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Drug Pricing 'Tantamount to Greed,' Lawmaker Says

 |  By cclark@healthleadersmedia.com  
   July 24, 2014

Four legislative actions could ease the burden of high-cost prescription drugs—such as a $1,000-per-pill hepatitis C drug—on Medicare, the public, and commercial payers, says U.S. Rep. Henry Waxman.

Calling Sovaldi, a high-priced drug for hepatitis C, "the poster child for high Medicare Part D drug prices," Rep. Henry Waxman, (D-CA), Wednesday urged Congress to pass several bills that would ease the prescription price burden on seniors, taxpayers, and the Medicare trust fund.

Made by Gilead Sciences, Sovaldi costs $84,000 for a 12-week course of treatment. "Why are they charging that? Because they have a monopoly and they can charge whatever they want," Waxman said.


He made his remarks during a news conference announcing the release of a report by MedicareRights.org and SocialSecurityWorks.org, two non-profits working to solve problems for older adults and the disadvantaged.

Citing a recent analysis, the congressman said Medicare Part D coverage for Sovaldi alone "will increase Medicare drug spending by $6.5 billion, or 8% in 2015. That's an astounding amount for one drug."

'Tantamount to Greed'
Waxman said Gilead had failed to respond to all the information his office had requested, and said the price for Sovaldi is tantamount to "greed." 

"I was interested when we wrote them a letter asking them how they can possibly charge so much for this drug, when people and governments can't afford it, and insurance plans can't afford it. Their stock dropped. The reality is that unless Congress acts, they can get away with it. Their greed is going to be unrestrained, and I say it's their greed because they haven't proved to me that it's not. Their investment is well returned with a reasonable price, and I think they're charging an unreasonable price."

In the report, the two non-profits express their concerns that high-cost medications are too expensive to be affordable by many of the nation's seniors and disabled. The groups offer four legislative actions that could ease the price burden, all of which Waxman, who is sponsoring one of the bills, supports.

1. Restore manufacturer discounts.
Bring back discounts that were available to dually eligible (those eligible for both Medicare and Medicaid) beneficiaries prior to 2003, when the Medicare Modernization Act was passed.

According to the report, while the MMA's Medicare prescription drug benefit known as Part D, in 2003 "significantly enhanced health coverage for older Americans and people with disabilities, the law also severely limited the government's ability to control Medicare drug prices. That's because dual-eligibles had to switch from Medicaid to Part D for prescription coverage.

"The switch resulted in windfall profits for pharmaceutical manufacturers: according to one analysis, drug company's profits soared by 34% to $76.3 billion in the first year of the Part D program."

A remedy is proposed in the Medicare Drug Savings Act, a bill introduced by Rep. Henry Waxman, (D-CA), and Sen. Jay Rockefeller, (D-WV), that would restore the drug discounts provided by manufacturers.

The report says that while opponents think that a return to drug discounts would stymie pharmaceutical drug development, "there is no evidence" that has happened.

2. Allow Medicare to negotiate drug prices for a public Part D option. While the Veteran's Administration healthcare system and state Medicaid programs  can negotiate prescription drug prices, Medicare can not. This "severely limited the federal government's ability to secure the best prices on Medicare prescription drugs." 

Several bills in Congress would restore this ability, such as those introduced by Sen. Dick Durbin, (D-IL), and Rep. Jan Schakowsky, (D-IL 9th).

"Without administering its own drug program, Medicare has limited tools to entice drug companies to provide rebates (or discounts) on specific medicines. If allowed to negotiate, Medicare would be best positioned to secure a better deal on costs for popular, blockbuster medicines new to the market," the report says.

3. Secure better discounts from drug manufacturers to close the Part D doughnut hole sooner.
When a beneficiary's drug costs reach a specified cap, known as the doughnut hole, he becomes responsible for 100% of the cost of his prescription drugs up to a catastrophic limit. This is a policy for all beneficiaries except those at the lowest incomes who are enrolled in assistance programs.

The Patient Protection and Affordable Care Act takes steps to close the doughnut hole, and to eliminate it by 2020. But that's not soon enough, according to the report.

President Obama, in his most recent budget request, proposes to accelerate closure to 2016 by increasing the proportion of pharmaceutical manufacturer discounts on brand name drugs. That "would save an estimated $16.6 billion over 10 years," the report says.

4. Promote cost-effective prescribing for Part B prescription drugs. These drugs, usually administered by a physician, include drugs for cancer, anemia, and arthritis. They are extremely costly, accounting for $12.8 billion in Medicare spending in 2011, according to a June, 2013 report from the Medicare Payment Advisory Commission.

Medicare's policy is to reimburse physician practices 106% of the cost of these drugs based on a formula developed from manufacturer data.

One alternative option is to just reimburse those practices at a lower percentage. Lowering it to 103% would save "an estimated $3.2 billion over 10 years," according to a January, 2013 report from the Kaiser Family Foundation.

The program could also see considerable savings "if policies were in place that encouraged the use of less expensive —but equally effective— alternatives to the highest cost drugs," the report says. And since Part B drugs require a 20% co-pay from the beneficiary, reducing those costs would reduce costs for beneficiaries as well.

Some of the highest spending comes from Part B spending. "One analysis finds that 'most of the 4,000 doctors who received at least $1million from Medicare in 2012 billed mainly for giving patients injections, infusions and other drug treatments.' "

Passage Unlikely
Waxman cautioned, however, that the legislation is unlikely to pass because "one of the biggest campaign contributors around, PhRMA, (the Pharmaceutical Research and Manufacturers Association) is certainly going to pull out all the stops to fight us."

A representative from Gilead Sciences provided a statement via email late Wedensday. It reads in part:

"Sovaldi brings significant value to payers, providers, patients and society. It was priced such that the total regimen cost is comparable to the previous standard of care regimen for genotype 1 patients with chronic hepatitis C, despite the fact that it provides a shorter treatment duration and improved tolerability, along with a higher cure rate…. Gilead has established one of the most comprehensive patient assistance programs in the industry to help ensure cost is not a barrier to Sovaldi for patients in the U.S. with high co pays or who lack adequate insurance."


A representative from PhRMA issued a statement late Wednesday, reading in part:

"Under current law, Part D purchasers already negotiate significant discounts and rebates with manufacturers in the program, and CBO has repeatedly said that further negotiation by the government would have a negligible impact on federal spending unless patient access to needed medicines was limited. Furthermore, proposed cuts to Part B and ASP could jeopardize patient access to medicines for beneficiaries – many of whom are battling serious conditions – causing major medical and financial hardship."

 

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