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Bill Owens: Obamacare Versus Drug Costs

The national media has reported on Turing Pharmaceuticals’ 5,000 percent price increase for Daraprim, a treatment for toxoplasmosis. There are numerous other pharmaceutical companies who have taken control of a drug and dramatically increased the price. After reading those stories and reflecting on comments made to me by a close friend and local pharmacist, I asked him to show me examples of price increases that he has seen in the last several years. He provided five examples reflecting the following dramatic price increases: Colchicine went from $18 per 1,000 to $578; Digoxin went from $0.88 per 100 to $78; Carac cream went from $402 for 30 grams to $2,425; Levothyroxine ( a generic) went from $12 to $48 in six months; and Tasmar (100 mg), selling for $165.50 per hundred in 1998, increased to $4,525 in 2014, and then to $9,895 in 2015.

Serendipitously, the Kaiser Family Foundation released a poll in August of this year that found Americans have a greater concern for medication costs than they do about the Affordable Care Act (you likely know it as Obamacare). There were numerous issues probed in the poll, so we’ll take a look at just a few. If you’re interested, the entire poll can be found at http://kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-august-2015/.

Some of the more interesting findings: 83 percent support allowing Medicare to negotiate drug prices on behalf of beneficiaries—as does Senator Sanders (a Brooklyn boy like Senator Schumer and me); 76 percent support limiting what drug companies can charge for medications to treat serious illness; 72 percent support allowing Canadian and other foreign pharmacies to fill prescriptions. Living close to the border, Senator Sanders and I support this too.

While about half of the respondents are currently taking prescription drugs, sixty-two percent of the respondents feel that prescription drugs developed in the past two decades have improved the lives of people in the US. Seventy-two percent say drugs are easy to afford, while 24 percent say they have a difficult time paying for their drugs (generally those with lower incomes or who have serious health-related issues). Eighty-six percent of the respondents support requiring drug companies to release information to the public on how they set drug prices.

The Republican presidential candidates continue to focus on the repeal of Obamacare, while no Democratic candidate has addressed the increasing cost of prescriptions until Hilary Clinton, in response to the Turing Pharmaceuticals disclosure, proposed capping out-of-pocket costs for prescription drugs at $250 per month.

The Kaiser poll indicates that, for the public, repealing Obamacare is much less of a concern: 44 percent of respondents have a favorable view and 41 percent of respondents have a negative view. Only 28 percent of the respondents want outright repeal, but most likely they have real-world concerns with drug prices.

Numerous studies have indicated that, if Medicare could negotiate drug purchases for Part B and Part D payments, Medicare costs would drop by approximately $15 billion a year. (Medicare Part B [doctor office visits and outpatient expenditures], costs approximately $20 billion per year, while Part D [the prescription program] costs approximately $80 billion.) Those savings would certainly help extend the life of this important program. If these savings were coupled with overall reductions in other drug costs, that would have a significant impact on not only the expenditures of the federal government, but also on families who have commercial insurance.

The impact on consumers of increasing prescription costs will become more and more acute as co-pays and deductibles increase and Baby Boomers age, all of which will likely ratchet up the pressure on office holders to address these issues.

Transparency is clearly a major concern of the public, but with the pharmaceutical industry unwilling to release information, the accuracy of the data related to profits, the cost of reinvestment in new drugs, the acquisition of start-up entities, all remain a mystery.

Pharmaceutical profits over the last three years have been averaging slightly over 17 percent, with revenue approaching $1 trillion.

One solution would be to provide increased funding to NIH, who would then be directed to use this funding for research on drug development at universities and other research-focused not-for-profits, with the requirement that those entities place their research on the open market in exchange for a share in the profits, to be divided between the universities/not-for-profits and NIH. The latter would recirculate the profits for further research, reward the researchers at the universities and other not-for-profits, and reduce the cost to the pharmaceutical companies with regard to research and development activities. There is likely legitimacy to the pharmaceutical industry’s concern about R&D costs, as well as the FDA drug approval process.

The CEO of Turing Pharmaceuticals states that as an entrepreneur, his sole goal is to make money for his investors—which he certainly has every legal right to do. There is an old saying in the legal field, “bad facts make bad law”; raising the price of a drug 5,000 percent certainly creates bad facts, and a response like Mrs. Clinton’s may well be bad law.

Clearly, a market-based solution such as allowing imports from Canada or the negotiation of prices by Medicare should not be a source of complaint for someone whose only interest is a “competitive” marketplace—or is it only competitive if I have an unrestrained monopoly and donate to the “right” politicians?

This article was published in The Hill on October 5th, 2015.

Mr. Owens is a former member of Congress representing the New York 23rd , a strategic advisor at Dentons out of its Washington, DC, office, and a partner in the firm of Stafford, Owens, Piller, Murnane, Kelleher & Trombley, PLLC, in Plattsburgh, New York.

The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.

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