Prescription Drug Costs: In Washington’s Line of Fire

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Ken Perez
Ken Perez

At two recent healthcare conferences run primarily for provider organizations, speakers spent a considerable amount of time highlighting the sharply increased U.S. spending on prescription drugs in 2014 (+12.5 percent versus 2013) and 2015 (+7.8 percent versus 2014)—about double overall healthcare cost inflation for those two years. In 2015, prescription drugs accounted for one-sixth of all the money spent on personal healthcare services. While drug spending growth is expected to moderate in the coming years, the attendees at the conferences were left with the lingering impression that pharmaceutical companies may have gotten away with inappropriate levels of profiteering in recent years.

Of course, that impression was made—and some would say cemented—last year when Martin Shkreli, former CEO of Turing Pharmaceuticals, famously hiked the price of Daraprim, a 62-year-old treatment for parasitic infections, by 5,455 percent overnight from $13.50 a tablet to $750. Similarly, Michael Pearson, outgoing CEO of Valeant Pharmaceuticals, raised by 1,800 percent the prices of two drugs used to treat cancer-related skin conditions: Targretin gel, a topical treatment for cutaneous T-cell lymphoma, and Carac cream, used to treat precancerous skin lesions called actinic keratosis. A 2012 report by Ipsos Public Affairs concluded that the U.S. pharmaceutical sector had a “net negative” favorability score with consumers, and the much-publicized actions of Shkreli and Pearson three years later obviously did not improve the public’s view of pharma.

As expected, the aforementioned price hikes by Turing and Valeant were denounced by numerous presidential candidates, and drug prices became a popular political football. Both former Secretary of State Hillary Clinton and Vermont Senator Bernie Sanders have made lowering prescription drug costs significant planks of their respective policy platforms. They both advocate allowing Medicare to negotiate drug prices with pharmaceutical companies. Sanders goes even further—to the brink of outright drug price controls—pledging to require pharmaceutical companies to publicly disclose information regarding drug pricing and research and development costs—with the obvious implication that there should be some reasonable relationship between the two.

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