Why prescription drugs cost twice as much in U.S. versus other advanced nations ― and what might be done about it

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Can Rx monopolies be tamed?

Why prescription drugs cost twice as much in U.S. versus other advanced nations ― and what might be done about it

Aug. 23, 2016
prescription drugs

Americans, on average, pay more than double for prescriptions compared to other industrialized nations ― largely due to drug monopolies, Harvard researchers contend.

Stock photo by FeaturePics

Here’s one Rx for slashing runaway drug costs: get the monopoly money out of U.S. health care.

That’s the finding of a new study by Harvard researchers who blame “government-protected monopolies” granted to drug makers for fueling the surge in prescription prices ― a trend that’s hitting American patients hardest of all.

In the U.S., spending on prescribed drugs exceeded $850 per capita in 2013 ― compared to $400 for the rest of the industrialized world, reports the study, published Tuesday in The Journal of the American Medical Association. As a result, prescription meds now comprise nearly 20 percent of total health care costs, jeopardizing the wellness of many patients who can’t afford their doctor-ordered drugs, researchers noted.

“Unlike … nearly every other advanced nation, the U.S. health care system allows manufacturers to set their own price for a given product,” wrote lead author Dr. Aaron S. Kesselheim, an associate professor at Harvard Medical School and a pharmacoeconomist at Brigham and Women’s Hospital. He and colleagues analyzed 12 years’ worth of peer-reviewed medical and health-policy literature on the topic. 

By exploiting federal protections against competition, drug makers can inflate brand-name drug prices, the study asserts. For example, when the U.S. Food and Drug Administration approves small-molecule drugs (like oral chemotherapies), manufacturers get five to seven years of market exclusivity before generic competitors can be sold (although there are clever workarounds that extend this exclusive period, such as “pay-for-delay” and “product hopping”). Under the same FDA umbrella, new biologic drugs (like the monoclonal antibody Soliris) are protected from competition for 12 years.

And nobody feels that pinch harder than cancer patients.

The price of cancer drugs has escalated by an average of $8,500 per year during the last 15 years, and the cost of drugs for each additional year lived by a patient spiked from $54,000 in 1995 to $207,000 in 2013, according to a 2015 commentary published in the journal Mayo Clinic Proceedings. It was co-authored by, among others, six scientists from Fred Hutchinson Cancer Research Center, including health economist Dr. Gary Lyman.

Dr. Gary Lyman

Dr. Gary Lyman

Fred Hutch file

“Cancer care [cost] has risen more rapidly over the past couple of decades than other health care expenditures, and cancer drug prices have increased the most,” Lyman said via email. He is an oncologist and co-director of the Hutchinson Institute for Cancer Outcomes Research, or HICOR. A 2015 study of cancer-drug costs, written by HICOR director Dr. Scott Ramsey, helped inform the new Harvard findings.

“This is putting an enormous financial burden on patients, families and the health system. It is also interfering with access to care, and may throw patients in bankruptcy, which appears to impact on patient outcomes, including survival,” Lyman said.

Across the pharma landscape, tales abound of consumers stretched financially by sudden price hikes.

EpiPens — portable devices packed with life-saving epinephrine to stop allergic reactions — now cost $365 per two-pack, unleashing national criticism this month. A decade ago, two EpiPens cost $56. That 500-plus-percent price increase even prompted so-called “Pharma Bro” Martin Shkreli to criticize the manufacturers during an interview with NBC News

Last year, Shkreli abruptly elevated the price of the malaria and HIV medicine Darapim by 5,000 percent, from $13.50 to $750, sparking harsh questioning from the House Committee on Oversight and Government Reform.

Patients with a certain type of blood cancer also are facing a pocketbook problem. In 2015, the FDA approved daratumumab, a promising drug for multiple myeloma. It hit the market costing upwards of $135,000 for one year of treatment.

Price busting 

What can be done?

In their paper, the Harvard researchers suggest tougher requirements for granting and extending exclusivity rights. (The Harvard study was supported by the Laura and John Arnold Foundation and the Engelberg Foundation.) The authors also back the idea of enhancing competition by ensuring quicker availability of generic drugs. And they propose that more education about drug costs and value-based prescribing be integrated into physicians' continuing education because, they said, many doctors don't know the costs of the medications they're prescribing. 

“Obviously, we agree with both the problem and most of the potential solutions proposed by the authors,” Lyman said. “We need a multipronged approach to this problem. A single solution is unlikely to entirely deal with it.”

For example, the Centers for Medicare & Medicaid Services, CMS, which oversee Medicare and Medicaid, must be allowed to negotiate drug prices with industry ― as is the rule in all other major markets globally, Lyman said. On that same point, the Harvard group recommends enabling Medicare to negotiate drug prices for individual Part D plans (also known as the prescription drug benefit) and to exclude coverage for pricey products that add limited medical effect.

Patient trade-offs

“Available treatments have to be assessed in terms of clinical meaningful benefit, harms (toxicity) and cost as patients often have choices,” Lyman said. “Hopefully, the introduction of biosimilars (drugs that aren’t an exact replica of already-approved meds but are therapeutically equal) will increase competition and reduce costs over time.”

But as Lyman and his HICOR colleague Ramsey wrote in a recent JAMA Oncology editorial, any policy changes that are deemed politically viable still will require some tradeoffs, perhaps even lessening patient access to cancer medicines.

And prescription prices are just part of the larger reality of climbing medical costs.

“It’s not just the drugs but also rising use and costs of advanced imaging (such as CTE/PET scans) and the rising costs of hospitalization due to mergers and reduced competition among providers and health systems,” Lyman said.

“It all has created an unsustainable health care environment economically for all of us but especially our patients.”

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Bill Briggs is a former Fred Hutch News Service staff writer. Follow him at @writerdude. Previously, he was a contributing writer for NBCNews.com and TODAY.com, covering breaking news, health and the military. Prior, he was a staff writer for The Denver Post, part of the newspaper's team that earned the Pulitzer Prize for coverage of the Columbine High School massacre. He has authored two books, including "The Third Miracle: an Ordinary Man, a medical Mystery, and a Trial of Faith." 

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