Sudden price spikes in older drugs are putting patients at risk of going without vital medicine. A new report by the U.S. Senate Special Committee on Aging uncovered an insidious business model that’s leading to monopoly pricing power and astronomical price increases.
Berna Heyman, a retired librarian who has Wilson Disease testified how she was a victim of obscene price gouging. Her annual co-pay for the drug Syprine rose from $700 in 2013 to $10,000 in 2014, with her drug plan paying over $260,000. When she and her doctor applied for Valeant pharmaceutical’s patient assistance program, she was denied financial assistance from the manufacturer because she was on Medicare.
“The drug is essential,” Heyman testified. “People can die without it… The drug company deserves the right to make a profit. But it is unconscionable that one company, Valeant, can hold Wilson Disease patients hostage,” she said in her testimony.
Wilson Disease can cause organ or cognitive failure. Because no equivalent for Syprine exists, Heyman was forced to try an alternative treatment, Galzin, which costs her about $480 per year. Heyman said the change was made only under duress, because it does not remove the fatal build - up of copper in her system — just absorbs it — and the long - term consequences of the switch are still unknown.
According to the Senate Special Committee on Aging some drug companies share this common business model which is leading to huge price spikes:
- Sole source drugs. The companies with monopoly pricing power acquire sole - source drugs for which there is only one manufacturer, and therefore face no immediate competition.
- Gold standard. Companies acquire drugs considered the best available for the condition they treat, ensuring that physicians would continue to prescribe it even if the price increased.
- Small market. The companies controlled drugs through a closed distribution system or specialty pharmacy where the drugs could not be obtained through normal channels or other means.
- Price gouging. The companies engaged in price gouging to maximize profits of drugs that had been off patent for decades. None of the companies investigated had invested in the research or development to create or improve the drug.
A recent report by the Office of Inspector General of the Department of Health and Human Services has also found that high price drugs are affecting federal spending on drugs and increasing federal payments for Medicare Part D catastrophic coverage. Once people hit the catastrophic level of Part D coverage, beneficiaries pay a 5% coinsurance for drugs while the Federal Government pays the vast majority of the remaining costs. But there is no limit. The Inspector General’s report said that federal payments for catastrophic coverage in 2015 exceeded $33.2 billion in 2015, which is more than triple the amount paid in 2010 ($10.8 billion). Incredibly, only ten high-priced drugs accounted for nearly one-third of all drug spending in catastrophic coverage in 2015.
President Trump recently said that the United States has to create new bidding procedures for the drug industry. TSCL believes that new bidding procedures alone would not give Medicare the power to bring down prices on drugs when a company holds a monopoly on the only drug available to treat specific conditions. TSCL supports giving Medicare greater power to negotiate the price of drugs like it does for all other services covered under Medicare, and making it easier to import less expensive FDA approved drugs.
Sources: “Sudden Price Spikes in Decades-Old Prescription Drugs,” Testimony of Berna Heyman to the U.S. Senate Special Committee on Aging, April 27, 2016. “High-Price Drugs Are Increasing Federal Payments For Medicare Part D Catastrophic Coverage,” Daniel Levinson, Department of Health and Human Services Office of Inspector General, January 2017.