Lets put patients first by holding pharmaceutical companies accountable

Prescription drug prices are out of control.   

From EpiPens to oncology drugs, too many medications are priced too high for American families to afford. The consequences hit everyone, from patients and businesses to hospitals and hardworking taxpayers.

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That’s why Members of Congress hear about the cost crisis from their constituents back home.  That’s why there was widespread bipartisan agreement that prescription drug prices have reached crisis levels at last week’s hearing in the Senate Health, Education, Labor, and Pensions Committee.  

Drug pricing is one of the most complicated aspects of healthcare, but there is one central fact that is very simple to understand:  Drug prices are not set by the market forces of supply and demand – they are set solely by pharmaceutical companies. 

Too often, drug companies game the system to protect their medications’ monopolies, giving them the power to set outrageous initial prices and then raise them like clockwork.  And why do they do this?  “Because they can.”  That’s how one witness from the Pew Charitable Trusts put it at the Senate hearing.

The simple truth is, excessive prices raise costs for everyone. More than 22 cents of every dollar spent on insurance premiums goes to pay for prescription drugs – the largest component of insurance costs.  So when the price of prescription drugs goes up, so too does the cost of the insurance that pays for them. It’s common sense.

That’s why health insurance providers fight so hard for lower prescription drug prices.  When health plans negotiate a lower price for a prescription drug, the savings are shared with consumers through lower premiums and lower out-of-pocket costs.

Health plans are held accountable to consumers and taxpayers, from formulary requirements to premium rate reviews, and rules that at least 85 cents of every Medicare premium dollar be spent on direct medical care. 

But no one is holding the pharmaceutical industry accountable for its pricing. Perhaps that’s why drug companies see average profit margins that are nearly eight times larger than health insurance plans. Perhaps that’s why price hikes accounted for 100 percent of Big Pharma’s earnings growth in 2016. 

There are commonsense, market-based solutions that could hold pharmaceutical companies accountable and make prices more affordable:  

  • Creating real competition in the market.  All too often, lower-cost generic and biosimilar competition is blocked by branded pharmaceutical companies. They use regulatory hurdles and anticompetitive actions to protect their bottom line. Eliminating the rules, regulations, and red tape that stifle competition will deliver more consumer choice, more patient control, and affordable prescription drugs. 
  • Delivering open and honest information. Even though nine of the ten biggest pharmaceutical companies spend more on sales and advertising than they do on research and development, consumers are denied the knowledge of the real costs of their medications and denied an explanation of why and when prices go up.  More information on the true costs of R&D, how a drug is initially priced, the value and efficacy of treatment, and a justification for significant price increases would educate and inform consumers about the prescription drugs they buy and use.
  • Limiting third-party payment schemes that drive up costs.  Drug coupons and copay cards mask the true impact of rising prescription drug costs from consumers but benefit pharmaceutical companies. Policymakers should examine how these schemes are driving up insurance costs for everyone.  

Pharmaceutical companies make life-saving medications and breakthrough cures.  But it does not give them the right to game the system and gouge hardworking Americans.  

Let’s deliver real solutions that put patients first. Americans deserve nothing less. 

David Merritt is executive vice president of public affairs and strategic initiatives for America’s Health Insurance Plans, the national association whose members provide coverage for health care and related services to millions of Americans every day. 


The views expressed by this author are their own and are not the views of The Hill.