Rising drug prices trigger civil war

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The insurance industry is picking a fight with pharmaceutical companies over the rising cost of specialty drugs.

Insurers say the high prices are raising healthcare costs for insurance companies and everyone else, threatening the sustainability of the U.S. healthcare system.

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Drugmakers say the high prices are necessary to recoup research and development costs. They also say insurers should cover more of the cost of pharmaceuticals.

The fight has been waged as a full-fledged feud in Washington between America’s Health Insurance Plans (AHIP), the lobbying group for insurers; and the Pharmaceutical Researchers and Manufacturers of America (PhRMA).

In the last week, AHIP CEO Karen Ignagni has launched a full-on public relations assault against drugmakers, who AHIP says threaten to bankrupt families and bust government healthcare budgets.

“Is this ‘whatever you can get away with’ pricing here?” Ignagni asked during a healthcare conference hosted by The New York Times on Thursday. “Is that the right thing for the future?”

Ignagni questions whether U.S. consumers are subsidizing lower drug prices in other countries. And during another recent healthcare conference hosted by The Atlantic, Ignagni warned if stakeholders do not fix the rising cost of drugs, the government might end up legislating drug costs.

The catalyst for this fight is Gilead’s $1,000-per-pill Sovaldi, which is used to treat hepatitis C. A patient required to take one pill a day for 24 weeks would have to pay $168,000.

AHIP has lambasted the drug’s cost. And while Gilead is not a member of PhRMA, the lobby group has come to its defense.

“It is penny wise and pound foolish to focus solely on the price of a new medicine while completely ignoring the value it provides to patients and the health care system broadly,” said John Castellani, PhRMA CEO. “Curing Hepatitis C not only dramatically improves patients’ lives, but has the potential to save the U.S. health care system as much as $9 billion per year by preventing expensive hospitalizations and avoiding thousands of liver transplants that routinely cost over $500,000 each.”

Castellani says the current insurance model is the real problem. He says AHIP’s members are covering patient costs for hospitalizations but requiring expensive co-pays for drugs that would keep them at home.

“Insurers are increasingly imposing unprecedented cost-sharing on patients that deters them from utilizing the medicines they need to manage — or even cure — their disease while covering the vast majority of costs of more expensive hospitalizations and services these medicines could prevent,” he added.

PhRMA says the average patient pays 4 percent to 7 percent out-of-pocket for doctor’s visits but could pay anywhere between 20 percent to 40 percent or higher in co-pays for prescription drugs.

“The insurance industry is facing a tremendous amount of pressure on health insurance premiums and focusing on prescription drug prices is an effort to try distract attention from the premium issue,” said Robert Zirkelbach, PhRMA’s new senior vice president for communications.

Zirkelbach used to be the top spokesman at AHIP. The insurance group replaced him recently with Brendan Buck, a former spokesman for Speaker John Boehner (R-Ohio).

The hire was notable because of tensions over ObamaCare between PhRMA and House Republicans, who have said the drug lobby got a deal from the administration for supporting the law. 

It was also notable because of Buck’s aggressive style, which has been noticed in eye-catching emails on the drug spat that he has sent to reporters since joining the insurers association.

Mark Silberman, a healthcare attorney with Duane Morris, says the problem is insurance companies could keep people with pre-existing conditions out of their plans or build their plans so they would have to bear a large portion of the treatment cost.

He says this kept the price of drugs on the market competitive, but now that insurers have to cover everyone regardless of the drug’s price, it has created a conflict between the insurers and drugmakers.

Express Scripts, the largest pharmacy benefits management company, has been trying to dampen the impact of Sovaldi by asking doctors to wait for new hepatitis C drugs that are expected to come out later this year. Those drugs could increase competition and bring down prices.

Like AHIP, Express Scripts is worried that, if the specialty drug cost problem isn’t fixed, the government might step in, which could hurt drug innovation.

Three Democrats on the House Energy and Commerce Committee, including ranking member Henry Waxman (D-Calif.), wrote to Gilead raising issues with the price of Sovaldi in March.

Specifically, they asked what formula Gilead used to determine the cost of Sovaldi, what discounts the company was offering, how it was factoring in a Food and Drug Administration-expedited review of the drug into its cost, and the potential public health impact if insurers refused to offer the drug.

Last year, Waxman introduced the Medicare Drug Savings Act, which aims to reduce Medicare Part D drug costs by requiring drugmakers to provide rebates for drugs prescribed to people with low incomes under the Medicare prescription drug benefit program. The bill would also restore the rebates used by dual eligible Medicare enrollees that were eliminated in 2006.

Steve Miller, Express Scripts senior vice president, says stakeholders are having the wrong conversation.

“What we’d really like to say is, ‘We have the opportunity to eradicate hepatitis C," he said.

Miller said people need to stop fighting over the cost of the drug and figure out a way to provide treatment to everyone who needs it.

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