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Senate Hearing Targets Rising Out-of-Pocket Patient Drug Costs

The hearing revealed mixed opinions about who is to blame for high out-of-pocket patient drug costs and how to fix the issue.

out-of-pocket patient drug costs

Source: Thinkstock

By Sara Heath

- Tackling high out-of-pocket patient drug costs is a priority for healthcare policymakers and pharmaceutical companies alike, although key stakeholders hardly agree on how to get there.

This and more came to light during a recent Senate Finance Committee hearing featuring prominent pharmaceutical company CEOs. Led by Committee chairmen Chuck Grassley (R-IA) and Ron Wyden (D-OR), this hearing sought to determine how to tackle high drug costs for patients.

Both Senators and each of the CEO witnesses agreed that lowering out-of-pocket drug costs will be essential to supporting patient health.

“America has a problem with the high cost of prescription medicines,” Grassley said in his opening remarks.

“Whether it’s about the EpiPen, insulin, or other prescriptions, in the thousands of letters I’ve received, Iowans have made clear that high drug prices are hurting them,” he continued. “I’ve heard about people skipping doses of their prescription drugs to make them last until the next paycheck. I’m not a doctor, but rationing one’s medicine doesn’t sound like a safe prescription for health and wellness. Others have told me about leaving their prescription on the pharmacy counter because it cost too much.”

READ MORE: CMS Models Target Patient-Centered Benefits Design, Drug Costs

But the path to lower costs will be complicated, as pharmaceutical CEOs put on their defenses and offered an array of industry-wide solutions to the problem.

“Because we are tackling medicine’s most challenging problems, solutions do not come easily or without significant risk,” said AbbVie CEO Richard A. Gonzalez.

The solution lay in altering Medicare Part D pricing formularies, not drug list prices, Gonzalez offered. Medicare Part D beneficiaries should be able to purchase insurance to cover more of their out-of-pocket expenses.

Representatives from Merck & Co, Inc., Bristol-Myers-Squibb, Pfizer, and Sanofi added that new rebate systems should pass along better savings to patients. Additionally, pharmaceutical CEOs recommended value-based reimbursement models, better price transparency, and other payment reforms to reduce patient financial responsibility.

Some companies added that list prices for drugs should not change. This revenue supports research and development (R&D) initiatives, Johnson & Jonson CEO Jennifer Taubert said. At Johnson & Johnson, R&D spending is 86 percent higher than spending for sales or marketing, she boasted.

READ MORE: Patients Support Efforts to Cut Out-of-Pocket Drug Costs for Seniors

AstraZeneca CEO Pascal Soriot echoed those sentiments.

“First, we are a science-led organization, as reflected in our continued investment in R&D and our success in introducing new treatments,” he said. “Continuing to develop treatments that deliver long-term benefits to patients and the overall health of the US population requires society’s commitment to supporting investment in innovation through purchasing our medicines for the duration of patent protection at a responsible price that allows for the recoupment of the investment and risk associated with innovation.”

Giovanni Caforio, MD, CEO of Bristol-Myers-Squibb came out against current efforts to cap list prices, including the Trump Administration’s proposed International Pricing Index (IPI), which would set list prices equal to those seen in other developed countries.

“We do not believe the US should adopt policies that stifle innovation in other countries, which could reduce a patient’s access to new medicines,” said Caforio. “Outside of the US, reimbursement of new medicines can often take more than two years.”

But Wyden and Grassley countered those arguments, insisting that the list price has a direct impact on patients.

READ MORE: How Out-of-Pocket Drug Costs Impact Patient Treatment Access

“For a patient taking a drug that has no competition, the list price is meaningful,” Grassley asserted. “For seniors on Part D who are paying co-insurance as a percentage of list price, the list price is meaningful. For people who have high deductible plans and pay thousands of dollars towards list price, the list price is meaningful. For pharmacy benefit managers, providing drugs with a high list price can be more attractive than providing a less expensive drug. Therefore, for taxpayers, the list price is meaningful.”

Additionally, the pair lambasted pharmaceutical companies for their disproportional R&D spending.

“There is a balance between incentivizing innovation and keeping prices affordable for consumers and taxpayers,” Grassley said.

And pharmaceutical companies are not striking that balance, Wyden said. For example, Bristol-Myers-Squibb spent $11.5 billion on dividends, stock buybacks, marketing, sales, and administrative costs. This is about triple the amount it spent on research and development, Wyden reported.

Other pharmaceutical companies are increasing their list prices at astronomical rates, he continued. AbbVie boosted Humira list prices from $19,000 to $38,000 in a 12-month period. Sanofi’s insulin vials went from about $100 each to just under $300 between 2012 and 2018, and is slated for another increase in 2019, Wyden said.

This all comes as drug companies make what Wyden suggests are empty promises about freezing drug costs.

“Pfizer gets first prize for emptiest gesture on pricing in 2018,” Wyden said. “After stern Trump tweets last year, Pfizer said it would temporarily freeze prices. But once the president got his splashy headlines, his gaze turned elsewhere, and Pfizer’s former CEO told investors it was back to ‘business as normal.’”

Ultimately, the industry could benefit from some pricing simplification, Grassley stated.

“Without a doubt, drug pricing is a complex issue. But I think we should all be asking: Should it be so complex?” Grassley concluded. “We cannot allow anyone to hide behind the current complexities to shield the true cost of a drug. And, we shouldn’t turn a blind eye to industry practices that thwart the laws and regulations designed to promote competition and generic drug entry in the market.”

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