Although I’m not referring to the legalization of marijuana in our nation’s capital, I am referring to what some in Congress would like to consider criminal activity by some in the pharmaceutical industry.
I was in Washington DC last week for the Legislative Summit as an Advisory Board member of the Council of Insurance Agents and Brokers (CIAB). Both Hilary Clinton and Bernie Sanders have become outspoken critics of the rising cost of pharmaceuticals. Whoever survives the Republican full-contact octagon will be forced to respond to the Democratic angst over pharmacy inflation.
So, what’s really happening with prescription drug costs?
Price Discrimination
Bernie Sanders is on record as saying people in the U.S. pay more for prescription drugs than anyone else in the world. This is largely true. Other world governments negotiate and/or dictate what pharmaceutical manufacturers can charge. For example: A 30-day supply of Nexium costs $215 in the U.S. while the same drug costs $42 in England. The specialty drug Humira® costs $2,246 per script in the U.S. and $1,020 in the U.K. Pharmaceutical manufacturers charge different prices in different countries. Why? Because they can.
Prescription Drug Price Gouging
Former Turing CEO Martin Shkreli consistently pleaded the 5th amendment last week during his Congressional testimony. He was called before Congress to answer why his prescription drug company increased the per pill price of Daraprim® from $13.50 to $750 after it purchased rights to the drug last year. Valient Pharmaceuticals has also found its way into the news by increasing the cost of Isuprel, which went from $440 per script to $2,700 per script after the company purchased the rights to the drug last year. To make matters worse, the drug cost $50 per script in 2013. That’s easy math (albeit, the numbers are scary) — a $2,650 per script increase since 2013.
Government Stand-down
The federal government legislated its way out of being able to negotiate drug prices for Medicare under President George W. Bush. The Obama administration has continued this prohibition in exchange for Affordable Care Act (ACA) support. As part of the ACA, the pharmaceutical industry pays the federal government an annual industry fee based on market share. The payment might be better categorized as “protection money” because it’s not based on profits like a tax. This year’s payment to the federal government is $3 billion. In exchange for the support of the ACA and for the payments, the federal government has maintained its no negotiation stance for Medicare. Bernie Sanders will force discussion on this issue.
Out of Touch with Reality
A 2015 Express Scripts report included the following quote, “Specialty trend will slow to more sustainable levels, averaging 22.1% over the next three years.” I don’t think that many CEOs, CFOs, or heads of HR believe that annual inflation of 22.1% is either slow or sustainable.
Irrational exuberance leads to market crash, government intervention, or both. The current inflation rate within the pharmaceutical space of employee benefits is not affordable or sustainable. A political campaign needs an enemy from whom the voter needs the government’s protection or vengeance. The insurance world lacks the wisdom and negotiating power to solve this cost crisis. Therefore, I believe the stage is being set for Big Pharma to replace the Wall Street fat cats as domestic public enemy number 1. If you don’t believe me, just google “Martin Shkreli smirk.” This just might become the face on the pharmaceutical most wanted poster.
So, I want to know…do you agree? What are you hearing? What issues are you having with this? I want to hear from you. Comment below and let’s talk!
