Consumers have called for the government to do more to combat high drug prices. But is a move toward a more European style of negotiating for lower drug prices the answer?
A recent poll from the Kaiser Family Foundation noted that a majority of consumers want the government to take action on soaring drug prices. Reports and studies have shown that prices for specialty drugs that treat serious diseases are rising for no reason. For example, first-generation multiple sclerosis drugs rose inexplicably from about $8,000 to more than $60,000.
It is no secret that Americans spend more on prescription drugs than other wealthy countries.
For instance, Canada spends a little more than 70 cents for each dollar spent in America on prescription drugs, according to a 2013 study from the Center for Economic and Policy Research. In the United Kingdom it is just under 40 cents, and Denmark 35 cents per dollar.
European countries have more market power and leverage over drug companies because they are similar to a single purchaser, said Dr. Peter Bach, director of Memorial Sloan Kettering Hospital’s Center for Health Policy and Outcomes.
Take England’s system, which has a single payer health system decide which drugs should be covered based on cost effectiveness.
For example, Gilead’s controversial and expensive hepatitis C treatment Sovaldi goes for $84,000 for a 12-week treatment course in the U.S. In England the cost was negotiated down to $54,000.
Part of the reason prices are higher is because the U.S. rewards innovation, said Peter Pitts, director of the Council for Medicine in the Public Interest.
“If you don’t reward innovation, you don’t get it,” he said.
Pitts said that while brand-name drugs are less expensive in Europe, generic drugs are 50 percent more expensive.
With a nod to consumer concerns, President Obama proposed allowing Medicare to negotiate for lower drug prices, a practice currently illegal. Several states are considering bills that would force pharmaceutical companies to disclose how they reached their high prices, a nod to the industry’s defense that prices reflect the high cost of drug development.
Obama’s proposal included in his budget is likely a nonstarter in a Congress controlled by Republicans normally reticent to additional federal regulations.
However, drug prices don’t just need to be lowered, but be based more on value, Pitts said.
“It isn’t beating pharma companies down to a lower price,” he said.
Take Sovaldi again. The drug is expensive, but it is a cure to hepatitis C, a chronic condition that contributes lot in healthcare costs, Pitts said.
The frustration could lead to a move in the U.S. toward “more transparency and having prices travel with value,” Bach said.
The pharmaceutical industry, for its part, believes moving to price negotiations could restrict access to treatments, said Holly Campbell, spokeswoman for the trade group Pharmaceutical Manufacturers and Researchers of America.
In Sovaldi’s case, despite the negotiated price Britain’s National Health Service delayed introducing coverage of Sovaldi until July, with cost being a factor, according to a report in the Wall Street Journal.
Campbell said that price concerns are overblown and that reported high prices can be misleading.
She said pricing critics don’t take into account rebates provided by drug companies, which can total more than $40 billion a year, according to a 2012 study from the sales and marketing firm ZS Associates.
In addition, price controls could stifle innovation, she said. Campbell cited two studies from the think tank RAND Corporation that found implementing price controls could reduce life expectancy and reduce innovation through lower revenues.
