Americans, tired of high-priced drugs, are fighting back

IF ONE concern unites Americans, it is the high prices of prescription drugs. One incident in particular tarnished much of the pharma industry: in 2015 the price of an antiparasitic drug, Daraprim, jumped from $13.50 to $750 per pill. But large price increases remain stubbornly commonplace (see chart). According to IQVIA, a health-data firm, the wholesale prices of leading drugs such as Humira, Enbrel and Lyrica increased by more than 120% between 2012 and 2017. Other data show that cancer-drug prices rose from about $10,000 to over $100,000 per year in just over a decade to 2012. Further ahead, a new generation of cures, such as a gene therapy for haemophilia, may cost more than $1m.

President Donald Trump, never one to avoid stoking a grievance, has waded in, accusing the pharma industry of “getting away with murder”. This week, as The Economist went to press, he was scheduled to deliver a speech outlining a strategy to lower prescription-drug prices. Whatever he says, though, a quiet revolt over drugs is already under way, led by insurance firms, pharmacy-benefit managers (PBMs), employers and patients themselves.

For sure, there is plenty for government to do to help keep prices under control. It could take aim at the system of rebates, huge incentive payments that prescription-drug manufacturers provide to middlemen such as PBMs, but which do not usually trickle down to patients. It could try to tackle the lack of competition, by cracking down on the tactics pharma firms employ to delay the use of generics and biosimilar drugs. It could also make changes to Medicare, a programme for the elderly; the options here include giving it a bit more flexibility over the drugs it must provide, as well as moving drugs administered in doctors’ offices into programmes that have some power to negotiate prices.

The risk is that sensible solutions to such problems will be overshadowed by a misguided “America First” strategy that has little bearing on the domestic-price problem. Alex Azar, the health secretary, recently accused foreign governments of “free-riding” on American health-care innovation when they negotiate to pay lower prices for their drugs than Americans do.

Whatever the federal government ends up doing, however, others are finding their own ways to reduce drug bills. That is not always to the good of patients. They have been forced by insurers to contribute more to the cost of their medicines, and have received less access to expensive drugs. For instance, they have struggled to get hold of ground-breaking but costly new cholesterol-lowering drugs known as PCSK9 inhibitors. But the fact remains that pharma firms are under increasing pressure to back down on pricing.

On May 1st Express Scripts, a PBM, announced it had won a large discount on the $14,600 price of a PCSK9 drug made by Sanofi/Regeneron, a pharma alliance. The new price is somewhere between $4,500 and $8,000 a year, in line with recommendations made by the Institute for Clinical and Economic Review (ICER), an influential drug-evaluating group based in Boston. The price reduction comes in the form of a large rebate that will be split between Express Scripts and insurers, and should eventually end up reducing the price of health insurance. Patients will also pay less in out-of-pocket costs.

Employers, who sponsor most of the country’s health-insurance plans, are also making inroads. The Health Transformation Alliance (HTA), which was created in 2016 to curb rising health-care costs, particularly drug prices, has grown to cover 40 large employers, including American Express, Coca-Cola and Verizon, and collectively spends about $27bn on health care. It is using this heft to extract better contracts from PBMs and to demand more say over the drugs that are covered. The HTA says that in 2018 it reduced members’ drug costs by a median of 15%.

States, too, are fighting back. On April 26th, in a case being followed with interest nationwide, New York’s Medicaid board demanded a hefty 70% discount from Vertex, a pharma firm, on its costly cystic-fibrosis drug, Orkambi. A new report from ICER suggests Orkambi should cost something like $83,000 a year (rather than $250,000). So even without action from Mr Trump, there is a meaningful pushback on drug prices. A new report from IQVIA says that although list prices for branded drugs increased by 6.9% in 2017, after discounts and rebates, net growth was only 1.9%. Pharma firms should be feeling queasy.