On June 7, 2021, the U.S. Food and Drug Administration approved Aduhelm (aducanumab), an Alzheimer’s medication developed by Biogen. While reservations about the drug had been expressed at various stages of its development, its approval represented one more sign of the innovation that is sweeping the prescription drug market.
Bardoxolone, which Reata developed for chronic kidney disease, was granted an Orphan Drug designation in April, and Mirati’s adagrasib, for certain cancers, was granted a Breakthrough Therapy designation in June. Novartis hopes to see its cholesterol drug inclisiran reviewed later this year, and other companies will soon be seeking approval for medications developed for autoimmune diseases, psoriasis, and Duchenne muscular dystrophy.
While each of these drugs represents potentially exciting breakthroughs, their emergence has also brought added attention to the issue of elevated drug prices. Consider, for example, Aduhelm, which costs a staggering $56,000 per year, most of which will be absorbed by Medicare and its beneficiaries, given the fact that Alzheimer’s disease is far more common among older adults.
At the same time, the arrival of these new medications underscores the structural problem spread between Medicare and commercial reimbursement. While Medicare absorbs risk, commercial payers limit risk. Payers, as a result, are conflicted: They make more money when healthcare costs increase, not less, resulting in an old question: Who advocates for the purchasers and patients?
Particularly concerning are spikes in the cost of vital drugs such as insulin. One study showed that a single vial of the medication rose from $21 in 1999 to $332 in 2019, a 1,000 percent jump. Of the nation’s 30 million diabetics, 7.4 million require insulin, and fully one of every four have resorted to rationing the drug, which is regarded as a dangerous practice.
Some Options to Consider
President Joe Biden prodded Congress to find a solution to the issue of rising prescription-drug costs during a White House address on Aug. 12, 2021, and his predecessor, Donald Trump, repeatedly addressed the matter during his administration. There has, however, been little progress. Half of all American adults, including nine of every 10 seniors, use such medications, and on average Americans spend $1,300 a year on prescriptions, the highest rate in the world. Moreover, drug prices in the U.S. have risen a staggering 33 percent since 2014.
In his address, Biden noted that while Medicare has been empowered to negotiate prices for all other healthcare services, that is not true in the case of prescription drugs. As a result, he urged Congress to enable Medicare to negotiate prices for all drugs, while still allowing for the costs associated with research and development. That, he said, would still enable the pharmaceutical companies to realize a “significant profit.”
Biden has also proposed capping the amount of money those 65 and older pay for prescription drugs at $3,000 a year. As mentioned, 90 percent of seniors require such drugs, and of those over half use four or more.
Trump, for his part, announced on Nov. 20, 2020, a “Most Favored Nation” policy for 50 high-priced Medicare Part B drugs, which would tie their pricing to the lowest rate paid for those medications in other industrialized nations. He also proposed the removal of “safe harbor” protections from drugmakers’ rebates to benefit managers. Both measures are, however, expected to face legal challenges.
In addition, the Elijah E. Cummings Lower Drug Costs Now Act — introduced in 2019, blocked in the Senate then but reintroduced in April of this year — calls for the U.S. Department of Health and Human Services to negotiate drug prices with pharmaceutical companies. One study concluded that if implemented, this legislation would result in healthcare savings of $195 billion for employers and $61 billion for employees.
The inability of lawmakers to enact meaningful change on this front has led to a bevy of enterprises producing less expensive medications on their own. PBS reported that these organizations tend to be hospital groups, startups, or nonprofits and that to date they have developed drugs — mostly generics — for cancer, diabetes, and inflammatory disorders. Some 50 percent of U.S. hospitals have made purchases from these organizations.
In addition, other measures can (and should) be enacted, as suggested in one journal:
- Patent reform: Pharmaceuticals are currently patent-protected for 20 years. A more realistic span would be seven to 10 years, to encourage the development of generics and biosimilars.
- Accelerated development of generics and biosimilars: A reciprocal agreement among the U.S, Canada, and the nations of Western Europe would simplify the approval process for such drugs and make them more widely available.
- Nonprofit generic companies: Such companies, under the control of governments or philanthropic organizations, would reduce drug shortages.
- Compulsory licensing: Such a measure would serve to lower prices when negotiations with pharmaceutical companies break down or are subject to extended delays.
- Value-based pricing: This speaks to the aforementioned desire to negotiate drug prices, something that is common in developed countries other than the U.S. The suggestion here is that a body, whether governmental or otherwise, be authorized to set ceilings on drug prices or to use an international reference price to do so.
No matter the approach, the need for reform is clear. And that need has become even clearer this year, with so many new drugs in the pipeline.