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The sequential escalation of drug prices threatens patients and our health care system

The sequential escalation of drug prices threatens patients and our health care system

By Andrew L. Concoff, MD, FACR, CAQSM

It has been widely recognized that the consistent and rapid upward spiral of costs of specialty pharmaceuticals used to treat autoimmune diseases in the U.S. are indicative of a failed market. It is no coincidence that three such medications — adalimumab, etanercept and infliximab — are among the top five prescription drugs in the U.S. when ranked according to acquisition costs.

As further indication of the impact of such medications on expenditures, although the manufacturer of adalimumab touted its restraint in increasing the cost of the drug by only 8.7% in 2018, the resultant increase in cost represented the largest increase in expenditure for any single drug in the U.S. last year.

The lack of transparency into the Byzantine web of confidential, internally-negotiated, to-and-fro monetary exchanges between stakeholders in the specialty drug supply chain when coupled with an unfettered, anti-competitive formulary tiering system for these medications has provided cover for any among its numerous, middlemen who have decided, without meaningful increases in their own expenditures, to progressively and less abashedly increase their take year after year. The result has been the sequential escalation in the overall price for each of these drugs, particularly extremely among the industry leaders.

While it has been said that nothing but mold grows in the dark, given the relationship between the lack of transparency of the specialty drug supply chain and the precipitous rise in the drug prices it delivers, to this list we must certainly now add autoimmune specialty drug prices.

The lack of effective, countervailing, downward price pressure and regulation, has translated into free rein for price increases with an overt absence of any significant threat of public or governmental recognition, recrimination or retribution among those who greedily expand their share of the profits from these medications.

Whenever public outcry or efforts at oversight do arise, the cacophony of contradictory public-facing statements and finger pointing that are aimed at one another by the various stakeholders is reminiscent of the zebras on the savannah befuddling a predator with the dizzying array of their interweaving stripes, hiding their own identity among the chaotic movement of the herd. Such behavior combined with the proprietary nature of the various, negotiated rebates and other payments, notably including those of the PBMs, mask the contribution of any individual stakeholder to that year’s increase in yearly drug price.

In the end, patients often suffer the consequences, particularly those enrolled in Medicare Part D. Such patients are responsible for out-of-pocket costs that are calculated based upon pre-rebate, list prices. This calculation results in a greater financial burden that threatens the use of — and adherence to — their medications. However, into this dark and depressive scenario has comes a bit of light.

The recent article in Healio (Price increases largely to blame for $3 billion spending hike on biologic DMARDs) by McCormick et al. has sought to provide some initial semblance of clarity by characterize the categorical source of the dramatic rise in Medicare and Medicaid spending on biologic DMARDs and a related small molecule, the JAK inhibitor, tofacitinib, collectively referred to as targeted immunomodulators (TIMS).

McCormick et al applied decomposition analysis to annual spending from public-payer claims for 10 TIMs from 2012 to 2016 to determine the degree to which such increases are alternatively attributable to increases in drug price, number of patients treated, intensity of treatment per individual, or treatment duration. The results are nothing short of appalling.

The majority of the doubling of costs for these 10 TIMs, rising from $3.8 to $8.6 billion per year, were a direct result of the increase in after-market drug prices. Adjusted for inflation, 57% of the five-year, $3.0 billion increase in Part D spending was solely attributable to price increases, while the more palatable expansion in the population treated was responsible for just 37%.

Adjusting for time-accelerated rebates only minimally affected the drug price contribution to the increased spending to 54% of the total. Similarly, in Part B, 50% of the increase in overall spending was attributable to higher drug prices. While overall costs were lower under Medicaid, the relative contribution of drug price again dwarfed the other explanatory categories.

The authors specifically emphasize that these increases in drug price represent a significant and escalating threat to taxpayers and beneficiaries. Indeed, it is hard to imagine that the rate of price escalation is sustainable, for example, with wholesale drug expenditures increasing from 2012 to 2016, for the two industry-leading TIMs, adalimumab and etanercept, by 180% and 61%, and the drug price escalating by greater than 80% for each over the same time period. Although the advent of the biosimilar era was initially thought to hold promise to mitigate this issue, the uptake, and resultant cost impact, has been disappointingly limited to date.

McCormick et al. also specifically emphasize that these dramatic increases in cost are unburdened by any relationship to value — and, perhaps, herein lies the solution. Explicitly linking the price of each TIM to the outcomes it provides on the individual level in so-called “value-based drug pricing” arrangements holds great potential restrain the rate of rise of the price of TIMs. Although this approach has been effective in other specialties, it has not yet been applied to any significant degree in rheumatology.

While value-based pricing is notoriously a scenario wherein the “devil lies in the details,” the proper combination of innovative payers, invested providers, interested patients and impacted pharmaceutical companies, who dare to shine a light on elements of the process have an opportunity to revolutionize the approach to TIM pricing and, thereby, control the threat imposed by the unrestrained expansion of their cost to our patients and our health care system.

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