March 5, 2015 at 5:00 am ET
Americans need a medication to keep them from fainting over the cost of new medications these days. But the increases in drug costs are no accident. Nor is the pharmaceutical industry’s attack on a drug discount program that helps the poor which will get top billing at an upcoming House Energy and Commerce Committee hearing.
Most of us assume that 1) drug manufacturers compete in a free market, and 2) they spend most of their profits on research to find new cures. Unfortunately neither of these assumptions reflect reality.
By reformulating and reintroducing drugs with new monopoly protections or by shifting development to specialty and biologic markets with less effective generic competition, drug manufacturers are increasingly insulating themselves from the real price competition that is the bedrock of any free market. And when it comes to investment in research, leading drug companies spend up to twice as much on marketing as they do on research and development, according to GlobalData.
Bearing these realities in mind, it is no surprise that Americans pay the highest prices for medicines in the world. For example, Gilead Science’s newest hepatitis C drug Harvoni costs an eye-popping $94,500 for a course of treatment. And what about the cancer drug Gleevec which sets Americans back $90,000? Or the AIDS drug Fuzeon, which runs $25,000 a year – for life?
Overpriced drugs like these are generating a tsunami of unsustainable costs that is squeezing patients and threatening the financial integrity of federal programs and the overall health care system. But instead of rising to meet this challenge, the industry has mounted a full-bore lobbying campaign to gut a little-known drug discount program, called 340B.
Why? The 340B program requires manufacturers to sell medicines at reduced prices to health care providers who treat high numbers of low-income and other underserved patients. Savings from the program fund medicine distributions to the needy as well as HIV/AIDS, diabetes, and cancer clinics and primary care centers in the community.
To be certain, 340B is no substitute for a competitive prescription drug market that puts downward pressure on prices across the board. But for entities that serve the most vulnerable, it does provide a safe haven from the worst overpricing practices.
Drug companies are not fighting to discontinue the 340B program’s discounts in order to prevent the bankruptcy of the pharmaceutical industry. 340B drugs account for just 2 percent of the $329 billion annual U.S. pharmaceutical market. Rather, the anti-340B campaign is fundamentally a means to distract lawmakers from the fact that current drug prices are unsustainable.
But facts are stubborn things. State Medicaid officials with real concerns that drug prices will bankrupt their programs are pushing Congress to stave off rising prices. Private health insurance carriers and large employers are equally concerned. And AARP and Consumers Union are sounding the alarm about the impact on consumers.
Drug manufacturers should be working with these stakeholders to keep overall prices within the realm of sanity, not targeting a drug discount program for the poor.
John Rother is President and CEO of the National Coalition on Health Care