Tag Archives: Pharmaceutical Industry Profits

Chart of the Day: Where Prescription Drug Spending Goes

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http://www.thefiscaltimes.com/2018/08/03/Chart-Day-Where-Prescription-Drug-Spending-Goes

 

U.S. spending on pharmaceuticals totaled $480 billion in 2016, according to a report published this week in Health Affairs.

“Two-thirds of this total ($323 billion) was captured by drug manufacturers in the form of net revenues,” the researchers from Memorial Sloan Kettering’s Center for Health Policy and Outcomes write. “The remaining third ($157 billion) was retained as gross profits in the supply chain. Of this share, nearly half was captured by retail and specialty pharmacies ($73 billion), and about 20 percent ($35 billion) by providers, such as hospitals and doctors’ offices. PBMs and wholesalers together captured approximately 25 percent ($23 billion and $18 billion, respectively).”

The takeaway: The analysis — which factors in the entire prescription drug supply chain, including pharmacies and pharmacy benefit managers as well as drugmakers themselves — shows that prescription drugs make up closer to 15 percent of all health care spending rather than the 10 percent more typically cited.

 

 

How drug companies are beating Trump at his own game

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https://www.politico.com/story/2018/08/03/trump-drug-prices-companies-721145

People pass the Pfizer headquarters in New York. |Getty Images

 

Recent price freezes and rollbacks are symbolic measures with little lasting impact.

A July tweet from President Donald Trump sent panic through the C-suites of some of the world’s biggest drug companies, prompting Pfizer and nine other companies to roll back or freeze prices.

But there’s less to those announcements than meets the eye. The gestures turned out to be largely symbolic — efforts to beat Trump at his own game by giving him headlines he wants without making substantive changes in how they do business.

The token concessions are “a calculated risk,” said one drug lobbyist. “Take these nothing-burger steps and give the administration things they can take credit for.”

Of the few companies that actually cut prices, for instance, most targeted old products that no longer produce much revenue — such as Merck’s 60 percent discount to a hepatitis C medicine that had no U.S. revenues in the first quarter.

Others volunteered to halt price increases for six months — in some cases, just weeks after announcing what is normally their last price hike for the year.

“A lot of this shit is meaningless to satisfy Trump,” said another drug lobbyist.

The industry’s deft response to Trump’s tweet shaming has also become a test of whether his administration is serious about following up with an aggressive crackdown on the companies or will simply declare victory based on token measures and move on.

“I think right now it’s a lot of noise, not a lot of substantial impact to the companies,” said Les Funtleyder, a health care portfolio manager at E Squared Asset Management, which owns shares in Pfizer. The prospect for meaningful change “is out there … but that will take motivation on the part of regulators and policymakers.”

Analysts are in broad agreement that the spate of recent concessions won’t hurt bottom lines, or rein in drug prices beyond this six-month period, because many companies already increased prices this year — in some cases, just weeks before publicly pledging to freeze them for the rest of 2018.

“There’s the glass-half-full and glass-half-empty interpretation,” said Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh. “Glass half full says we have never before seen pharma promise not to raise prices anymore. So this is a step forward — including for patients. Glass half empty is that these are token measures — either on drugs few people use, or drugs that just had their price raised, and that prices will just go up next year.”

Either way, Gellad said, “this is not the kind of structural change we want in the market so that prices go down.”

Drug prices are a fixation for Trump, who rants about them in conversations with aides and advisers, according to people close to the president. He sees the issue as a political winner, especially among his conservative — and largely older — base, which relies heavily on prescription drugs. And after facing huge hurdles moving his legislative priorities through Congress, he sees this as something he can win on by using his executive authority.

That has put huge pressure on Health and Human Services Secretary Alex Azar, a former top official of Eli Lilly and Co.

“They talk three times a week, and they never have a conversation where drug pricing isn’t a topic,” said one person briefed on the conversations, adding that Trump has also interrupted Cabinet meetings to encourage Azar to brief the group on the latest developments.

But even as Azar implements his 44-page blueprint aimed at lowering prices, Trump has grown impatient with the glacial pace of rulemaking and arcane details of drug policy.

His outlet is Twitter, where he can marshal the rage of his millions of followers in an instant. White House aides say he sees his Pfizer tweet as a warning shot to other drug companies — part of a public “shaming” campaign designed to pressure companies to take voluntary steps to lower prices.

That strategy diverges sharply from what Azar is saying publicly — raising doubts about how serious the administration is about cracking down on drugmakers.

The HHS secretary’s rhetoric often targets pharmacy benefits managers — the obscure middlemen who manage the drug side of patients’ health insurance benefits — not drug companies. And targeting the middlemen is a play directly out of pharma’s strategy book — drug companies have long sought to pin patients’ frustration with rising costs on PBMs. HHS has also signaled it wants to overhaul a drug discount program for hospitals that could put money back in pharma’s pocket.

Pfizer CEO Ian Read himself praised the president’s blueprint on the company’s recent second-quarter earnings call, just a few weeks after Trump’s Pfizer tweet.

“I don’t think the administration is gunning for [pharma],” said Ronny Gal, a financial analyst at Sanford Bernstein. Everything they are doing right now is “scratching around the problem,” he said.

“You can tell by the way the stock has performed that investors aren’t too concerned,” Funtleyder said. “They figure, ‘OK, the pharma companies waved the white flag for now, so they’re out of the cross hairs.‘”

Meanwhile, HHS and drug industry officials have worked closely to show Trump they are getting results, administration and pharmaceutical industry sources tell POLITICO.

In private meetings with drug officials, HHS officials ask what steps they’ve taken that they might relay to Trump to keep the president satisfied, said drug company sources.

“They’re also like, ‘Hey, don’t be stupid. If you’re going to do something you feel like we can mutually take some credit for, let us know. … If you can get a good tweet out of it, don’t be an idiot. Let us know [ahead of time],’” said one person familiar with the conversations.

“They’ve said: ‘What would it take for you to lower prices?’” said another top drug industry official.

“There is a real fear that Trump only understands things very simplistically,” said a lobbyist for several drug companies. “So they want to keep tossing treats for him or he will go after blunt instruments,” like government drug price negotiations — steps neither the conservative leadership at HHS nor the drug industry want.

Observers both inside HHS and outside the administration see Azar’s drug pricing team as a buffer for the drug industry.

“To be candid, the secretary is pro-patient, pro-innovation and pro-competition and, quite frankly, really standing in between the industry and some faster ways to lower prices that some would say are not pro-competition,” said HHS’ John O’Brien, a senior adviser to Azar, at a drug cost event one day after Trump’s tweet attacking Pfizer.

Azar prefers the industry and HHS work to make change together, rather than it being adversarial, according to people familiar with HHS’ strategy.

He publicly touts industry price freezes and reversals “in part to show Trump they’re making progress, but also to show the industry that you get recognized for playing ball,” said a person familiar with the discussions.

The White House, meanwhile, was thrilled about the industry’s recent price freezes, even as officials acknowledged the companies’ announcements are only a first step — and promised what one official characterized as a “deluge” of drug price-related regulatory action in the coming months.

“Nothing about what they do or don’t do is going to really turn the tide in a major, major way on a voluntary basis,” the official said of the drug companies’ actions, promising that the administration will take aggressive action.

In the meantime, the White House isn’t ruling out more Twitter shaming.

“You’ll see continuing of the tweeting and announcing different actors doing good or bad things in the market,” the official said.

That will get particularly tricky for the industry come January, when drugmakers would typically take their biggest price increases of the coming year — and when their public concessions sunset.

“They can live with the changes that were made — but they can’t live with not raising prices forever,” Gal said. “It’s a noose they put their head into. In January, we will see what happens with that noose. Does it tighten or not?”

 

The real driver of health care spending

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https://commonwealthmagazine.org/opinion/the-real-driver-of-health-care-spending/

An inefficiency gap is boosting costs — and profits

THE HEALTH CARE DEBATES that occurred in Washington over the past year were largely irrelevant to what’s happening in the health care marketplace. Republicans couldn’t repeal the Affordable Care Act but they made some changes that weakened it. Those changes will increase insurance premiums in the individual market but they do nothing to address the most significant trends that are evolving across the system. To understand the important trends, one must look elsewhere.

In March, three researchers from the Harvard T. H. Chan School of Public Health published a study in JAMA analyzing the well-known reality that the United States spends dramatically more on health care than other wealthy countries. They compared the US, where health care consumes 17.8 per cent of gross domestic product, to 10 comparable nations where the mean expenditure is 11.5 percent. Despite spending much less, the other countries provide health insurance to their entire populations and have outcomes equal to or better than ours. The researchers found that this inefficiency gap is primarily driven by two characteristics of the US system: the high cost of pharmaceuticals and inordinate administrative expenses.

The high administrative spending derives in large part from the fact that 55 percent of the people in the US are covered by private health insurers who embed their own billing requirements, expenses, and profit into the system. The next highest country in this regard is Germany, where 10.8 percent of the population is covered by private insurers. In many countries, there are no such middlemen.

Coincidentally, when the JAMA study was published, the large publicly traded health care companies that dominate the US market had just finished disclosing their 2017 financial results. Examining those results provides additional insight into the economic forces that make our system so expensive and inefficient. The scale of the money involved is sometimes hard to grasp. The largest health care corporations, those included in the S&P 500, had almost $2 trillion in revenue last year. (Table 1)

Most of these enormous companies are engaged in one of two businesses: they’re either selling drugs or they’re selling health insurance. The excess costs reported by the Harvard researchers serve mainly to support the revenue of the companies in those fields.

The 2017 reporting of corporate profits was complicated by the passage of the new tax bill. But most companies also reported “adjusted net income,” which shows their normalized profits after accounting for the one-time impact of the tax law. The chart below (Table 2) uses the adjusted numbers to show the largest annual profits among S&P health care companies.

Health insurers such as United Health and retailers such as CVS have enormous revenue and impressive profits but, when profit is measured as a percentage of revenue, they can’t compete with biotech and pharma. The highest relative profitability, using the same reported adjusted results, is in the chart below. (Table 3)

These profit margins show that there are many situations where between a third and a half of every dollar spent on a prescription drug falls to the bottom line of the of the company that made it. This profit derives in large part from the enormous difference in drug prices in the US versus other countries where such prices are more effectively controlled.

The high administrative cost of the US system stems from the large portion of the market dominated by insurance companies looking to maximize their profits.  Notwithstanding many news stories about turmoil in the insurance markets, 2017 was a banner year for the largest health insurers. The big players all had significant increases in annual profitability in 2017.

Note that Humana did not report “adjusted” numbers even though its profit was swollen by unusual events. A major distortion was a huge break-up fee the company received from a failed merger. That accounted for approximately $630 million in after-tax profit. Even discounting that, it was a very good year.

The revenue and profitability of these corporations support the proposition that high pharmaceutical prices and insurance-related administrative costs account for much of the extraordinary expense of our system. US health policy, or the absence thereof, has enabled these businesses annually to drive costs up for the benefit of their bottom line. That effect will continue. Not surprisingly, the big health care companies are developing new strategies to enhance their businesses and drive their profits going forward.

The term now heard often among health care giants is “vertical integration,” which means combining upstream suppliers with downstream buyers to control the flow of business. If this strategy persists, health care delivery will evolve significantly although it is unlikely to become less expensive. The most prominent current example of  vertical integration is the planned $68 billion acquisition of Aetna by CVS.

How would these companies work together? A Wall Street analyst recently described the vision as a way to “identify high risk patients and preemptively get them into a Minute Clinic.” Thus, your health insurer could send you to a local store for diagnosis, treatment, drugs, and anything else you might need from the shelves. This will keep even more of the health care dollar under their control.

Similarly, Cigna is in the process of acquiring Express Scripts, a huge pharmacy benefits manager, for $54 billion, another attempt to bring more services under one roof. The combined company would have annual revenue of $142 billion and, presumably, enough leverage with drug companies to improve profits although not necessarily to lower costs to patients. United Health, a leader of vertical integration, previously bought a pharmacy benefit manager but co-pays and deductibles for its patients have continued to climb. United has aggressively acquired physician practices in recent years and is now in the process of buying DaVita Medical Group, which operates nearly 300 clinics and outpatient surgical centers.

More striking are reports of a potential but unsigned merger of Walmart and Humana, a combined company that would have revenue of $550 billion. Walmart is a large operator of retail pharmacies inside its stores and the logic is similar to the Aetna-CVS deal. Humana, a huge insurer, is separately in the process of acquiring a large home health business from Kindred so this could represent yet another level of vertical integration.

If this course continues, the health care system will evolve quickly, giving fewer and larger companies even more market leverage. Integration of this kind benefits the large corporations that initiate it but there is no evidence it will lead to lower costs, improved access, or enhanced quality. These changes are driven by highly focused corporate financial interests and are occurring without reference to public policy. That’s because there is no coherent public policy to guide these changes.

On May 11, President Trump made a long-awaited speech to reveal what he described as “the most sweeping action in history to lower the price of prescription drugs for the American people.” His typically firebrand language struck at “drug makers, insurance companies, distributors, pharmacy benefit managers, and many others” who contributed to “this incredible abuse.” His attack seemed to target the large public companies that have benefited from the abuse. Unsurprisingly, his speech did not include specifics. His staff then released tepid policy details, which immediately generated a significant upward spike in the biotech stock index as well as the stock prices of other large health care companies. For all the presidential bombast, investors saw Trump’s policy for what it is: indifference to the current path and no threat to high prices.

It is not in the interest of huge profit-making corporations to restrain the overall cost of the US health care system. In fact, their interest is served by driving health care expenditures higher. When combined with the spending analysis provided by researchers, the financial data disclosed by public corporations point to a path that the country must follow to make our system more coherent and less costly. Any progress will require driving down pharmaceutical pricing and reducing administrative costs imposed by middlemen. We are not doing that yet but, ultimately, we must.

 

 

It’s the Monopolies, Stupid!

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http://www.commonwealthfund.org/publications/blog/2018/may/drug-monopolies-pricing?omnicid=EALERT1410094&mid=henrykotula@yahoo.com

Image result for pharmaceutical monopoly

At the core of the nation’s drug pricing problem is one fundamental fact: Drug companies enjoy government-sanctioned and -enforced monopolies over the supply of many drugs.

These monopolies result from patents awarded under federal law for novel molecules. Patents allow manufacturers to prevent competitors from selling the same drug for 20 years from the time the patent is filed. Given that the process of gaining regulatory approval to market their new drug takes time, research suggests new drugs have, on average, 12 to 13 years of market exclusivity.

Once new drugs are approved by the Food and Drug Administration, the monopolies assured by patents enable pharmaceutical companies to charge any price they choose. They generally pick prices that not only cover their development costs, but also generate profits that exceed those of most other industries: for example, the average profit margin for the 25 largest software companies (which are cited as having the same high R&D investment and low production and distribution costs as pharmaceutical companies) was 13.4 percent in 2015, while the average profit margin for the 25 largest drug companies was 20.1 percent in 2015. Drugmakers are also free to raise prices whenever they want at rates they alone determine.

The existence of patents does not totally prevent competition. Often, other companies introduce drugs that are distinct enough to justify their own separate patents and accomplish the same therapeutic goal. This results in competition that lowers drug prices, but often by not enough to make the medications affordable for many patients. In addition, the makers of patented drugs — for example, Mylan’s EpiPen and the weight-loss drug Suprenza — have developed effective mechanisms to extend the lives of their patents beyond 20 years. These approaches include making minor modifications in the formulations or packaging of drugs that have no clinical significance, as well as paying potential generic competitors not to introduce generic drugs.

That said, patents eventually expire, at which point generic drug companies can manufacture the drug and sell it at a much lower price. But even generic drug competition has been weakened recently by generic drug market monopolies, as these manufacturers have bought up their competition. As a result, the prices of old and familiar drugs have risen dramatically. The price of the cardiac drug isuprel has increased more than sixfold between 2013 and 2015, and the price of the antibiotic doxycycline has soared 90-fold over the same period.

As long as drug companies (or a small group) hold monopoly (or oligopoly) power over potent new therapies, there is no free market solution to lowering drug prices. Only a countervailing nonmarket force of equal strength can bring those prices down. Other western industrial countries, recognizing this, authorize their governments to step in and moderate drug prices for the benefit of their citizenry. Some set prices by fiat, while other negotiate with drug companies. In the latter case, the negotiations are sometimes guided by comparative effectiveness analysis that estimates the value of new drugs to patients. Of course, drug companies are free to walk away from such deals, but they generally choose not to, presumably because they still make money from those sales.

Drug companies say their monopoly earnings are necessary to sustain the research and development that produce new drugs. In effect they are saying that they need to be able to charge the very high prices we now see for patented drugs so they can innovate. This raises the questions of how much money society should allocate toward pharmaceutical innovation and who should decide. Setting those questions aside for the moment, we should be very clear about one thing: As long as pharmaceutical companies have uncontested market power to set prices for many patented and generic drugs, those prices will remain a huge problem for Americans and their elected representatives.

Among Those Who Want to Lower Drug Prices, Cacophony, Not Consensus

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Everyone seems to want lower drug prices. 5 reasons why that hasn’t happened

Image result for no silver bullet

 

Everyone seems to want lower drug prices. 5 reasons why that hasn’t happened.

Of all his campaign promises, President Trump’s vow to bring down drug prices was perhaps the most popular.

An assortment of interest groups spoke out loudly and passionately on the need for action, from hospitals to doctors to insurers to generic drug makers to patients themselves.

And in many ways, they seem to have the clout, and resources, to counter drug makers’ slick ad campaigns and lobbying firepower. Last year, the American Medical Association, America’s Health Insurance Plans, and the American Hospital Association together spent more than $45 million lobbying Congress, almost twice what the drug makers’ group, PhRMA, spent in the same time period.

Instead, congressional efforts to lower drug prices are at a total standstill. In interviews with STAT, lobbyists, lawmakers, and congressional staffers, Republicans and Democrats alike, said the most powerful health industry players conspicuously disagree about exactly how to move forward. Every group pushes its own priorities and strategies — a cacophony that makes it unlikely that crushing drug prices will change any time soon.

“They all say, ‘Yes, we should [lower drug prices], and someone else is responsible for it,’” Sen. Patty Murray of Washington, the top Democrat on the Senate Health, Education, Labor, and Pensions Committee, told STAT. “Everybody needs to come to the table and say what can my industry do, what can pharma do. … That will be how we solve this.”

Solving it, however, seems a stretch when just addressing it has gone nowhere. Despite President Trump’s insistence, on the campaign trail and in office, that he will lower drug prices, there has been no major federal effort to do so in the first year of his administration.

The disarray was on full display at a recent congressional hearing, when representatives from nearly every major trade group with any stake in the country’s drug prices — AMA, AHIP, and AHA included — spent almost an hour and a half testifying without more than a cursory discussion of how Congress could fix the problem. When they finally did talk solutions, outside of buzzy phrases like “increase transparency,” almost none of their answers matched.

So why can’t the broader health care industry agree on how to make drugs more affordable? Here are five factors.

1. Health care lobbyists are stuck playing defense.

When it comes to drug pricing, hospitals, insurers, and PBMs in particular have spent the last year fending off congressional inquiries into their own business practices — leaving little time to go on the offensive.

Meanwhile PhRMA has alternately pointed at hospitals, insurers, and PBMs as the profiteers in the current system.

It’s “lobbying 101, to muddy the waters,” according to Rep. Peter Welch (D-Vt.). And in the complicated world of drug pricing, it’s an effective strategy.

Drug makers’ efforts to vilify PBMs and to demand more transparency about their role in the supply chain are well-documented. The Washington Post earlier this year called pharma’s tactics against those players an effort to “start an industry war.”

They’ve opened a similar front against insurers, ramping up rhetoric and backing new patient groups that decry how higher deductibles and copays mean steeper costs for consumers, even when list prices don’t change much.

And they’ve accused hospitals of marking up the price of drugs and pocketing the difference, both in general and specifically as part of a push to overhaul the hot-button 340B drug discount program.

“That disarray you talk about, it’s not accidental,” Welch said. “The flames of that are fanned by pharma, [which] is doing everything they can to create confusion about what’s the right remedy,” he said.

The problem, according to Walid Gellad, who leads the University of Pittsburgh Center for Pharmaceutical Policy and Prescribing, “is that every part of the industry says things that are correct. It is correct that one of the reasons patients are feeling such high prices is because they have to pay coinsurance and big deductibles,” Gellad said, noting that pharma’s concerns with the PBMs and hospitals had some validity, too. “And it’s true that pharma sets the list prices high. They do do that.”

PhRMA spokesman Robby Zirkelbach also said there was a reason for lawmakers’ interest in so many players: the validity of the concerns. He pointed to data that showed slowing growth of prescription drug prices and increasing copays and deductibles.

“There’s no wonder that people are continuing to dig into this issue, and what they’re realizing is that to really be able to address the drug pricing concerns that people have raised, you’ve got to address some of the misaligned incentives in the system,” he said. “This is a complicated system, and we’ve got to look at how money flows across the system.”

And the tactic has successfully diverted lawmakers’ attention. Republicans in both chambers of Congress have held hearings in the past year looking at the “supply chain” that goes into the cost of drugs — broadening their spotlight from the companies that set the price to the other actors that can impact it. And lawmakers on both sides of the aisle say they want to better examine the vast array of players before they make any sudden policy moves.

“There are some that zero in on just one piece of the cost curve, so what I’m trying to do on the committee is look methodically at every piece,” Rep. Greg Walden, the Oregon Republican who chairs the influential Energy and Commerce Committee, told STAT. “We’re going to look at PBMs, we’re going to look at hospital costs, we’re going to look at what insurance costs. We’re going to look top to bottom.”

2. Congress isn’t jumping to act.

Beyond hearings, Congress hasn’t actually shown great appetite to tackle drug pricing. And that lethargy can dampen lobbyists’ enthusiasm to throw their weight and resources behind a given campaign or piece of legislation.

One physician lobbyist called it a “chicken and the egg” problem, wondering whether it would be Congress or the industries to first signal their motivation to act.

Case in point: the so-called CREATES Act. It’s one of the few pieces of drug price legislation that has the support of hospitals, insurers, doctors and a whole host of other groups and companies. But it’s languishing on Congress’s to-do list.

The bill, like its counterpart, the Fast Generics Act, takes aim at what supporters call delay tactics that drug makers use to keep generic competitors off the market. The legislation would give generic manufacturers that are legitimately seeking product samples the right to sue the drug makers if they refuse to hand over those samples.

It’s a small but meaningful change — the Congressional Budget Office has estimated that the legislation could save Medicare, Medicaid, and other federal government health programs more than $3 billion over 10 years.

And industry has been pushing the legislation, albeit without the same urgency that’s animated other priorities. Together, many of the trade associations — along with some three dozen other groups and companies, including Walmart, CVS, and AARP — formed a coalition, the so-called Campaign for Sustainable Rx Pricing, to push the bill. They hired a handful of lobbyists who are largely focused on the issue, too, to the tune of $440,000 over 2017.

But as one supporter put it, “it’s kind of telling that it has to be such an egregious abuse for everyone to coalesce.”

So far, drug makers have blocked attempts to include the measure in the 21st Century Cures Act that passed in 2016 or in last year’s reauthorization of FDA user-fee agreements, a priority for the drug industry. They say the bill will weaken protections for patients and spur “meritless, wasteful litigation.”

Supporters were nonetheless optimistic about the path forward for the bill. Several lobbyists backing the effort, along with staffers in both the House and Senate, told STAT there is momentum on Capitol Hill to include the measure in an upcoming spending package since it could help offset some other spending.

3. Each industry has very different priorities, even when they do agree.

Even when they do agree — as on CREATES, for example — health industry lobbyists don’t always prioritize the same issues. Some may have spent 2017 more focused on the repeal and replace of the Affordable Care Act than drug pricing. Others might have they used their meetings with lawmakers to defend a tax credit. Or perhaps some argue for other, more important drug pricing policies that need to be tackled first.

“When you work with these other groups, they rank [policy proposals] differently. There are certain things they want first. So it’s not only about finding solutions you can agree on, but about which ones you want to do first,” one patient advocate told STAT.

Drug makers, on the other hand? Pricing is their primary concern.

Other groups “have their own fish to fry, their own priorities,” said David Mitchell, the founder of the patient group Patients for Affordable Drugs. For drug companies, “it’s their number one issue: drug pricing. All the rest of them have their own number one issues, and drug prices aren’t it.”

4. All the major players have a stake in the status quo.  

Academics had another easy explanation for the lack of consensus — and the lack of concerted effort — from health care industry groups that profess an interest in lowering drug prices. They all profit from the current system.

Hospitals are paying more for drugs for patients admitted to the hospital, but on the flip side, at least some facilities are profiting from reimbursements for drugs in outpatient settings and in their own specialty pharmacies, according to Peter Bach, the director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes. PBMs also earn bigger rebates if the list prices are higher. And doctors, too, make more money under Medicare rules if they administer a more expensive drug to a given patient.

“People are paying these bills and the pie is getting bigger. Everyone’s arguing about where the knife comes in and cuts the slices of pie,” he said. “Everybody thinks everybody else is getting an unfair share.”

Gellad agreed.

“Everyone is making a lot of money. No one’s gone broke. So they don’t want to change things,” he said. “And that’s why the industry is not going to all agree to do something [on drug prices], because they’d all have to agree to lose money. Why would anyone agree to do that?”

5. There’s no silver bullet.

It’s not as if there’s one easy solution, ripe for the picking, if only groups could agree on it, several trade association officials told STAT. The piecemeal approach — getting behind policies like CREATES and then turning to other, smaller issues — may be the best way to approach the issue, they argued.

Similarly, lawmakers said there’s no one fix.

“The reason you haven’t seen all of the groups coalesce around one proposal — it’s not really clear what the solution is at this point because it’s such an opaque process,” Rep. Diana DeGette (D-Colo.) told STAT. “It’s hard to see what one solution there would be.”

Mitchell, along with a spokesman for the Association of Accessible Medicines, which represents generic manufacturers, also pointed to growing consensus behind smaller, targeted policies that would keep branded drug manufacturers from “gaming the system” — policies like CREATES and other changes to the patent system that could garner broader support. They each noted, too, that newly confirmed Health and Human Services Secretary Alex Azar, himself a former drug company executive, had voiced support for those changes during confirmation hearings.

They also preached patience. Bach, a former senior adviser to the Centers for Medicare and Medicaid Services, likened the push to the decades of jockeying between various environmental groups over fossil fuel regulation.

“Environmental regulation is a classic example of this,” Bach said. “You have this broad array of interested parties that would like to see movement, but the flavor of the movement they want, the ranking of their priorities, it’s not ‘one and only,’ even if it’s top [priority] — against a highly concentrated entity that specifically has a single agenda counter to it, with deep influence. That is a very hard row to hoe.”

“We are making progress,” he added. “But we get there in fits and starts.”

​Pharma’s big quarter

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Data: SEC filings; Chart: Andrew Witherspoon / Axios

Axios’ Bob Herman has been tracking the health care industry’s financials over the third quarter, in which the 99 largest publicly traded health care companies cumulatively collected $33 billion of profit and $577 billion of revenue worldwide.

Winners: Pharmaceutical companies collected more than 60% of those profits, but only 22% of the revenue.

  • No health care company netted more profits than Johnson & Johnson, the behemoth maker of drugs, medical devices and consumer products like Band-Aids and Tylenol. Its net profit was $3.8 billion in the quarter.
  • 8 of the 15 highest net profit margins were at drug companies.
  • 12 of the 15 highest net profit totals were at drug companies.

Californians will get more information on what’s driving prescription drug prices under law signed by governor

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http://www.latimes.com/politics/la-pol-ca-prescription-drug-price-disclosure-20171009-story.html

Image result for Californians will get more information on what’s driving prescription drug prices under law signed by governor

Gov. Jerry Brown approved a measure Monday to increase disclosure on prescription drug prices, the focal point of growing efforts to clamp down on climbing pharmaceutical costs.

Supporters call the law the nation’s most sweeping effort to make prescription drug pricing more transparent. The measure would require drugmakers to provide notice to health plans and other purchasers 60 days in advance of a planned price hike if the increase exceeds certain thresholds.

The measure, SB 17 by state Sen. Ed Hernandez (D-Azusa), will also require health plans to submit an annual report to the state that details the most frequently prescribed drugs, those that are most expensive and those that have been subject to the greatest year-to-year price increase.

”The essence of this bill is pretty simple,” Brown said at a Capitol signing ceremony. “Californians have a right to know why their medical costs are out of control, especially when pharmaceutical profits are soaring.”

The disclosure, backers say, would help shed light on how prescription drugs are contributing to overall healthcare costs.

“SB 17 speaks to the needs of all Californians who have felt the strain of nonstop prescription drug price increases,” Charles Bacchi, president and chief executive of the California Assn. of Health Plans, said in a statement. “Pharmaceutical prices have long played an outsized role in driving up the cost of health coverage across the board. SB 17 gives us the tools to address the issue by helping us prepare for price hikes and discouraging needless cost increases.”

But pharmaceutical companies strongly opposed the measure, arguing the information would paint an inaccurate picture of drug spending, since the disclosure centers on full sticker cost set by manufacturers. Purchasers rarely pay the full list price, either through negotiated discounts or through use of consumer rebates or coupons.

“It is disappointing that Gov. Brown has decided to sign a bill that is based on misleading rhetoric instead of what’s in the best interest of patients,” Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, said in a statement. She said the measure “ignores the reality that spending on prescription medicines remains a much smaller portion of overall healthcare spending.”

VanderVeer said the manufacturers’ group was ready to work to combat affordability issues but added: “It’s time to move beyond creating new, costly bureaucratic programs that don’t make a dent in patients’ costs for medicines.”

Escalating drug prices inspired a slate of measures from lawmakers this year. Brown on Monday signed an additional measure, AB 265 by Assemblyman Jim Wood (D-Healdsburg), that will restrict the use of drug rebates or coupons for brand-name drugs when cheaper generic alternatives are available.

The law includes a number of exemptions, including for when patients have gotten authorization from their health insurers for brand-name treatments. But Wood has pitched his measure as a way to stem widespread use of such vouchers, which some researchers have said drive higher overall healthcare costs by giving patients incentive to pick pricier medicines.

Other related bills, including a measure to clamp down on gifts doctors can receive from pharmaceutical companies and a proposal to regulate pharmacy benefit managers, a little-scrutinized part of the drug supply chain, sputtered earlier this year.

The disclosure bill was seen as the centerpiece of the focus on drug prices, setting off a fierce lobbying battle in which the pharmaceutical industry squared off against a coalition of backers that included health plans, labor groups and consumer advocates.

It also garnered support from some Republican lawmakers, who have typically been aligned with drug makers.

“Shouldn’t we do something to help make this system operate better so we can get better cost savings for our consumers? That’s a conservative principle,” said Assemblyman James Gallagher (R-Yuba City).

Now, Hernandez said, he hoped the law would inspire similar action on a national level.

“I want to challenge our federal elected officials…to do the same thing at the national level,” he said, “so that we can make sure that every single person in this country not only has access to healthcare but they can afford their healthcare premium dollars.”

In his signing remarks, Brown said the angst over rising drug costs — and manufacturers’ substantial profits — was symptomatic of the broader gap between the haves and have-nots.

“The social and political fabric is being ripped apart,” Brown said. “The inequities are growing. The rich are getting richer, the powerful are getting more powerful and a growing number of people are getting more desperate, more alienated.”

He directed a message to the pharmaceutical industry that opposed the bill: “You’ve got to join with us. You’re part of America. And if we all don’t pull together, we’re going to pull apart.”