The Prescription for High Drug Costs? Transparency for Starters

For most Americans, $280,000 might represent the price of a home or perhaps their entire retirement savings. But for the 1.3 million people in this country stricken by rheumatoid arthritis (RA)that quarter million dollars could be their drug bill.

Rheumatoid arthritis is a debilitating disease that causes painful inflammation and swelling of the joints. Left untreated, it can lead to permanent disability. Thankfully medications such as Enbrel, Humira and Zeljanzcan keep patients healthy enough to stay active and keep working. Yet the price tag is quickly becoming out of reach.

One recent report from Express Scripts found that spending on drugs that treat inflammatory conditions such as arthritis rose 25 percent in the last year alone. The annual cost of treating the nation’s RA sufferers is expected to reach $9.3 billion by 2020 – a 45 percent jump from 2013.

For a 45-year-old patient recently diagnosed with RA, the lifetime cost of medication is likely to exceed $1.4 million. Even if that person has 80 percent of their costs covered through insurance, the math works out to $280,000 in copays alone.

There’s something out of kilter when families may be forced to choose between investing in a home or easing a loved one’s pain. Yet that is exactly the sort of Catch-22 some will face if we do not find a sensible way to price drugs.

Americans will never be assured of paying a fair amount for medications until we can all see inside the black box of how those prices are determined. And while transparency from drug manufacturers is in short supply, there are also troubling signs of market manipulation, be it the pay-for-delay schemes used by manufacturers to keep generics off the market or price-boosting to reap short-term gains as lower-cost ‘biosimilars’ emerge. As RA biosimilars near approval, Amgen raised the price of Enbrel three times in 2015.

Of course, RA drug prices are just one example. One in 11 Americans suffers from diabetes, and related medication spending is expected to rise 18.3 percent over the next three years.First-generation drugs treating multiple sclerosis,which originally cost $8,000-$11,000 nearly two decades ago, can now exceed $60,000 per year, while emerging multiple sclerosis treatments are being priced up to 25-60 percent higher than existing ones without offering significant improvements in care.

Ultimately we all pay the price. In fact, the Express Scripts report found that spending on drugs for inflammatory conditions such as RA cost all insured Americans an average of $89 each last year.Consumers might have difficulty keeping up with their out-of-pocket expenses, as health plans struggle to keep premiums affordable while providing their members the drugs they need. Hospitals and physicians cope with the consequences if patients skip doses and end up with complications. In the long run, employers very well may be forced to cut other benefits to meet rising drug prices, and the federal government will see additional strain on Medicare, Medicaid and insurance exchange subsidies.

Simply put, the indefensible increases in drug prices crowd out other priorities,such as groceries or investments in education.

Many hospitals and health plans help patients live productively with challenging illnesses, often through medication therapy management in which pharmacists guide patients through a treatment regimen. While such programs can improve patients’ health and manage costs, they are no longer enough to absord the rapid rise in pharmaceutical prices. Health plans are simply running out of ways to provide lifesaving treatments and maintain affordable premiums.

We won’t be able to find solutions for unrelenting drug price increases until we all understand how those prices are actually derived. That’s why transparency is such an important first step.Drug companies should be expected to reveal the percentage of money spent on research and development, marketing and other costs.

Health plans today operate under medical loss ratios (MLR), which require 80-85 percent of revenue spent on medical care. The MLR and state insurance commissions bring a hefty dose of transparency to health plans. Under the Affordable Care Act, any proposed premium increase over 10 percent triggers an automatic rate review. Shouldn’t pharma operate under the same requirement?

And a growing number of hospitals and physician groups are posting cost estimates for a specific treatment in a given facility. Employers and some startups deserve credit for purshing to make medical costs better understood by the average consumer. The drug industry has a similar responsibility to be more forthcoming.

We need more clarity about both the cost and relative effectiveness of drugs, so we can all work together to ensure consumers can access the drugs and treatments they need –without having to mortgage the house.



Ceci Connolly

President and CEO



This blog originally appeared on The Health Care Blog.