Article

JurisdictionUnited States,Federal
CitationVol. 33 No. 2 Pg. 33
Pages33
Publication year2020
Article
Vol. 33 No. 2 Pg. 33
Utah Bar Journal
April, 2020

March, 2020

Why Can’t I Self-Check Out My Percocet?:

Evaluating Current Drug Pricing Proposals through the Lens of the Opioid Crisis

By Cami Schiel, RN, JD, MBA

A PwC Health Research Institute study found that prices, and not utilization, are pushing up healthcare costs. Medical cost trend: Behind the numbers 2020, Pwc health res. inst., 42 (June 2019) available at https://www.pwc.com/us/en/industries/ health-industries/assets/pwc-hri-behind-the-numbers-2020.pdf.

One of the highest price categories is prescription drugs. Id. In 2019, drug companies raised the prices of over 3,400 drugs at an average rate of 10.5%. Aimee Picchi, Drug prices in 2019 are surging, with hikes at 5 times the rate of inflation, CBS news (July 1, 2019), available at https://www.cbsnews.com/ news/drug-prices-in-2019-are-surging-with-hikes-at-5-times-inflation/. That’s five times the rate of inflation. Id. Rx Savings Solution reports that near forty-one drugs have boosted prices by over 100%. Id. Politicians have proposed solutions to reign in these out-of-control prices.

CURRENT DRUG PRICING PROPOSALS

Elijah E. Cummings Lower Drug Costs Now Act of 2019.

This bill recently passed in the House would:

• Permit the Centers for Medicare and Medicaid Services (CMS) to negotiate prices for as many as 250 of the most expensive drugs, including insulin, for Medicare Part D, something currently prohibited by law.1 H.R.3, 116th Cong. (2019). CMS could impose hefty monetary penalties if drug manufacturers refuse to negotiate. Id.

• The negotiated price may not exceed 120% of the average price in Australia, Canada, France, Germany, Japan, and the United Kingdom. Id. Other countries pay sometimes a half or a third of what the U.S. pays for certain drugs, such as the patented Humira, that don’t yet have a generic version competing for market share. Selena Simmons-Duffin, How An ‘International Price Index’ Might Help Reduce Drug Prices, NPR (Sept. 19, 2019), available at https://www.npr.org/sections/health-shots/ 2019/09/19/762435585/how-an-international-price-index-might-help-reduce-drug-prices.

• Require drug companies to rebate any price increases that exceed inflation. Congress.gov supra.

• Limit out-of-pocket drug spending for Medicare beneficiaries. Id.

• Require drug companies to offer the prices negotiated by HHS to all commercial plans. Id.

Prescription Drug Pricing Reduction Act.

This bill recently approved by the Senate Finance Committee is very similar and, among other things, would:

• Focus on lowering prices of drugs that face minimal competition.

• Establish a new $3,100 out-of-pocket cap on drug spending for Medicare Part D plans, effectively limiting what patients would be charged for their drugs and eliminating the “donut hole.” Loren Adler, Paul B. Ginsburg, & Steven M. Lieberman, Understanding the bipartisan Senate Finance prescription drug reform package, Brookings (Oct. 3, 2019), available at https://www.google.com/amp/s/www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2019/10/03/ understanding-the-bipartisan-senate-finance-prescription-drug-reform-package/amp/.

• Require manufacturers to rebate drug prices in Part D and Part B plans that grow faster than inflation.

• Change federal reinsurance from 80% to 20% for brand name drugs and 40% for generic drugs, thereby incentivizing plans to shift usage to less costly alternatives.

• Eliminate “spread pricing” that lets Pharmacy Benefit Managers (PBMs) retain a large portion of the drug payments by limiting PBMs’ ability to mask a source of their revenue.

• Establish “Drug Pricing Dashboards” through which the public can review drug spending and utilization information.

Foreign Importation of Pharmaceuticals.

Some politicians have championed foreign importation of drugs to introduce competition and push prices downward. They claim these drugs are identical to those in America, but sell for 50, 60, or 70% lower abroad. Thomas Barrabi, Trump to Florida: Go to Canada to import cheaper prescription drugs, fox Bus. (nov. 26, 2019), available at https://www.foxbusiness. com/politics/trump-florida-prescription-drug-plan-canada. However, not all foreign drugs have the same identifying marks on the individual pills and shipping cases that match our databases here in the United States, so this legislation would have to also provide protections for counterfeit drugs. Adam J. Fein & Dirk Rodgers, State drug importation laws undermine the process that keeps our supply chain safe, stat news (July 11, 2019), available at https://www.statnews.com/2019/07/11/ state-drug-importation-laws-undermine-supply-chain-safety/.

Price Transparency.

Some efforts have been made to require drug companies to include prices in their television ads, with limited success. Id.

Profit Ratios.

Medical Loss Ratio regulation targets health insurers and requires them to rebate any profits that exceed a specific threshold back to consumers. This guardrail limits the amount they can spend on marketing, administrative expenses, and profits while promoting transparency and allowing for some profits. Rachel Fehr & Cynthia Cox, Data Note: 2019 Medical Loss Ratio Rebates, Kaiser family found. (Sept. 10, 2019), available at https://www.kff.org/private-insurance/issue-brief/ data-note-2019-medical-loss-ratio-rebates/. In 2019 the total rebates reached nearly $1.3 billion. Id. If applied to the pharmaceutical industry, especially for drugs still under patent, similarly substantial rebates might be possible and would also allow pharmaceutical companies to make a profit, unlike a strict price cap. Yet some adjustment is required given drug companies’ enhanced ability to manipulate expenses.

Evaluating the effectiveness of these proposals requires understanding why drug prices rise virtually unrestrained in the first place. Interestingly, the opioid crisis illustrates some of the abnormal market factors that contribute to lofty drug price hikes. Analyzing the opioid crisis provides insight into the drug market and thus the potential effectiveness of these drug pricing proposals.

OPIOID CRISIS

In the late 1990s drug manufacturers claimed that opioids were not addictive. Opioid Overdose Crisis, nat. inst. On drug abuse (Jan. 2019), available at https://www.drugabuse.gov/drugs-abuse/ opioids/opioid-overdose-crisis. Thus, healthcare providers began to prescribe them at increasing rates for pain. Id. However, in reality, these substances were highly addictive and their increased distribution eventually led to widespread diversion and misuse before their addictive nature could be fully recognized. Id. In 2017, President Trump officially declared the opioid crisis a public health emergency. Ending America’s Opioid Crisis, the white house, available at https://www.whitehouse.gov/opioids/. A 2018 cost estimate of the opioid crisis was over $1 trillion through 2017; this is estimated to increase by $500 billion by 2020. Economic Toll of Opioid Crisis in U.S. Exceeded $1 Trillion Since 2001, altarum (Feb. 13, 2019), available at https://altarum.org/news/economic-toll-opioid-crisis-us-exceeded-1-trillion-2001. This includes the costs of lost productivity, addiction treatment, healthcare, and criminal justice involvement. The U.S. Bureau of Labor and Statistics notes that unintentional overdoses at work increased 25% between 2016 and 2017. Dep’t of Labor, National Census of Fatal Occupational Injuries (Dec. 18, 2018), available at https://www.bls.gov/news.release/pdf/cfoi.pdf. Utah is above average for opioid deaths – in 2017 Utah’s rate of deaths was 15. 5 per 100,000 persons; the national...

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