I was recently at a presentation by Cigna and its Express Scripts unit which highlighted pharmacy issues. Specialty medications for the first time are expected to exceed non-specialty in 2019 (52% versus 48%). The industry has argued that cost controls will stifle innovation, but so far pipelines are growing with over 7,000 medications in development with cancer being the most prevalent therapeutic class. Medication therapy has replaced surgery as the preferred course of treatment for cancer, HIV and even cardiovascular disease. Since 2010, more specialty drugs have been approved by the Food and Drug Administration (FDA) than traditional medications and, in 2019, it was almost a 2-to-1 margin. Precision medicine has given rise to bioengineered drugs, and incredibly profitable medications are fueling pharmacy costs increases – and these costs will continue to explode.
The Senate Finance Committee is holding hearings on drug costs and the commentary on these hearings has underscored the complexity of our healthcare system. Politicians and U.S. citizens have demanded reduction in drug costs and there are a number of proposals getting a lot of attention.
Elimination of drug rebates seems like a clear winner but opponents would argue that, at least in the short term, this may result in increased costs and certainly will create a shift in who bears the expenses. Users of drugs with high rebates would be the winners; however, if costs are a zero-sum game, those reductions would be redistributed and shared by all plan participants. And if manufacturers no longer pay rebates would they reduce costs dollar-for-dollar or would they retain some of the rebate as a windfall? A recent Milliman report shows that 57% of the Medicare population has under $1,000 in claims and their costs would increase without rebates as compared to 27% of the population with costs over $2,500 whose costs would decrease. These indicate favoring the status quo in an election year.
Some easy-to-implement and impactful proposals are also getting attention: including prices of drugs in advertisements, reducing timelines for the introduction of generic alternatives and allowing the federal government to negotiate lower costs on behalf of Medicare recipients. And less popular options to cap Medicare costs under consideration are tying the cost of medication to an index of international prices, allowing Medicare to impose step therapy and putting an overall cap on medication costs under Medicare.
Controlling drug costs is complex and full of political friction. Battle lines are being drawn and the lure of maintaining the status quo is compelling – but something has to give. These costs are crazy.