You see Joseph McGuirk wince as he talks about the lifesaving cancer drugs he prescribes his patients and the sacrifices they have to make to afford them.
Take Revlimid, for example. It has dramatically improved the survival odds of people with multiple myeloma. But the daily pills cost $17,000 a month, and patients have to take them indefinitely to keep their blood cancer in check.
“For a doctor, if the copay is 10 percent, that might be affordable. But for an average family of four, something’s got to give,” McGuirk said. “It’s groceries or Revlimid.”
McGuirk, who leads the bone marrow transplant program at University of Kansas Hospital, prescribes from a long list of drugs with five- and six-figure prices for his cancer patients.
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But high drug prices have been hitting a lot of us hard lately.
Overall prescription costs spiked nearly 14 percent from 2014 to 2015, rising to $374 billion last year. That’s double the growth rate over the previous five years, the actuarial firm Milliman says.
In recent days, the news has been filled with stories about a pharmaceutical entrepreneur who raised the price of Daraprim, a drug critical to fighting certain infections in AIDS patients and pregnant women, from $13.50 a pill to $750. Stung by protests from physician groups, the company said it would lower the price.
Meanwhile, Hillary Clinton followed the lead of Bernie Sanders, a rival for the Democratic presidential nomination and a longtime critic of drug pricing, and came out with her own plan for reining in drug costs.
Expect more politicians to chime in.
Making high-priced drugs affordable is the public’s top health care priority across the political spectrum, even eclipsing repeal of the Affordable Care Act among Republicans, a recent Kaiser Family Foundation tracking poll found.
The most glaring reason for the price escalation has been the rising cost and increasing numbers of specialty drugs. These are the always expensive drugs that are often developed for rare or difficult-to-treat conditions.
Last year’s new big-ticket specialty drug was Sovaldi, which offered a virtually surefire cure for hepatitis C but listed for $1,000 a pill — $84,000 for a full course of treatment.
This year, the prescriptions threatening to break the bank are Praluent and Repatha, two newly approved wonder drugs that can lower persistently high cholesterol. Each costs more than $14,000 a year, and patients take them indefinitely.
While specialty medications like these represent just 1 percent of the prescriptions we fill, they account for 32 percent of all drug spending. By 2018, they’ll represent 50 percent.
“The trajectory goes in only one direction, and that’s up,” said Brian Henry, spokesman for Express Scripts.
The St. Louis-based company, which manages drug benefits for insurance plans nationwide, forecasts that spending on specialty drugs will continue growing more than 20 percent a year through 2017.
“The trend is unsustainable,” Henry said. “At some point, the market won’t bear it anymore. You have to have rational prices.”
But what makes for rational prices in the pharmaceutical industry is hard to fathom. Manufacturers closely guard their reasons for the price tags they stick on their drugs.
Yes, the high cost of research and the clinical studies to prove a drug’s safety and effectiveness plays a large role. So does the cost of marketing, which may be inflated by expensive television advertising.
Yet many observers say a drug’s price generally comes down to whatever the market will bear.
“The drug market is like the Wild, Wild West,” said Chris Girod, a Milliman principal and consulting actuary. “Drug companies set their prices and we have to pay them.”
“That’s not necessarily fair,” countered Holly Campbell of PhRMA, the pharmaceutical industry’s trade group. “It’s the list prices a lot of critics have been talking about, but there’s a lot of discounts and rebates going on.”
Drug companies also have assistance programs for patients who can’t afford their medications, and these concessions together offset the price increases last year, she said.
Campbell said insurers also must bear responsibility for keeping medications affordable to the patients they cover.
“We need to make sure that insurance does what it is intended to do.”
Cancer drug prices take a toll
But on the front lines of health care, the high prices of some drugs have been causing angst not just for the patients who have to pay for them but for the doctors who prescribe them. And they have been training their sights on the drug industry.
No group has been more vociferous than the doctors treating cancer. Last month, more than 100 prominent cancer specialists signed a petition calling for federal action to hold down drug prices.
Prices of new cancer medications have been rising steadily for decades. Last year, every new cancer drug approved by the Food and Drug Administration cost more than $120,000 per year of use. At such prices, even insured patients can face $25,000 to $30,000 in out-of-pocket expenses.
“Nothing could be more frustrating to the scientific and biomedical research enterprise than to have a drug that is essentially a cure unavailable to patients because of a broken market,” Peter Bach, a Memorial Sloan Kettering Cancer Center physician and health care policy expert, recently told a group of journalists.
Bach and other Sloan Kettering physicians made headlines three years ago when they refused to give their patients the newly approved colorectal cancer drug Zaltrap. It worked no better than a similar drug already in use, but its price, $11,063 a month, was more than twice as high. Zaltrap manufacturer Sanofi reacted quickly by cutting its price in half.
Bach pointed to Gleevec, a breakthrough drug for chronic myelogenous leukemia, as an example of how drug prices don’t seem to follow market expectations.
Gleevec and related drugs are “one of the most important treatments we have,” Bach said, and have “turned a rapidly fatal condition into a manageable one.”
But over the past decade, Bach has seen Gleevec’s price rise steadily, from less than $100 a day in 2003 to more than $200 now, adjusted for inflation. The price continued to go up even as two competing drugs entered the market and the FDA approved Gleevec for additional uses.
“No one can … say (that) anything about the market is working,” Bach said.
High cancer drug prices weigh heavily on patients’ health and their finances.
Patients need to take Gleevec for life to keep their cancer in check. But researchers at the University of North Carolina at Chapel Hill determined that the higher the copays, the more likely these patients are to stop taking the drug.
From a financial perspective, people with cancer are two to three times as likely to declare bankruptcy as people without a cancer diagnosis, according to a study by the Fred Hutchinson Cancer Research Center in Seattle.
“Not a week goes by where we don’t have discussions about patients not able to pay for their medications,” said McGuirk, the KU Hospital cancer specialist.
For McGuirk’s patients, drugs are the most costly part of their care. His program has social workers and financial advisers at work constantly negotiating with insurance plans, seeking discounts from drug companies and financial aid from nonprofit organizations.
“It’s not easy and it’s not available to all patients,” he said. “People are losing their homes, losing their cars, going into bankruptcy to fight their cancer.”
One of those patients is Tammy Smale. In 2008, Smale, now 56, was diagnosed with acute myelogenous leukemia. It took two bone marrow transplant procedures to restore her health.
“It just threw us into a huge financial tailspin,” she said.
Even though Smale and her husband, David, had health insurance, they had to declare bankruptcy. They ended up having to sell their house in Merriam and move into a rented home in Lenexa.
For at least five years after she left the hospital, medications remained Smale’s largest medical expense, averaging $500 to $600 a month out of pocket.
“Some of it was just astronomically expensive. I don’t understand why,” she said. “It ate up our savings and retirement plans.”
Her husband now works several jobs to help make ends meet.
Controlling costs but creating problems
Efforts to control costs and make drugs more affordable have met with some success but created problems as well.
Pharmaceutical companies’ patient assistance programs cover more than 300 drugs and spend about $4 billion per year helping cover patients’ costs. But Medicare and private insurance plans are skeptical about the programs’ overall benefits, reasoning that they may be raising overall health care spending by steering patients to high-priced drugs when less expensive alternatives would be effective.
“Assistance programs are a triple boon for manufacturers,” David Howard, an Emory University health policy expert, wrote in the New England Journal of Medicine. “They increase demand, allow companies to charge higher prices and provide public relations benefits.”
Insurance plans have tried to make high-priced drugs less attractive to patients by moving them into higher coverage tiers, where patients are responsible for more of their cost.
That may be an effective way to save money when it induces patients to choose less expensive and equally effective generic drugs over the more expensive brand-name versions. But the result can be far different for patients in need of specialty drugs where choices are few, said Girod, the Milliman actuary.
“It’s more of a cost shifting method (from insurer to patient),” Girod said. “Patients taking costly specialty drugs have good reasons for using them.”
Insurers also set restrictions on which patients may receive a high-priced drug, and those insurers tell doctors to try lower-cost therapies before using more expensive drugs. The intent is to keep doctors from expanding the use of new drugs beyond the medical evidence of their effectiveness, as well as to keep them from making new and expensive drugs their treatments of choice when tried and true, and much cheaper, alternatives are available.
But such restrictions can have harsh and frustrating consequences.
Richard Gilroy is a liver specialist at KU Hospital. The new hepatitis C drugs, which can run close to $100,000 for a course of treatment, have been so effective curing the debilitating liver infection that he’s been able to take five patients off the hospital’s liver transplant list.
He said there’s some validity to the drug manufacturers’ argument that their medications save money by preventing many liver transplants. And with companies offering competing drugs, private insurers and government agencies such as the VA have been able to bargain prices down at least 40 percent.
But with more than 3 million Americans infected with hepatitis C, insurers have been making the treatment tough to get and limiting it to the sickest patients.
“I have an incredibly high-performing infrastructure, but it takes weeks for us to get treatment approved,” Gilroy said. “I have had to tell people who have come to me with hepatitis C that they will have to wait until their liver disease is more advanced.”
Calls for government action
Many proposals for holding down drug prices, including those in the cancer doctors’ petition, call for government action.
Among the ideas: permit patients to import drugs from Canada, where prices are lower; allow Medicare, which controls a sizable share of the market, to directly negotiate drug prices, something now forbidden by law; and reform patent law to make it harder for manufacturers to delay the entry of cheaper generic drugs.
Sanders and Clinton are calling for these measures. Clinton also wants insurance plans to cap patients’ out-of-pocket drug costs at $250 a month.
How far these proposals go will depend on how the political debate is framed. The Kaiser poll that showed most people think drug prices are too high also found that large majorities favor government actions, such as negotiating drug prices.
But when the question was posed as government regulation versus marketplace competition, most favored the marketplace.
One kind of reform measure that seems to have at least some support from all quarters is basing drug prices on their medical value, such as how well they work to alleviate symptoms, delay disease progression or save lives.
“Prices seem to be escalating dramatically when they’re uncoupled from how much better they are for patients,” said Steven Pearson, president of the Institute for Clinical and Economic Review.
The nonprofit watchdog organization has gained attention lately for its new project calculating a “value-based price benchmark” for high-priced drugs. These benchmarks take into account how much additional benefit patients receive compared with existing treatments and the drug’s economic effect on the health care system.
Pearson said ICER will be timing its reports for maximum effect by releasing them around the time new drugs receive FDA approval.
“Our hope is to influence the entire line, from manufacturers to doctors groups to insurers,” Pearson said
Earlier this month, ICER released a report on Praluent and Repatha, the new cholesterol-reducing drugs that cost more than $14,000 a year. By its calculations, the extra benefits of the drugs over current therapies gave them a value of $3,615 to $4,811, a big discount over list price. To keep health care spending within reasonable limits, they would have to be priced at $2,177.
Express Scripts is looking eagerly at ICER’s reports and similar work by other researchers and hopes to apply them to its reviews of how drugs should be used and what they should cost.
“Everybody wants everyone to have the best, the latest drugs,” said Henry, the company spokesman. “But you have to manage spending to afford the breakthroughs.”
Campbell of PhRMA said the drug industry is open to such “value assessments” of drugs, with reservations.
“If they’re misapplied, they can harm patients by restricting access,” she said. “You can’t put a price on a patient’s life.”
Physician Patrick Moriarty runs a program at KU Hospital for patients with high cholesterol levels that have been hard to treat with conventional medications.
He has seen dramatic improvement among patients who have received the expensive new drugs. And he has been getting lots of calls from physicians in the community asking for advice about which patients should be getting them. He is seeking guidance himself.
“I understand the dilemma, the cost, the chance they may be used too liberally,” he said. “The persons who control the purse strings have to decide who gets this.”