WITT: Thoughts on fixing prescription prices

Published 12:33 pm Tuesday, May 29, 2018

One of the greatest challenges facing Americans — especially older Americans — today is the constantly rising cost of medications.

Many on Medicare are confronted with what is euphemistically called the “doughnut hole”’ when the outlay for their medicine reaches a certain point and they are then required to absorb a greater percentage of the cost.

Another problem within the Medicare system is, through Congressional action, it is not permitted to negotiate drug prices. If Medicare, a huge system, were allowed such negotiations, the price of prescription drugs would most likely come down substantially.

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Adding to these systemic problems is the ability of pharmaceutical companies to establish pricing on their own terms. If any other industry were operating in the manner of the pharmaceuticals, it would be called price fixing and be punishable under federal law.

In 2015, a drug to treat toxoplasmosis rose from $13.50 to $750 per tablet. And, of course, the disease cannot be controlled with one tablet.

Epipen, a treatment for allergic reactions, saw a 500 percent increase in nine years. Epipens are often used to treat children. How do parents cope with these increases?

At the same time consumers are being charged outlandlishly rising prices for drugs, the CEOs of pharmaceutical companies are enjoying some of the highest compensations among companies in the U.S.

In 2015, the CEOs of 14 biotech and pharmaceutical companies received median compensation packages of $18.5 million, 71 percent more than the median compensation of the S&P 500 executives in all industries. The CEO of Regeneron Pharmaceutical, in particular, received compensation of $47.5 million in 2015.

Pharmaceutical companies claim the research and development of new drugs is so costly the prices must reflect those costs. These same companies receive government support for their research, tax breaks that are not available to the average taxpayer, and they spend huge sums advertising their drugs, at times more than what they spend on development.

A recent proposal would require companies which advertise their new drugs on TV and elsewhere must also reveal what the cost of the drug will be.

A better alternative would be to prohibit drug companies from advertising prescription drugs at all, the same way that cigarette makers were banned from advertising several decades ago.

After all, what is the purpose of advertising prescription drugs to the average consumer? It’s an attempt to get patients to pressure their physicians to prescribe these drugs, when physicians should be basing their prescription practices on what is effective.

Naturally, the costs of advertising are tax deductible.

Another factor influencing drug prices is the existence of pharmacy benefit managers (PBMs). These are companies, the largest three being Express Scripts, CVS Caremark and Optum RX, are hired by healthcare companies, including Medicare and Medicaid, to negotiate pricing with those who produce the drugs.

These PBMs receive a rebate based on the cost of the drugs on which they negotiate. Unfortunately — for the consumer — the size of the rebate is based on the cost of the drug, so the PBMs, when the price escalates, receive increased profits. How can this be any incentive to operate for the benefit of the consumer? Quick answer, it can’t.

The very best remedy to the situation is for Congress to allow Medicare to negotiate drug prices.

Yeah, right. When pigs fly (or payoffs to Congressmen from the drug companies end).

Chuck Witt is a retired architect and a lifelong resident of Winchester. He can be reached at chuck740@bellsouth.net.