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Price gouging of lifesaving drugs raises alarms, threatens budgets Some pharmaceutical companies are employing predatory tactics to buy up drugs that have been on the market for decades, then jack up the prices, according to a U.S. Senate investigative report. [Illustration by 123rf.com] Sunday Feb 19, 2017 at 2:00 AM Feb 20, 2017 at 1:42 PM Vickie Aldous Mail Tribune @VickieAldous Skyrocketing drug prices are causing politicians on both sides of the aisle to search for solutions as costs strain federal and state budgets, drive up health insurance premiums and hit consumers in the pocketbook. "At town hall meetings all around Southern Oregon, I've heard from patients and families concerned about the cost of prescription drugs," says U.S. Rep. Greg Walden, R-Hood River. "On a personal level, my wife used to carry an EpiPen due to a bee allergy — and stopped when the price jumped over 500 percent." Whether in the White House, Congress or the Oregon Legislature, Democrats and Republicans are proposing wide-ranging measures to combat price increases. Ideas range from allowing imports of cheaper drugs from other countries to expediting generic versions to mandating rebates on high-cost drugs. In his first press conference in January, President Donald Trump said the pharmaceutical industry is "getting away with murder." He called for more aggressive negotiations with drug companies. U.S. Sen. Ron Wyden, D-Ore., says something must be done when the astronomical price of hepatitis drugs alone could devastate state budgets. He points to Gilead Sciences, which sells hepatitis C drugs that cure the disease in most patients — but cost up to $1,000 per pill for the three-month treatment. The Oregon Health Plan, which covers one-quarter of state residents, and many insurance programs have responded to the high cost of hepatitis C drugs by limiting coverage mainly to patients in the later stages of the disease. "That astronomical price of one drug for that one disease wreaked havoc on state budgets, and left many people hoping to be treated still waiting in line," Wyden says. While some companies are introducing new drugs with high prices, others are employing predatory tactics to buy up drugs that have been on the market for decades, then jack up prices, according to a December 2016 U.S. Senate Special Committee on Aging investigative report. As one example, Turing Pharmaceuticals bought Daraprim, used to treat parasitic infections, and raised the price from $13.50 to $750 per tablet. A one-year course of treatment needed to prevent grave complications from the infection, including brain damage, jumped to nearly $360,000. The bipartisan Senate report says the companies used a "patient as hostage" business model. Higher prices hit home Although most consumers have long been shieldd from the true cost of drugs because of insurance, many are noticing ever-increasing prices. "They're too high. Every time I buy something, it's so out of reach anymore," says Medford resident Diane Rabbe, who was recently visiting West Main Pharmacy. "They're getting more expensive. I wish they could do something about it. Health care is through the roof right now. Prescription drugs are way out of line. Most people can't afford them." West Main Pharmacy owner Dennis Clark says some companies are rushing to make hefty profits on drugs while they can. "It's being treated like a commodity market. People are cornering the market on what were $5 to $10 generics, then ramping up the price," he says. "They see price controls coming. Any time they see the government getting involved, they get scared. They say, 'Let's get while the getting's good.' I've seen some drugs with 1,500 percent increases. It's unaffordable if you don't have insurance. If you do, it's still ridiculous." Clark says he is seeing unjustifiable price hikes on a variety of drugs. While easy-to-use EpiPens to treat allergic reactions now cost hundreds of dollars, Clark says he could use a syringe and medication to make a treatment device for $10 or less. The patent on the EpiPen auto-injector device is driving up the cost, he notes. Clark says an old antibiotic used for acne, respiratory infections and sexually transmitted diseases went up in price by more than 1,000 percent. "It's been around longer than I have," he says. "There's no reason for it. It was about $13 to $14 per prescription." Other medications that have spiked in price include potassium, insulin, medications for schizophrenia and Suboxone — used for opioid addiction, he says. Clark says many people with schizophrenia are on government-supported health insurance. "Companies are depleting the health care dollars we have by ripping off the government," he says. What's behind the higher prices? Tom Burns, former director of Oregon Health Authority pharmacy programs and now a consultant, says a variety of factors are driving up prices. "It's very expensive to bring a drug to market," he says. "In the United States, we want to make sure everything is 100 percent safe. We go through a rigorous process before you can get to market. There's a cost to all that testing to meet FDA standards." From drug discovery through federal Food and Drug Administration approval, developing a new medicine takes 10 to 15 years and costs an average of $2.6 billion, according to the industry group Pharmaceutical Research and Manufacturers of America, known as PhRMA. But not all drugs that turn out to be blockbusters are so expensive to develop. And the companies that develop breakthrough drugs aren't necessarily the ones that reap most of the benefits, according to a U.S. Senate Committee on Finance investigation of Sovaldi. Pharmasset Inc. spent $62.4 million on research and development for Sovaldi, a hepatitis C cure, and planned to sell it profitably for $36,000 per course of treatment.  Gilead Sciences bought the company in 2012 for $11.2 billion — and made $11.4 billion off Sovaldi sales in less than a year after pricing the drug at $84,000, the Senate committee reported. With $18.1 billion in profits, Gilead was the fifth most profitable Fortune 500 company in 2015, beating out more well-known companies such as Google, Exxon Mobil and Bank of America in the top 10 rankings. Gilead expects to make $7.5 billion to $9 billion off various hepatitis C drugs this year because of falling sales. Less expensive treatments costing about $35,000 have come on the market. Investors likely will push Gilead to acquire more "external assets" in order to grow, Merrill Lynch said after Gilead stock fell this month. Burns says other factors driving up prices are consumer demand and fear about the consequences of untreated illness. "People will pay. If you were given a choice of having a very serious illness and not getting treated or paying $100,000 for treatment — like with hepatitis C — you'll pay," he says. Burns says patients and insurance companies alike are backed into a corner. He pointed to insulin, which has risen dramatically in price as new, improved varieties come on the market. "Patients need it or they will die. The insurance company has to pay because they don't want the patient on dialysis," he says. Burns says patients also don't realize they may not need a drug. While hepatitis C can damage the liver and cause liver cancer, it is usually a slowly progressing disease. Many with the infection will die of other causes. But widespread advertisements urge people with the virus to seek treatment. An estimated 3.5 million Americans have the disease. "Drug companies are trying to stampede everyone with hepatitis C to demand a $100,000 drug," Burns says. "Every study says that is not a good use of limited resources." PhRMA says hepatitis C drugs will save money and lives in the long run by preventing liver damage, cancer and transplants. By 2050, the new treatments will have prevented 126,500 liver-related deaths. The Oregon Health Authority, which is in charge of the Oregon Health Plan, says the cost of the average generic prescription inched up $1 from 2013 to 2015, but brand name prescriptions rose $97. High-priced specialty drugs, defined as those costing more than $600 per month, jumped $451 — hitting $1,364 each month on average. "What we're seeing is more and more specialty drugs coming on the market," says OHA Chief Medical Officer Jim Rickards. "Many are revolutionary and breakthrough drugs, but the prices are higher than we've ever seen before. The sky is the limit for what these drugs can be brought to the market for." Americans shouldering the burden The rising cost of prescription drugs is impacting countries around the world, but Americans pay the highest prices for drugs. Pharmaceutical spending hit $1,112 per person in the United States in 2016, compared to $787 in Canada, $741 in Germany and $489 in Sweden, according to Statista, which gathers data on a wide range of industries. The United States puts fewer controls on prices, and a 1938 law bans the import of most prescription drugs from other countries, including Canada and Europe. The almost $90,000 cost of Harvoni, a hepatitis C cure, drops to $50,000 in Switzerland. Tecfidera, used to treat multiple sclerosis, costs about $5,000 per month in America but only about $660 in the United Kingdom. When bought in the United States, the painkiller OxyContin is about $250 for 60 tablets, but the same supply costs $36 in Spain, according to the International Federation of Health Plans. "In Europe and Canada, the government says, 'This is the price we'll pay for it. This is what we think the drug is worth, and that's the price,'" Burns says. Through higher prices, Burns says Americans are subsidizing drug research and development costs for the whole world. Most research and development is done in the United States. "Patents for new drugs are almost exclusively held by Americans. Drug companies know they can get their research and development dollars back because the drug companies set the prices here," Burns says. Proposed solutions run gamut While Americans buy everything from clothes to cars from around the world, the federal Food, Drug and Cosmetic Act of 1938 bans the import of most medicine from other countries. Many legislators have approached proposals to allow imports of cheaper drugs with caution. An amendment allowing Canadian drug imports was shot down 52-46 by the Senate in January, with Republicans and Democrats on both sides of the issue. Both of Oregon's Democratic senators voted for the proposal and were joined by Sen. John McCain, R-Ariz., and other Republicans on the losing side. PhRMA says Canada has stated it would be unable to guarantee products would be safe, effective and of high quality. "The importation of unapproved and potentially counterfeit medicines into the United States jeopardizes our secure medicine system and presents a serious risk to public health," says PhRMA Public Affairs Senior Director Holly Campbell. Canada doesn't have enough medication to meet the demand of Americans if imports were widespread, says CareOregon Executive Director of Pharmacy James Slater. CareOregon partners with several coordinated care organizations to provide Oregon Health Plan benefits, including in Jackson County. "Drug companies allocate product by country," he says. "If Canada sent drugs to America, there could be a shortage in Canada." The U.S. Senate Special Committee on Aging has recommended highly targeted, temporary drug imports to combat sudden price spikes. The committee and PhRMA are united in calling on the FDA to improve its review process and address the backlog of generic drug applications. More than 4,000 generic medicines are awaiting approval in a process that takes an average of four years to complete, says PhRMA Public Affairs Director Caitlin Carroll. Walden backs a bill requiring the FDA to prioritize and expedite generic applications when there are product shortages or few, if any, manufacturers. He called the generic backlog unacceptably high. "We all remember recent situations where bad actors jacked up the price of older, off-patent drugs because there was no competition," he says. "We want to make sure that doesn't happen again." Wyden says the drug pricing system needs change from top-to-bottom, with more transparency about profits throughout the supply chain. He called for more government negotiation on prices, especially involving Medicare. In the Oregon Legislature, two Portland legislators introduced a bill to cap consumers' out-of-pocket expenses. They also want drug companies to give rebates on pricey medicines that cost significantly more in the United States than in other countries. PhRMA says imposing aggressive price controls on innovative, lifesaving medicines would fatten the wallets of insurers and chill innovation, employment and investment for years to come. The Oregon Health Plan already gets almost half of its pharmaceutical spending back in the form of negotiated rebates. But those rebates do little good when drugs are entering the market at $100,000 instead of $10,000, Rickards says. As high as prices are today, Slater says the problem will only get worse if something is not done. Rising prices pushed Oregon Health Plan drug expenditures from $533.6 million in 2014 to $673.5 million in 2015 — an increase of $139.9 million, according to an October 2016 report. "We're on an unsustainable trend," Slater says. "With that double-digit inflation, every three years we will spend twice as much. Our expenditures will double every three years." Slater says drug companies do deserve to profit off their products, but the question is to what extent. "It's expensive to figure out solutions. Not all their investments pay off. They need some remuneration," he says. "But if it doesn't add up to what we can afford, it's not a solution. It's like if a company designs an automobile that works extremely well and protects people, but it costs $200,000 instead of $20,000. The average person can't afford it." Reach staff reporter Vickie Aldous at 541-776-4486 or [email protected]. Follow her at www.twitter.com/VickieAldous.