Latest Drugwonks' Blog
Here's the headline from TheStreet.com 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.
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.
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?
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.
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.
The bottom line results and approach confirm the wisdom of ignoring anything ICER puts out as self-serving, voodoo economics. See Tom Philipson's excellent discussion of the shoddy short-sightedness of value frameworks here.
I also post a link to yesterday's blog with these updates:
ICER concludes that given that the QALY exceeds what they call the 'norm' of $150K only 1200 out of 32000 patients should be treated. That's rationing. And it has implications for any orphan disease (of which MM is one). That's because in the short term, the use of these new medicines in combination will increase medical costs, not reduce them.
Death and doing nothing is very cost effective.
Further, ICER is setting a trap on combination therapies. That is, it is attempting to send off alarms about how to pay for 2-3 medicines all priced at $150K, etc.
In my previous blog I estimated that ICER would treat only18000 patients, let 34000 people die. ICER's draft report assumes 320000 patients of whom only 1200 would get treatment each year.
As I predicted: ICER didn't even try to set a price for combo therapy:
Indeed, ICER -- unlike previous studies -- refused to set a drug price because it knows that it would be absurdly low to meet it's QALY standard and would be attacked from all sides.
The remarks came at the HELP Committee’s third and final markup of biomedical innovation legislation. The committee voted to pass five bills. The Promise for Antibiotics and Therapeutics for Health Act (S. 185) would create a new pathway for FDA to approve antibiotics for limited populations. The FDA and NIH Workforce Authorities Modernization Act (S. 2700) includes a proposal from Friends of Cancer Research to establish one or more “Intercenter Institutes” within FDA to coordinate activities among centers for drugs, biologics and devices to treat major diseases. It also would give NIH and FDA authority to pay salaries up to the level of the president.
The Promoting Biomedical Research and Public Health for Patients Act (S. 2742) would create five-year terms for NIH institute directors that are renewable at the NIH director's discretion, would remove restrictions on the National Center for Advancing Translational Science funding Phase III studies, and would reduce paperwork for NIH-funded researchers.
The Advancing Precision Medicine Act of 2016 (S. 2713) would authorize NIH to implement a precision medicine initiative. The Advancing NIH Strategic Planning and Representation in Medical Research Act (S. 2745) would require that NIH take steps to increase the numbers of women and ethnic minorities who participate in clinical research.
Alexander said the bills will be combined into a single bill with other biomedical innovation legislation HELP has passed. If agreement on NIH funding is reached and the HELP innovation bills reach the Senate floor, Alexander said several amendments will be offered on topics where the committee hasn’t reached a consensus. These include proposals to create a five-year conditional approval pathway for regenerative medicines and to regulate laboratory-developed tests.
Alexander also said the Senate would vote on an amendment based on the Orphan Product Extensions Now (OPEN) Act, which would grant six months of additional exclusivity to drugs that are repurposed for Orphan conditions.
I wasn't. After all, Amgen had already dealt with ICER's 'methodology' when it recommended that Repatha be sold for $2600 a year and be limited to about 3 percent of patients with statin resistant LDL that could benefit.
The surprise is a function of the fact that the media is buying into to ICER's well-funded – and extremely effective -- attempt to establish itself as the de facto price setting group. It is not a function of the fact that ICER's findings were not pre-ordained.
Amgen believes ICER is "using opaque methods to combine multiple, disparate trials to arrive at different estimates of efficacy, or make assumptions to create unrealistic “worst-case” scenarios. Results produced by independent organizations should be informed by experts, made fully transparent and available, and undergo complete and independent peer-review."
The company is right. ICER defines value as whatever doesn't exceed an arbitrary cap on drug spending as set by PBMs and insurers. But it is clear that ICER is cooking the numbers ala Breaking Bad to get the desired outcome.
Like NICE, the rationing body in the UK, ICER cherry picks data to achieve its desire conclusion. If anyone needs an alternative to incarceration, they should flip through a NICE guidance to see how it picks and chooses what data to accept from companies and what data it uses to say yes or no. It accepts what it wants and rejects what it wants.
The sloppy, even sleazy, approach ICER takes is on full display in it's effort to compare newly approved drugs for multiple myeloma and compare them with the combinations of lenalidomide (Revlimid) plus dexamethasone (Rd) and bortezomib (Velcade) plus dexamethasone (Vd).
Let's set aside that there is no standard treatment for myeloma patients who relapse at ANY stage of their disease. In many cases the combination used is a function of what medicines were used before. Myeloma is incredibly heterogeneous. Yet ICER has no problem making comparisons and assuming every patient will respond the same. The Mayo Clinic's Dr. Rafael Fonseca, on the country's experts in treating MM notes: "The value of these interventions can vary significantly by the presence of this various risk factors. For instance a patient who requires stem cell transplant and is considering maintenance should discuss with the treating physician the various options for treatment based on genetic heterogeneity. Patients with standard genetic factors could very well be treated with lenalidomide versus patients who have high-risk disease where the use of proteasome inhibitors it is highly recommended."
Not only does ICER ignore these important variations, it uses a statistical magic trick – called network meta-analysis -- to turn highly different patients in different clinical trials into carbon copies of each other. ICER never tells anyone how or why it achieves this transformation. It never shares its methods or data and it never submits ANY of it's work to peer review. Instead, a group of 'experts' that also happen to be dues paying members of ICER pass judgment.
At least NICE has patients on their panels, ICER has none. NICE has people who actually use the medicines they are evaluating on their panel, ICER has none. ICER doesn't publish in academic journals: instead it issues it's 'findings' by sending around press releases which are then reported and repeated by medical journals and journalists.
I could go on. The number of scientific offenses that ICER commits could fill a book, a very boring book to be sure. The most important thing to keep in mind, is that for all the statistical mumbo-jumbo, ICER establishes prices and access based upon a GDP+1% cap on the total spending on drugs as a percent of total health spending. That cap, like ICER’s value measure, is arbitrary and set to, as ICER President Steve Pearson has observed, to “set off alarm bells” about drug prices. To that point, ICER will only look at single drugs because it's trying to set the price of each drug so it doesn’t add more than $900 million a year to health spending. Forget about what combination of treatments work best.
So let me save you the time and effort of reading another ICER report and show you how they crank out their pharmaco-economic fairy tales. (Trust me, my rough estimates follow the ICER formula without all the footnotes.)
Pick what you want to spend to extend someone's life from $50K-150K a year (ignoring consensus economics that it's more like $300K)
2. Multiply the list price of a drug by the number of patients that could benefit.
3. Divide that total by the amount you want to spend per QALY (always use $50K even though that number was pulled out of thin air in 1980 to establish the value of dialysis. If you haven't figured out by now, the cost and choice of a QALY cost is subjective. In the case of ICER and Peter Bach's rationing calculator, it assumes insurers and PBM -- and both fund ICER and Bach --will choose the QALY )
4. If your cost per QALY for all patients is above $900 million a year you either reduce the price to meet the cap or restrict access.
So with that in mind let's look at how ICER acts as judge and jury.
1. There are about 80000 people with MM. A recent study estimated that 65 percent of patients will relapse each year. That's 52000.
2. To spend $50k per each life of each of the 52000 would cost $2.6 billion.
3. Which means we need to cut spending by $1.7 billion one of two ways:
Spend only $17000 per patient. (By way of comparison, 20 mg Cialis has annual cost (at list price) of $16800.
Treat only 18000 patients, let 34000 people die.
I won't even discuss combination therapy because ICER won't, even though it's the best way to treat relapsed patients.
You can’t blame the media for not taking a closer look -- or at least the same close look they have applied to pharma -- at how ICER measures value. But that’s because the producers of medical innovation – pharma, biotech, medtech -- have failed to systematically explain the social, economic and medical consequences of the rationing ICER proposes.
So while I agree with Amgen and other companies that ICER (and Peter Bach) is shortchanging value, I can admire how well they have defined the conversation about drug price. ICER has done something pharma, biotech and medtech have the resources to do, but never done. It has effectively and properly defined it's audience as the media, Congress and consumers. It has been proactive and at least gives the appearance of being objective and ‘independent.’
The biotech and pharma industry should support a competitor to ICER, one that -- in concert with patients and providers – uses a long term measure of value that takes into account individual differences in needs and response and outcomes that matter, like productivity, quality of life, physical and emotional independence, time spent with loved ones, caregiver burden.
I hope the biopharma industry ceases fiddling and responds to ICER’s cherry picking of data and who lives and dies.
•Fail first policies in which patients are required to fail on older, inferior treatment before getting the treatment their doctors prescribed;
•Adverse tiering in which most, if not all, medications, including generics, used to treat a condition, such as HIV or Hep C, are placed on the highest cost-sharing tier in which up to 50% of costs are passed on to the patient;
•Clinical pathways in which an insurer pays a practitioner to prescribe a cheaper medicine despite the patient’s needs;
•Prior Authorization in which practitioners can spend up to 20 hours a week on the phone with insurers trying to obtain approval for treatment they’ve prescribed for their patients; and
•Nonmedical switching in which insurers are forcing stable patients to switch to different cheaper medications without even informing the patients’ doctor.
Stacey Worthy, who directs the Alliance policy shop said, “These practices serve to financially exclude patients with a pre-existing condition, create a blatant conflict of interest for the physician, take up valuable physician time trying to obtain approval for the treatments, and in the end, just serve to save company money.”
I’d go a step farther and note that the discrimination is driven by profits. The claim that such restrictions have to apply most drastically to the sickest patients practices to keep costs down is the opposite of the truth.
We know that patients with HIV, Hep C, cancer, pulmonary disease, autoimmune disorders, comprise about 4 percent of everyone with health insurance. Health plans state that drugs for these disease now make up 25 percent of all spending on medicines and about 11 percent total health spending. So that means all the barriers to access described by the AIMED Alliance target 4 percent of patients who make up 11 percent of plan expenditures.
It’s not because the 4 percent are such a burden on our health system. Rather, the growing number of new medicines is a cash cow for pharmacy benefit management companies, insurers and other health institutions. And limiting access is a way to get biopharma companies to pay to play.
Many so-called experts, such as Peter Bach, claim that restricting access to extract discounts is just what we need to reduce drug prices (here he uses hep C drugs as an example):
"Saying no, or even the threat, works to lower prices.. More recently, Express Scripts, a company that manages pharmacy benefits, showed that approval was no guarantee. It was therefore able to play two makers of treatments for hepatitis C off against each other.
Express Scripts, once it showed it could say no, got AbbVie to discount its product. It isn’t saying how much, but Steve Miller, a senior executive, said it had “significantly narrowed the gap between prices charged in the United States and Western Europe.” Sounds like the kind of progress we need."
Don’t believe me?
Read what Credit Suisse reported about the amount of rebate money being pocketed by insurers and PBMs:
“ For 2014, our 20 company universe has shown net US drug sales of $202bn and reported total rebates of $98bn. We conclude that in 2014 US rebates rose 24% against just a 7% increase in net sales, reflecting continued formulary pressures... US rebates rose 24% against just a 7% increase in net sales, reflecting continued formulary pressures.”
Rebates of $98 billion is 32 percent of total US drug sales (for that 20 company group).
That’s a lot of cash being divvied up by Dr. Bach’s noble warriors against drug pricing.
Read Anthem’s lawsuit against Express Scripts, the PBM Bach hails as a pricing savior. Anthem is suing the PBM for not sharing more than $13 billion in rebates over four-year period. The $13 billion is on top of rebates already being given to Anthem.
A good portion of those rebate dollars (I estimate nearly 40 percent) are extracted from the specialty drugs used by the 4 percent of all insured patients (about 11 million). So “by saying no” as Dr. Bach urges PBMs and insurers are able to share – or squabble over -- $40 billion.
That’s about $3600 per person that is going right to PBM, insurers, hospital systems, pharmacy chains.. everyone except the patient.
Peter Bach says that it sounds like the progress we need.
I believe discrimination is not progress, it's illegal and it begs for a legal remedy.
Let’s compare the claims that cancer costs – and drug costs in particular – are unsustainable with the facts:
“One of the fastest growing components of US health care costs is cancer care, the cost of which is now estimated to increase from $125 billion in 2010 to $158 billion in 2020.1 Although cancer care represents a small fraction of overall health care costs, its contribution to health care cost escalation is increasing faster than those of most other areas.”
American Society of Clinical Oncology Statement: A Conceptual Framework to Assess the Value of Cancer Treatment Options
“The combination of increasingly unsustainable rises in the costs of cancer care, the accelerating pace of expensive innovations in oncology, and persistent hope for rescue in patients with life-threatening disease require solutions that incorporate and promote value.”
National Comprehensive Cancer Network® (NCCN®) Policy Summit: Value, Access, and Cost of Cancer Care
And now for the facts:
“The increase in people living with cancer and the introduction of new therapies are associated with a rise in cancer care costs. Cancer care costs in the U.S. were estimated to be $124.57 billion in 2010, and are projected to increase to $158 to $173 billion by 2020.
The objective of this analysis was to identify trends in the overall and component costs of cancer care from 2004 to 2014 and to create comparisons to cost trends in the non-cancer population.
We identified the following key dynamics:
1. The percent increase in per-patient cost from 2004 to 2014 for actively treated Medicare fee-for-service (FFS) and commercially insured cancer patients has been similar to the corresponding increase for the respective non-cancer populations.
2. The per-patient cost of chemotherapy drugs is increasing at a much higher rate than other cost components of actively treated cancer patients, driven largely by biologics, but the chemotherapy drug increase has been offset by slower growth in other components.
3. The site of service for chemotherapy infusion has dramatically shifted from lower-cost physician office to higher-cost hospital outpatient settings.
We have important observations on trends in prevalence, cost, and site of service, summarized below:
_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.
o In particular, the portion of spending for biologic chemotherapies increased from 3% to 9% in the Medicare population and from 2% to 7% in the commercial population.
_The portion of chemotherapy infusions being performed in generally more expensive hospital outpatient settings increased by at least 30%, from 2004 to 2014 with a corresponding reduction in the generally less expensive physician office settings.
_As explained in the body of the report, if the chemotherapy infusion site-of-service distribution in 2014 had been maintained at 2004 levels, the estimated Medicare FFS cost per infused chemotherapy patient in 2014 would have been approximately:
o $51,900 per actively treated Medicare FFS patient instead of the observed $56,100 (7.5% lower)
o $89,900 per commercial patient instead of the $95,400 observed (5.8% lower)
Cost Drivers of Cancer Care: A Retrospective Analysis of Medicare and Commercially Insured Population Claim Data 2004-2014 , Community Cancer Alliance
The ASCO and NCCN value frameworks are based on false assumptions and generated tremendous press and discussion.
My guess is that the Community Cancer Alliance study will be, like many stubborn facts that grate against the anti-pharma narrative, undervalued and ignored. Why let truth get in the way of what we want to believe?