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Senate Hears Options for Making Drugs Affordable

New report calls lowering cost of medicines a ‘national imperative’

Senate hearing & NAM report on drug affordability


Americans spend more than half a trillion dollars on pharmaceuticals each year, according to a new report.

Giving the federal government the power to negotiate prescription drug prices, making lower-cost generics easier to get to the market, discouraging advertising and lowering the prices Medicare beneficiaries pay for their medicines are some of the keys to making pharmaceuticals more affordable, the head of a prestigious committee told a Senate panel Tuesday.

A new report by the National Academies of Sciences, Engineering and Medicine, “Making Medicines Affordable — A National Imperative,” says that “consumer access to effective and affordable medicines is an imperative for public health, social equity, and economic development.” Norman Augustine, chair of the study and a former chairman and chief executive officer of Lockheed Martin, told members of the U.S. Senate Health, Education, Labor and Pensions Committee that the rising cost of prescription drugs threatens to make them “unaffordable to patients, and potentially even to society as a whole.”

Americans spend more than half a trillion dollars on pharmaceuticals each year, the report found, and as costs continue to increase, so does the share that patients pay. Deductibles, for example, have on average increased 2½ times over the past decade.

Augustine acknowledged the need to strike a balance of making drugs affordable while still ensuring that new lifesaving drugs continue to be developed.

“There are people in this room who would not be alive today” without pharmaceuticals, Augustine said. But, he added: “Drugs that are not affordable are of no value.”

David Mitchell, founder of Patients for Affordable Drugs, was one of the people in the hearing room Augustine was referring to.

Mitchell testified that he has an incurable blood cancer and said prescription drugs are “keeping me alive.” During this year, he said, he has had $450,000 worth of drug infusions.

Mitchell said every day his organization hears from people who have to decide between filling their prescriptions or spending their retirement savings and emptying their children’s college funds.

“People are scared and angry,” Mitchell said, “and they need help.”

Augustine told the senators that a key way to foster competition in the drug market and lower costs would be to permit the federal government to negotiate prices on behalf of Medicare patients. He said the government could use the large volume of prescriptions it pays for to strike better deals with manufacturers. The report also recommends limiting the out-of-pocket costs paid by Medicare beneficiaries. One way to do that, it says, is to base deductibles and copays on the net purchase price of a drug, not the list price.

Several senators focused on the study’s recommendation that direct advertising of drugs to consumers be discouraged. Currently, costs for that advertising are tax deductible for the drug manufacturers.

The problem with such advertising, Augustine said, is that it can lead to patients using a more expensive version of a drug because they saw an ad for that brand on television and asked their physician for it.

“Most of the drugs advertised tend to be the most expensive,” Augustine said, adding that when patients see these commercials doctors feel pressured to prescribe the advertised drug instead of an equally good medicine that costs less.

The study committee, he said, was first inclined to ask Congress to ban such advertising but realized that was likely not possible, given First Amendment concerns. “At least don’t allow the tax deduction for it,” Augustine told the senators.

Sen. Johnny Isakson (R-Ga.) noted that such advertising “is a tremendous component of the cost” of a drug. “Consumers think they have a problem” and need a particular drug, he said, “because the advertising told them they need it.”

The report also recommends making it easier for generic companies to get the information they need to produce lower-cost alternatives to brand-name medicines and to bring their products to the market.

When a brand-name drug goes on the market, the drug company that developed it has exclusive rights to sell it for a specified number of years. Once that period ends, a generic version can be manufactured. The study found that pharmaceutical companies often pay generic companies to delay creating an alternative to the brand-name drug. The report says manufacturers should be deterred from such practices.

“Too many drug companies game the system to block free-market competition,” Mitchell told the senators.