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New Survey Finds Massive Variations in Prescription Drug Prices

By Mark Griffith
High Value Health Care, Advocate

Because of our broken health care system, many Americans struggle to afford their necessary, sometimes life-saving prescription drugs. OSPIRG Foundation’s new report,The Real Price of Medications: A Survey of Pharmaceutical Prices found this problem is worsened because common medication prices could vary by nearly 900 percent nationally.  Depending on which pharmacy they frequent, patients could be paying hundreds or even thousands of dollars a year more for their prescriptions

The failure to create a transparent pricing system with real competition, combined with potentially urgent health risks if patients don’t buy their medicine, leads to price-gouging at every step of the supply chain -- from manufacturers, to pharmacy benefit managers (PBMs), insurance carriers, drug wholesalers, and pharmacies. And patients don’t get any healthier when they pay more. Oregon’s legislature should pass new laws aimed at bringing down the high cost of prescription drugs: increased pricing transparency for medications throughout the system; increased competition to provide alternative supplies that make people just as healthy; and safeguards to protect against price gouging.

People living in the United States have access to some of the best medical care in the world, from life-saving drugs to cutting-edge surgical techniques. Despite that, spiraling costs force many Americans to spend more for health while still receiving poor quality care.  High prescription drug costs are at the core of this problem. Insulin prices have nearly doubled in the last decade. This January alone, pharmaceutical companies raised the prices on more than 250 prescription drugs by 6 to 10 percent. One in four Americans who rely on prescription drugs are struggling to afford their medication. Many are forced to make tough choices that undermine their health: splitting doses, skipping does entirely, or otherwise rationing care.

To understand a patient’s experience and how prices can vary, OSPIRG Foundation surveyed more than 250 pharmacies in 11 states for cash prices on 12 common drugs. We found wide variations in prices:

●     Patients could save anywhere from $102 - $5,400 a year (minimum to median prices) based on the pharmacy they purchase their medication from.

●     Prescription drug prices are disconnected from any clear factors, with median prices an average of 892 percent higher than the lowest available price nationally.

●     Switching to the generic alternative of a medication could save patients significantly. For example, switching to the generic version of acid reflux medication Nexium cost $756 less a year on average than the brand name.

●     Brand name drugs did not adjust to competition from generic drugs, even years after they entered the market. For instance, patients who switch from branded Lipitor to its generic could save an estimated $3,927 annually.

●     Large chain pharmacies tend to have higher prices than their small chain or independent counterparts, despite having more leverage in the marketplace. Eight of the 12 drugs in the survey had median prices up to 840 percent higher at large chains, compared to small or independent pharmacies.

WHAT BROKE THE SYSTEM

These results make it clear that failures in the prescription drug system are driving up costs for Americans and our healthcare overall. The three main causes of price gouging are lack of transparency, failure to foster competition, and patients depending on their medicine for their health, or even their lives.

Lack of Competition: There are three clear places in the drug supply chain where monopolization impacts the price: pharmaceutical manufacturers, middlemen such as pharmacy benefit managers and wholesalers, and the types of pharmacies where patients can buy their medications. Brand manufacturers enjoy 20 years of patent protection on approved drugs they develop, and through a variety of strategies they are often able to add even more years of exclusivity for their product. Wholesalers and PBMs further contribute to the problem because there’s often a lack of competition in their marketplace. Three wholesalers and three PBMs control 85 percent and 78 percent of their markets, respectively.  Additionally, large chain pharmacies are expanding their footprint. The five largest pharmacy chains control more than 60 percent of the marketplace. These chain pharmacies are often the only local place for patients to get medication, leaving them few other alternatives.

Lack of Transparency: A lack of transparency throughout the entire drug supply chain further disincentivizes patients from seeking out alternatives that may ultimately create more value. Moreover, it makes it harder for large purchasers such as insurance companies, government agencies, and pharmacies to deliver affordable, high quality prescription drugs for their patients—or identify potential savings.

Lack of Informed Choice: Due to the lack of transparency and clinical research comparing the effectiveness of medications, it is difficult for providers and patients to have a value-based discussion about prescription drug treatment. This leaves patients -- and providers -- armed with little knowledge to make informed choices. Furthermore, the information they do have can be skewed:  providers and patients are inundated with pharmaceutical manufacturers’ targeted advertising in their offices and homes.

WHAT CAN BE DONE

Price Transparency: Public disclosure of prescription drug price information throughout the entire drug supply chain -- from manufacturers to retail pharmacies -- should be required. The public should know how much pharmaceutical companies spend on research, development and marketing, the price and any additional cost at each step in the process, who receives coupons and rebates, and reimbursement levels provided to the government, insurers, pharmacies and patients. This level of transparency will explain high prices and help people devise solutions. In addition, this information will allow patients and doctors to make a value-based decision about quality of care and medication affordability and allow consumers to better shop around for more affordable options in their area.

The Oregon legislature passed a comprehensive drug price transparency bill last year, requiring drug manufacturers to justify unusually large price increases.  This year, several bills are under consideration that take further steps to shed light on the forces driving high prescription drug prices. HB 2658 requires drug companies to give advance notice before raising prices, while HB 2961 would require drug advertisements in Oregon to disclose the wholesale price.  SB 872 would increase transparency throughout the supply chain. These important measures represent important steps towards understanding high prices, and break down the secrecy that has allowed price gouging for prescription drugs to continue. We urge Oregon’s legislature to take the next step, and pass these bills in the 2019 session.

Addressing Monopolization and Lack of Competition: Drug manufacturers utilize numerous strategies to extend their drug monopolies as long as possible.  However, even when generic alternatives become available, brand name manufacturers use their power to avoid competition whenever they can get away with it.  OSPIRG Foundation found that the median price for brand-name Lipitor, a treatment for high cholesterol, was 350% higher than the generic Atovastatin, even though the generic has been on the market for seven years.

FDA approved drugs are typically sold in Canada at half the price or less than the price for an identical product in the United States.  One way to increase competition and use market forces to drive down prices could be eliminating barriers to importation, and permitting individuals and states to import lower-price drugs from Canada.  HB 2689 would allow Oregon to engage in the wholesale importation of prescription drugs from Canada for sale to consumers throughout the state. While this is not a permanent solution, it is a proposal that has a real chance to bring real savings to Oregon consumers and the state budget in the near future.  Similar proposals are under consideration in states as politically diverse as Vermont, West Virginia, Florida, and Colorado. OSPIRG urges legislators to take action, and open up the safe importation of FDA-approved medications from Canada in Oregon.

Patent Reform: Patent exclusivity for drug manufacturers should deliver high quality medication that improves patient lives at reasonable costs. But pharmaceutical companies are abusing the patent system by delaying the introduction of generic prescription drugs through a variety of mechanisms.  Examples of this include:

●     Creating a “patent estate” or “patent thicket” where a company will file dozens of patent applications that cover every aspect of the drug’s life, from origin to manufacturing to treatment uses.

●     “Evergreening” patents such as when AstraZeneca changed a single molecule in Prilosec (Omeprazole) to become Nexium (Esomeprazole).   This enabled the company to issue a new patent for the barely modified medication, effectively extending the company’s monopoly on this type of drug well beyond the period granted by the original patent and without new innovation to improve health outcomes.

●     “Pay for Delay” which describes when branded drug manufacturers pay a competitor to delay a generic version of the drug entering the market. The Federal Trade Commission has estimated this tactic costs Americans $3.5 billion a year in higher annual health care costs.

Federal legislation that bans or limits pharmaceutical company’s ability to improperly expand or extend patent protection could reintroduce market competition for high-priced brand names, and allow for prices that better reflect the value of treatment.  Oregon’s congressional delegation has been active in the ongoing debate over potential federal action on drug prices. OSPIRG urges the state’s Senators and Representative to make patent reform a core piece of any comprehensive proposal to handle high drug prices in Congress.

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