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Senate Investigates Out-of-Control Drug Prices

Health-care experts describe ‘broken system’

A Senate investigation into drug-price hikes at four companies kicked off on Wednesday, December 9, with health-care specialists testifying that they are powerless to manage out-of-control prescription costs. The hearing launched the Special Committee on Aging’s investigation into the soaring prices of old drugs, including the recent overnight jump in the price of pyrimethamine (Daraprim, Turing Pharmaceuticals) from $18 to $750.

The hearing comes on the heels of a recent Senate investigation into the pricing of the $84,000 hepatitis C treatment sofosbuvir (Sovaldi, Gilead Sciences), and at a time when presidential candidates on both sides of the aisle have denounced price-gouging by the pharmaceutical industry.

A recurrent theme at the hearing, led by Sen. Susan Collins (R-Maine) and Sen. Claire McCaskill (D-Missouri), was that competition has dried up, resulting in a broken system that allowed some older drug prices to spiral out of control in ways that called government intervention.

Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health, urged greater scrutiny of mergers and acquisitions that reduce competition in the generic industry. He suggested a fast-track review of applications for generic drugs when there is no competition.

He also described possible solutions to the practice of “marketing the spread” –– when the sticker price of a drug is set very high, and then undisclosed rebates are negotiated with the pharmacy. That secretive process, he said, leads insurers to overpay for drugs because they are basing what they pay on the sticker price and not on the real price that the pharmacy pays. If everyone knew the real price of a drug, transparency could be a powerful tool toward containing spending, Anderson said.

Mark Merritt, president of the Pharmaceutical Care Management Association, a trade group that represents pharmacy benefit managers, argued in prepared testimony that price controls or even limits on the amount of costs that patients pay could be harmful. Limiting what patients pay may seem to benefit sick people, he argued, but it actually opens the door for greater price increases as the system continues to shoulder the brunt of the costs, through increased premiums.

Erin Fox, director of the Drug Information Service at University of Utah Health Care, described the effect of a single price increase on her institution. Price increases of Nitropress (sodium nitroprusside injection) and Isuprel (isoproterenol hydrochloride injection), two heart drugs acquired by Valeant Pharmaceuticals this year, would lead to nearly $2 million more in spending if the hospital continued to use the same amount of each drug as the previous year.

“Our physicians are extraordinarily frustrated by having to make decisions about whether to use these critically important but extremely expensive medications in emergency situations, especially when they have been using these drugs for years,” Fox said.

Source: Washington Post; December 10, 2015.

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