Transcript Drug Prices: They’re too damn high!

Drug Prices: They’re Too
Damn High!
AIDS Drug Assistance Program
OVERVIEW
AIDS Drug Assistance Programs (ADAPs), jointly
financed by Ryan White Part B funding and state
appropriations, ADAPs are state-run and drugs are
purchased a discount, capped lower than the
government-negotiated ceiling price (340B price).
The programs serve as the payer of last resort to
provide HIV therapies to patients who don’t
qualify for any other form of insurance or who
have inadequate coverage.
Some factoids to know before we go on
(forgive
me if you know this already):
There is very little transparency; pharmaceutical
companies in the U.S. are not required to share the kind
of data that would allow for more effective negotiations
(i.e. R&D, marketing, cost to each payer, etc).
Public payers in the
and mandatory rebate
ensure lower prices.
controls and rebates
leverage.
U.S. are subject to price ceilings
levels for each drug purchased to
Greater capitalization on price
can lead to greater negotiation
Public payers buy more drugs to provide to PLWHIV than any
other source. The Ryan White program is the third largest
source of public funding for HIV care. There are more than
1 million PLWHIV today; however, more than half are not in
regular care (RAND, 2012; CDC, 2010; Kaiser Family
Foundation, 2007).
The cost of HIV care is increasing. The main reasons for
this are newer, more expensive drugs; rising cost of
existing therapies; increased HIV infections overall;
rising number of HIV patients on medication living longer
(Jing et al., 2007; KFF, 2009a).
High ARV prices have a direct impact on the sustainability of
ADAP
programsthe
nationwide.
They areaa bunch
prime factor
for ADAP
So
here’s
thing…well,
of things…
insolvency. ARVs don’t have to cost that much.
Government payers cost contain by rationing care or by restricting
eligibility for public programs.
Limited funding and a growing need for HIV treatment will continue to cause
the system to swell, forcing programs to make decisions on who will be
covered.
Stakeholders have options to reduce the cost of ARVs and
procure as many drugs as necessary to serve every patient
needing to access the AIDS Drug Assistance Program.
ARV prices are NOT determined in a free market setting. The prices are
generally negotiated between the pharmaceutical manufacturers and the
buyers (i.e. Medicaid, ADAPs, etc.)
There is limited credibility to the argument that high prices are needed to
sustain the development of new drugs. There is a lack of (available) data
demonstrating costs of manufacturing, therefore making it impossible to
determine what prices are “fair” or “right.”
Some things to consider about antiretroviral drug pricing:
Patents protect manufacturers and allow them to set the price.
This concept is called monopoly pricing, whereby prices are
set depending on how sensitive the demand is. In the case of
ARVs, there are generally no substitutes and few generics.
Manufacturers therefore have considerable market power to
dictate price and maximize profits (RAND, 2012; Mas-Colell,
Whinston, and Green, 1995).
Some regulatory provisions, such as mandatory formulary
additions of ARVs, allow manufacturers to price drugs free of
fear that the drugs won’t be purchased. Methods of
procurement, such as the absence of direct negotiations with
pharmaceutical companies by individual buyers, can have the
same effect.
Drug manufacturers’ claim that high drug prices are necessary to offset
research and development (R&D) are not substantiated by available data.
Drugs with lower development costs, particularly those who have
benefited from government subsidies, do not have lower drug prices
(RAND, 2012; Keyhani, Diener-West, and Powe, 2005).
Some things to consider about antiretroviral drug pricing:
Drug manufacturers will often anticipate or react to changes
in markets, charging more for drugs in one market if price
manipulation occurs in another market. The idea that prices
are set based on costs incurred is discounted by similar drugs
sold for different prices in different markets. Available
evidence shows that prices are set for profit maximization.
ARVs exist in a monopoly market (RAND, 2012).
There is a moral dilemma in all of this. Price fairness should be
considered. Because HIV patients need ARVs to survive, there is a
high tolerance for price increases. However, the “fairness” of
high drug prices is questionable when these costs make up large
portions or surpass the incomes of poor and marginalized people.
This also affects those who are insured.
Insurances allow for a lower observed price by the consumer,
but allow for drug manufacturers to charge high prices to
payers (RAND, 2012).
The existence of multiple, segmented markets allow drug
manufacturers to practice price discrimination (Reinhardt,
2007).
Let’s talk about ADAP…that’s
why we’re here!
In Most
2007,ADAPs
ADAP can
instituted
a
either program;
be
ADAP is a discretionary
minimum
formulary
ADAP
had
on
lists
categorized
by waiting
one
each
ADAP4,118
can set
its of
owntwo
requirement
that
requires
in
12
states,
primarily
in the
structuralcriteria.
models--the
eligibility
alldirect-purchase
states
to include
at
South
(NASTAD,
2012)
model and
least
one
drug
from
each
the rebate model.
ARV class (Kaiser Family
Found., 2012).
Systematic changes can affect ARV prices by bringing the market
closer to a free-market situation (RAND, 2012)
Have greater transparency. All players can have a better understanding of
manufacturer pricing information, allowing for a level playing field in
price negotiation.
Use reference pricing, that is prices are based on those paid in other
markets.
Switch dually eligible beneficiaries from Medicare Part D to Medicaid,
which pays lower prices for HIV drugs.
Make the government the single payer for AIDS drugs.
Ease minimum formulary requirements. Empower payers to exclude more
expensive drugs if a affordable price can’t be negotiated.
Change the patent system and provide subsidies that support innovation.