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The Dose

Welcome to The Dose, which tackles the business and economics inside the turbulent world of health care and life sciences in Indiana. Your host is John Russell. To contact me call 317-472-5383.

The report Big Pharma doesn't like at all

March 11, 2016

In case you missed it, the pharmaceutical industry took a beating last year over drug prices.

Remember Martin Shkreli, the grinning, villainous poster child for pharmaceutical greed, who raised the price of a lifesaving drug, Daraprim, by 5,000 percent overnight?

And Valeant Pharmaceuticals, which raised the price of two heart drugs by 500 percent and 200 percent?

And Questcor Pharmaceuticals, which raised the price of a multiple sclerosis drug from $1,235 a vial to more than $29,000?

By early fall, the issue of soaring drug prices reached a boiling point, sparking front page headlines, Congressional hearings, and denunciations by nearly every presidential candidate.

Well, get ready for more.

This week, the Department of Health and Human Services issued a report that is sure to throw more fuel on the fire.

It says that prescription drug spending in the U.S. is rising and is projected to continue rising faster than overall health spending in coming years.

Drug spending rose by a “remarkable” 12.6 percent in 2014, following unusually slow growth of about 2 percent a year between 2008 and 2012, the report said.

Last year, prescription drug spending last year in the U.S. was estimated at $457 billion, or about 16.7 percent of overall personal health care services, the report said. That’s up from $377 billion, or 15.3 percent of all personal health care services in 2013.

Some of it was due to population growth, and some of it to an increase in prescriptions per person.

But much of it -- about 30 percent -- was due to price increases on existing drugs or a general shift toward more expensive prescriptions, the report said.

And such increases have real-life consequences. “The rising cost of prescription medicines is putting pressure on public and family budgets in the United States,” said the report, issued by the HHS’ Office of the Assistant Secretary for Planning and Evaluation.

The 16-page report uses low-key language, and even the title ("Observations on Trends in Prescription Drug Spending”) nearly causes a yawn.

But the charts and tables could give the public and pharmaceutical drug critics the ammunition they need to keep the issue alive.

Not that doing so will be hard. Nearly three-quarters of people surveyed last summer in a Kaiser Health poll thought the cost of prescription drugs was unreasonable. A Gallup poll in September ranked the pharmaceutical industry 23rd out of 25th in public esteem, above only oil and gas and the federal government.

And the federal government is far from the only one tallying up the numbers. PricewaterhouseCoopers said the cost of branded drugs outpaced inflation for the 10th consecutive year in 2014, and spending on complex specialty drugs, like those for cancer and hepatitis C, increased by nearly 27 percent.

And nearly every consumer group, from Public Citizen to Consumers Union, has attacked or satirized Big Pharma in recent years.

The issue resonates loudly in Indiana, a leading center of the nation's life science industry, where scores of companies research, manufacture and sell pharmaceutical products and supplies.

John Lechleiter, CEO of Indianapolis-based Eli Lilly and Co., said last fall that while there have been “individual huge drug price increases,” the cost of drugs is rising very slowly and remains a small part of overall U.S. health care spending. He believes drugmakers are getting a bum rap, and that the industry is an easy target for politicians.

Meanwhile, in West Lafayette, the not-for-profit Chao Center for Industrial Pharmacy & Contract Manufacturing last year cut the price of a drug for multi-drug resistant tuberculosis roughly 90 percent after re-acquiring rights to the medicine from Rodelis Therapeutics, which had pushed up the price from $20 to $360 a capsule.

The drug industry’s trade association, the Pharmaceutical Research and Manufacturers of America, is taking sharp issue with the HHS report, saying it “ignores the tremendous value medicines provide to patients.”

“Patients are living longer, healthier lives thanks to innovative medicines developed by biopharmaceutical companies,” PhRMA said. “The cancer death rate in the U.S. has fallen 22 percent since its peak, new hepatitis C therapies cure more than 90 percent of treated patients and the death rate from cardiovascular disease has dropped 46 percent since 1991.”

It also pointed out that spending on prescription medicines is the same share of health care spending now as it was in 1960.

This week, however, industry leaders seem uncertain how to respond to the continuing blizzard of criticism. Meeting in Washington at an industry conference, pharmaceutical executives were trying to figure out how to get away from the image of bad guys. (One headline: "Drug makers peer out from the bunker.")

The price of drugs has gripped the public like never before, and the industry is on the defensive.

The new report seems unlikely to change that.
 

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