices net of rebates and the invoice or retail price.   The amount of prescription drug revenue pouring into such ‘stakeholders’ has increased since Obamacare began taking effect.  Net price increases have actually dropped by half since 2011.  As the IMS study observes: “The average net price for brands already in the market is estimated to have increased by 2.8% in 2015, down from 5.1% in 2014 and significantly lower than seen in prior years.”

Meanwhile, the increase in rebates as a share of price growth surged.  As the charts above and below reveal, rebates as percent of total price growth increased ten fold since 2011.  

Further analysis shows that rebates were $10.8 billion (40 %) of the total increase in specialty drug spending between 2014-15.   As a percent of all brand medicine spending, rebates were 71 percent of the total increase from 2014-2015.  This means much of the price increase imposed on patients reflects the cost of rebates that PBMs and other claim make medicines ‘affordable’.

Patient Cost Sharing Increases as Rebate Revenue Soars

Even as the share of drug spending as a percent of rebates has soared and the contribution of net price increases to spending has declined, PBMs and insurers have increased cost sharing by more than 25% since 2010.  

Patient cost sharing is a percent of the ‘invoice’ or retail price, not the net or rebated price.  This suggests that rebate dollars are not passed through directly to patients. 

As IMS points out…”in response to this rising level of patient cost exposure, brand manufacturers are steadily increasing their use of “buy-downs” through patient savings programs such as coupons or vouchers, to help patients offset these costs. 

Even after coupons are applied, patients with pharmacy deductible plans are still facing high cost exposure.”

Even worse, the percent of patients facing cost sharing of up to 40 percent of a retail price has soared even as rebate revenue increased.  And the number of drugs with the highest cost sharing amount also generate the most rebates.  

A recent Avalere study found that many insurers – with help from the PBMs that design drug formularies and cost sharing “….placed all drugs in a class on the specialty tier. Specifically, in the Protease Inhibitor and Multiple Sclerosis Agents classes, 29 and 51 percent of plans respectively place all drugs, including available generics, on the highest tier. There are no generics in the other three classes of drugs listed below.”

Specifically, in 8 of the 10 classes, 2015 exchange plans were more likely than 2014 plans to assign all single-source branded drugs to the highest cost sharing tier. A single-source branded medication is a brand name drug without a generic equivalent. The practice was most common for some cancer drugs and drugs used to treat multiple sclerosis. Roughly 30 percent of plans also place all single-source drugs for HIV/AIDS on the specialty tier.

Conclusion: The Real Source of High Drug Costs

The real story about drug pricing is how PBMs like Express Scripts and health plans are pocketing about a bigger and bigger share of drug revenues while increasing what patients – especially those with the greatest need for the newest drugs generating the biggest rebates – are seeing their share of the invoice price of a medicine surge.   

The outrage about high drug prices is directed at biopharmaceutical firms. But the IMS study suggests that the $100 billion in rebates and discounts that could reduce the out of pocket cost of consumers is taken by $100 PBMs, insurers and hospitals.  And to add insult to injury, these organizations turn around and charge consumers retail price and require them to pay an increasingly greater share of that cost. 

The fact that such practices not only increase PBM, insurer, etc. revenues but deny people access to new medicines – that in turn increase the risk of staying sicker or getting sicker -- should be a big story.   Why aren’t media outlets and policymakers focusing on the real source of high drug costs?

From the pages of the Deseret News ...

Transparency in medicine isn't a one-way street.

The transparent truth is that the prices patients actually pay aren't set by drug manufacturers — they're determined by pharmacy benefit managers, insurers, hospitals and pharmacies.

A majority of Americans believe increased health care transparency should be a top national priority. It's easy to understand why. Rising health care costs, coupled with high-profile stories of price-gouging at some small pharmaceutical companies, have left consumers feeling ripped off, especially when it comes to drug prices.

But most drug companies aren't whimsically increasing prices. In fact, if the health care industry was really transparent, people could see the truth: drug companies often aren't the culprits behind high costs. In fact, they're the best hope for dramatically lowering health care spending.

The transparent truth is that the prices patients actually pay aren't set by drug manufacturers — they're determined by pharmacy benefit managers, insurers, hospitals and pharmacies.

And these third parties frequently engage in … price-gouging.

Consider the "prescription price shell game" uncovered in Minneapolis, where a local CVS jacked up the price of a kidney medication to more than $6 per pill from 87 cents. Or the Levine Cancer Institute in North Carolina, which collected nearly $4,500 for a colon cancer drug that hospitals typically buy for $60.

Unfortunately, the media largely ignores such abuses, preferring to concentrate just on alleged misbehavior or greed by pharmaceutical companies. When one drug maker released a breakthrough Hepatitis C cure, headline after headline blasted the company for the drug's initial $84,000 price tag.

Few follow-up stories have noted that, because of competition from other drug makers, the manufacturer granted such big discounts — often in excess of 50 percent — that the medicine now costs less in the United States than in price-controlled Europe.

Even fewer stories put America's health care spending in perspective. Name-brand drugs accounted for just 7 percent of $100 billion increase in health care spending from 2013 to 2014.

That 7 percent accounts for some of the most promising advances in treatment in decades. By addressing once-untreatable symptoms and complications, these advances help patients avoid expensive surgeries and lengthy hospital stays — which account for a far larger share of health care spending than pharmaceuticals do.

Journalists crying page one crocodile tears over high drug costs aren't just ignoring hospitals' and insurers' roles in jacking up retail prices. They're ignoring the fact that massive decreases in health care spending will only come about due to pharmaceutical cures. Better MRI machines are not going to end the scourge of cancer. New drugs could — and do.

Of course, medicines aren't cheap to create. The average cost of developing an FDA-approved prescription medication is $2.6 billion, according to the Tufts Center for the Study of Drug Development. That represents a 145 percent increase over the past decade.

For every successful new compound, hundreds of others once deemed promising end up abandoned. Research chemists at pharmaceutical companies may spend an entire career in the lab without working on a single drug that gets to market.

Understandably, pharmaceutical companies don't love to publicize their frequent failures. As a result, everyday Americans only see the successful, profitable drugs — and the high price tags that stem from the cost of research plus the markups tacked on by third parties.

Consumers are justifiably mad about health care costs. But their anger is misdirected. If the health care industry was truly transparent, Americans would see who's really to blame for rising prices. With rare exception, it's not the companies creating lifesaving medicines.

Peter J. Pitts, a former FDA associate commissioner, is the president and co-founder of the Center for Medicine in the Public Interest.
From the pages of the Detroit News:

Don’t burn drug execs at the stake

There’s a torch and pitchfork sale underway in the nation’s capital — or so it would seem from Congress’ recent witch hunt targeting the pharmaceutical industry.

The Senate Special Committee on Aging has called upon a long list of industry executives to explain their pricing practices. House Democrats recently launched a task force to investigate supposedly excessive drug prices and consider potential legislative remedies.

And a probe led by Sens. Ron Wyden, D-Oregon, and Chuck Grassley, R-Iowa, scoured 20,000 pages of emails from Gilead looking for evidence of wrongdoing.

The closest thing to a smoking gun was the senators’ meek conclusion that Gilead fulfilled its legal, fiduciary obligations to maximize shareholders’ returns. Oh, the horror!

But drug costs aren’t climbing faster than general health care inflation. In fact, robust market competition has helped drive down prices. Federal intervention is unnecessary and counterproductive to the goal of improving American health care.

Pharmaceuticals represent only about 10 percent of national health care spending — a share that’s remained remarkably stable since the 1960s.
That doesn’t mean medicines aren’t becoming more expensive. They are. But their prices aren’t increasing faster than health care services as a whole. Much media coverage has focused on last year’s 13 percent increase in the list price of brand-name drugs. Far fewer journalists and politicians bothered to mention that, factoring in rebates and discounts negotiated by insurers and pharmacy benefit managers, actual net drug spending has only increased 5.5 percent. That’s right in line with overall health care spending growth.

Sadly, Congress will probably ignore such facts. It’s much easier to score cheap political points by demonizing an entire industry based on isolated anecdotes. But even those misleading examples of bad behavior prove that government intervention isn’t needed.

Consider Turing Pharmaceutical’s recent price gouging on Daraprim, a seven-decade-old treatment that combats parasitic infections in people with weakened immune systems. Turing’s 5,500 percent price hike, from $13.50 to $750 per pill, prompted toothless outrage from the media and politicians — and a crippling response from a private sector competitor, Imprimis, which released a $1 per pill alternative.

Simply put, competition works.

New regulatory intrusions on drug pricing would undermine innovation. Firms would be less willing to risk billions creating new medicines.
And since medicines lower health care costs by improving patient health and warding off more serious complications, government interventions that discourage drug development will increase health care spending, not cut it.

For instance, anti-retroviral drugs have cut the HIV/AIDS death rate a stunning 85 percent since the mid-1990s. That didn’t just save tens of thousands of lives — it also saved the U.S. economy $615 billion by averting health care spending and increasing worker productivity.

Congress’ inquisition of the pharmaceutical industry is meant to justify government restrictions on drug pricing. If facts still matter, free-market competition will be exonerated and upheld as the best way to contain health care spending while delivering quality care. If they don’t matter, and legislators insist on imposing innovation-killing price controls, future health care savings will go up in smoke.

Peter Pitts is president of the Center for Medicine in the Public Interest.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

Blog Roll

Alliance for Patient Access Alternative Health Practice
Better Health
Biotech Blog
CA Medicine man
Cafe Pharma
Campaign for Modern Medicines
Carlat Psychiatry Blog
Clinical Psychology and Psychiatry: A Closer Look
Conservative's Forum
Club For Growth
Diabetes Mine
Disruptive Women
Doctors For Patient Care
Dr. Gov
Drug Channels
DTC Perspectives
Envisioning 2.0
FDA Law Blog
Fierce Pharma
Fresh Air Fund
Furious Seasons
Gel Health News
Hands Off My Health
Health Business Blog
Health Care BS
Health Care for All
Healthy Skepticism
Hooked: Ethics, Medicine, and Pharma
Hugh Hewitt
In the Pipeline
In Vivo
Internet Drug News
Jaz'd Healthcare
Jaz'd Pharmaceutical Industry
Jim Edwards' NRx
Kaus Files
Laffer Health Care Report
Little Green Footballs
Med Buzz
Media Research Center
More than Medicine
National Review
Neuroethics & Law
Nurses For Reform
Nurses For Reform Blog
Opinion Journal
Orange Book
Peter Rost
Pharm Aid
Pharma Blog Review
Pharma Blogsphere
Pharma Marketing Blog
Pharmacology Corner
Pharmaceutical Business Review
Piper Report
Prescription for a Cure
Public Plan Facts
Real Clear Politics
Shark Report
Shearlings Got Plowed
Taking Back America
Terra Sigillata
The Cycle
The Catalyst
The Lonely Conservative
Town Hall
Washington Monthly
World of DTC Marketing
WSJ Health Blog