Projects of Florida Governor
The current head of Florida has proposed the creation of a special program for the import of prescription drugs from Canada. According to Ron DeSantis, this will save tens of millions of budget funds, enabling the state to direct money to other areas of health care and saving tens of millions of budget funds. The governor is confident that this plan will allow Florida to significantly reduce healthcare costs and channel these funds to other areas that need funding.
To date, the problem of the high cost of drugs is increasingly felt in the United States of America. Sometimes the situation reaches an absurd scale. For example, a Pennsylvania resident has to travel to Canada every 3 months to buy medicine for his son. This man spends $15000 on an expensive drug each year, but if he buys it in the United States, it will cost him $58000. This is a huge difference, and a similar situation is observed in most U.S. states.
Unapproved prescription drugs are not allowed into the United States. But the secretary of the Ministry of Health and Human Services has the right to approve special import programs. It is this rule that the governor of Florida intends to use. Ron DeSantis is sure that the prices of prescription drugs hit not only the pockets of ordinary citizens, but also draw huge amounts of money from regional budgets. Inexpensive drugs from Canada can solve this problem. According to the governor, he discussed his plan with U.S. President Donald Trump, and the head of state supported his idea. In the nearest future, Ron DeSantis intends to apply to the relevant ministry in order to obtain approval for the import of prescription drugs from Canada.
Why Are Drugs in the USA the Most Expensive in the World?
The pharmaceutical industry in the United States has experienced a month of bad news. Over the years, its influence on politics has been very serious. But lately, everything seems to be going in a different direction. In mid-May, more than 40 states filed a lawsuit against large pharmaceutical companies, accusing them of conspiring to artificially raise the price of conventional medicines.
Shortly before, the government of Donald Trump, which, after its campaign, promised to lower the price of medicines, announced that starting in the summer, pharmacies should include prices in their advertising. He also called on manufacturers, health insurance companies, and hospitals to disclose actual drug prices in order to increase competition and therefore reduce costs. The discussion even reached the Congress, where the leaders of large pharmaceutical companies were interviewed in order to identify the reasons for the price increase.
Nevertheless, the American media, such as the pharmaceutical portal Stat, indicate that Trump’s comments were, on the one hand, not very specific, and on the other hand, partially misleading. Meanwhile, according to a recent analysis of the prices of branded drugs for the 7 months of 2018, carried out by the Associated Press, for each price reduction there were 96 price increases. In total, by the beginning of 2018, manufacturers raised prices for 1800 medicines by an average of 9,12%, and many continued to increase prices throughout the year. The study analyzed price changes for 26177 branded drugs according to the Elsevier analytical campaign. The Associated Press also interviewed representatives of 23 major pharmaceutical companies whether they planned to lower drug prices. No one answered in the affirmative. As a rule, manufacturers motivate the increase in drug prices by the need to pay for lengthy expensive research on the development of new drugs, although industry critics dispute this.
Pricing in the US pharmaceutical industry is far from being transparent. Manufacturers usually set high prices on the price list, but then negotiate concessions and discounts with intermediaries such as pharmacy benefit managers (PBMs) to get preferential insurance coverage for their products. Many consumers never see the price list, although rising drug prices are forcing insurers to raise rates. Patients with a high deductible or without insurance often pay the full price for medicines. In this connection, Medicirc and similar services are of huge help, helping find better deals on drugs for when there is a need to pay from one’s own pocket.
Growth has slowed, but prices have not dropped, and such temporary containment of price increases occurs periodically, during the period of elections and increased public attention, but then companies return to their previous policies again.
How Expensive Are Drugs in the US?
According to a Commonwealth Fund study, the price of prescription drugs in the United States is more expensive than in any other country. In fact, the Organization for Economic Co-operation and Development (OECD: https://www.oecd.org/about/) estimates that Americans spend an average of about $1200 a year on prescription drugs, which is the highest drug cost in the world. According to a study by the Harvard School of Public Health, per capita spending in other developed countries ranges from $467 to $938.
The U.S. Pharmaceutical Research and Manufacturers of America (PhRMA), the association, representing the largest pharmaceutical and biotechnology research and manufacturing companies in the United States, denies that Americans tend to overpay. The organization says that international comparisons often collate the price in the United States, which almost no one pays, to artificially low prices set by governments in other countries.
According to PhRMA, these prices do not include frequent discounts negotiated by insurance and the so-called pharmacy benefit administrators (PBMs), a third party that is responsible for lower prices between pharmacists and insurers. There is a unique healthcare system that has various government programs and private coverage options depending on the needs of the patient and solvency. The Florida-based initiatives also include cooperating with canadian pharmaceutical item distributors, which further helps to sink down the prices.
However, civil society organizations have denounced that the stratospheric price of medicines in the United States leaves millions at risk of death. According to an analysis by the Kaiser Family Foundation, about 26,5 million Americans do not have or cannot afford medical insurance, so they will usually have to pay out of pocket for the cost of prescription drugs.
But although about 90% of the population has health insurance that covers most of the costs, this does not mean that patients are exempt from payments. In fact, according to various studies, the final price that you need to pay in pharmacies – the so-called deductibles and copayments – means that many people prefer not to buy medicines, but to travel abroad to buy them, or to take a lower dose than indicated.
Insurers to Blame
PhRMA is ultimately responsible for price increases for insurance companies. So, while manufacturers set the price list for branded medicine, more than 1/3 of the cost is returned to payers and the supply chain. Insurers negotiate big discounts, but do not share them with patients who pay deductible or copayment for their medicines. Ultimately, it is the insurer who determines how much you pay for drugs from your pocket.
In the United States, prices are set at the level of such developed countries as Germany, France and Japan in order to encourage manufacturers to bring their products to the market faster, which is entirely in the patient’s interests, PhRMA emphasizes. As a result, American patients gain access to new cancer drugs 2 years earlier than in other developed countries.
PhRMA also expresses its disapproval of the Centers for Medicare & Medicaid Services (CMS) plans for the introduction in spring 2020 of the International Pricing Index Model until the spring of 2025. With this tool, CMS is going to regulate costs, simultaneously assessing its impact on beneficiaries’ access to medicines and the quality of their medical care. PhRMA, after conducting a corresponding survey, argued its categorical rejection of the new model:
- 93% companies said they risked a decrease in investment in drugs that they intend to extend the effect of this model (mainly biological drugs);
- 76% companies reported that the innovation will seriously affect the ability to continue and initiate future research projects;
- 69% representatives of companies expect a significant reduction in research and development costs in oncology;
- 65% companies express concern about the need to reduce staff in the near future, stop production facilities and reduce expansion plans;
- 87% institutions said that gene and cell therapy projects would be affected.
About 30 pharmaceutical companies, including giants such as Novartis AG and Bayer AG reversed the decision made under pressure from the Trump administration and unfroze drug prices. Such market leaders as Allergan, GlaxoSmithKline, Amgen, AstraZeneca and Biogen also raised the bar. The US Department of Health (HHS) has proposed a number of measures aimed at lowering prices and organizing more discounts agreed upon by medical insurers for patients. But these measures will most likely not help consumers in the short term and will not give government health authorities direct authority to negotiate or regulate drug prices.
Requests and public criticism did not work. The market participants now expect even more growth in 2019 than in previous years. Pfizer Inc canceled the planned price increase after President Trump tweeted that the manufacturer should be ashamed and that his administration would respond to the price increase. Then Pfizer said it would postpone the increase until January 2019 in order to support the administration. This move by Pfizer has prompted many industry peers, including Bayer, Novartis, Allergan, AstraZeneca, Amgen and Merck, to follow the lead of the pharmaceutical giant.
The growth in prices for medicines of the 20 largest manufacturers slowed down in the second half of 2018, despite the fact that before that, companies had raised prices by more than half of the items. However, some manufacturers went to various tricks. So, Merck cheapened only those drugs that urgently needed to be sold: that which was not in demand or ceased to be exclusive.
Novartis plans to raise prices for more than 100 items, with an increase in the range from 4,5% to 10%. More than $20 billion in Novartis revenue is expected to be on this year’s drug list. The list also includes Diovan, the proprietary version of Valsartan’s blood pressure medication, which is currently in short supply for other versions, after being discovered as potential carcinogens in active ingredients made in China. This led to mass product reviews.
According to the company, over the past three years, net price reductions for business in the US have ranged from 2% to 2,7%. Bayer has filed a notice with California agencies about an increase in the price of six of its drugs since January, most of them contraceptives. The increase will mainly be 5%. Bayer said the wholesale price of the company’s products in the US did not reflect what most consumers pay, and that the price increases are expected to be offset by higher discounts and bonuses.
Fight of Mediators
What PhRMA agrees with is that the president is the need to limit the unfavorable role of intermediaries – RVM. Without revealing specific measures, in May 2018, he announced a new course for the largest action to reduce the cost of prescription drugs for the American people ever. D. Trump sent them an unambiguous signal about elimination of these intermediaries that have become quite wealthy.
According to Business Insider analysts, currently about 70% of the U.S. pharmaceutical market is controlled by 3 companies – PBM, namely CVS Caremark, Express Scripts and OptumRx. Thus, Express Scripts, the largest independent PBM, reached a turnover of $100 billion.
Pharmacists were also criticized by the president in connection with the activities of RVM, as the latter enter into transactions with pharmacies, providing for the primary recommendation of certain drugs. The ever-increasing health care costs are behaving like a hungry tapeworm in the U.S. economy says E.W. Buffett, managing director of Berkshire Hathaway in a joint press release with representatives of two other major and most influential companies in the US (Amazon.com and JPMorgan Chase) regarding their opening of a non-profit enterprise to organize medical care for their employees.
The U.S. president also criticized the governments of other countries that literally blackmailed American companies demanding lower prices. According to him, many states are forcing U.S. pharmaceutical manufacturers to provide their medicines at a lower price, which increases the burden on American patients. The PhRMA’s recent appeal to the Office of the United States Trade Representative (USTR) is devoted to the same issue.
Despite the sharp tone of the president’s remarks, the American media and market experts believe that the government does not plan decisive steps and does not want to reduce the price of medicines by direct measures.