State of the Union Spotlights Pharmaceutical Problem in America

Pharmaceutical companies’ stocks took a hit just after the State of the Union address, when President Trump listed drug pricing as one of his “greatest priorities” this year.  Medication prices across the board have been rising sharply, occasionally with consequences from Washington.

For example, Turing Pharmaceuticals former CEO Martin Shkreli was called to appear before Congress when he raised the price of the AIDs medication Daraprim from $13.50 per pill to $750 per pill in 2016.

Related Post: Drugmakers Pfizer and Allergan Merge for Tax Break

There have not yet been any policy initiatives to force drug prices down, and until there are, prices are likely to continue to rise — with insurance companies finding more ways to pass this burden onto you, the consumer.

One of biggest changes I’ve seen among my own clients is many medications have changed tiers, resulting in a much higher cost share for members.  So a drug that was once in Tier 2 and covered with a $50 copay may now have switched to Tier 3 with a $150 copay — for the same drug at the same insurance carrier. That’s a pretty shocking price hike in a matter of just a few months.

I’ve also seen many insurance carriers adopt a Mandatory Generic Substitution for a growing number of medications. This requires members only receive the generic version of a drug, or pay the difference for the brand name version.

Related Post: Drug Coverage Changes With Continued Spending Hike

Then some drugs have fallen off of insurance carriers’ formularies altogether, meaning they are no longer covered at all.  Most often this happens when a drug has become so expensive even insurance carriers are having trouble paying for them. So imagine how the average consumer feels.

All in all, this is not a problem exclusive to 2018 alone, but it is a problem that will only get worse until sweeping changes are made to how drugs are priced. So please, Mr. President, make the drug industry great again.

Use The ClaimLinx Prescription Savings Card

We have seen how much prescriptions costs are rising for all of our members. So we have been sending prescriptions savings cards (see above) to members along with their Explanation of Benefits (EOB).

Related Post: ClaimLinx Prescription Drug Card Services

See the sample of the insert members have been receiving with the ClaimLinx Prescription Savings Card.

Why does this savings card benefit members?

  • Big discounts – The price for 80% of the most used generic drugs is lower with the card than insurance copays of $10 or more.
  • Easy to use – Members just have to give the card to the pharmacist to start receiving discounts.

Related Post: See ClaimLinx’s Complimentary Elite Services for Clients

The exclusive ClaimLinx prescription savings card can be ordered by emailing or by following the instructions on the insert.

Drug Coverage Changes With Continued Spending Hike

Spending on prescription drugs rose by 5.2 percent in 2015 and is projected to continue to climb, much faster than overall health spending, in the coming years.

The increase is largely attributed to the high cost of specialty medications used to treat conditions such as rheumatoid arthritis and cancer. And greater medication use overall due to millions of Americans gaining access to insurance coverage through the Affordable Care Act also contributed to the surge in spending.

Related Post: ClaimLinx Prescription Drug Card Services

As it stands though the rise of powerful, expensive prescription drugs has become the greatest drain on American pocketbooks. Spending on specialty medications rose 18 percent last year, while spending on standard drugs rose less than one percent, according to a report by the largest prescription benefit manager in the U.S., Express Scripts Holding Co.

The report also found the average price of brand-name drugs on the market increased by 16.2 percent in 2015 and has jumped 98.2 percent since 2011. One-third of brand-name prescription drugs had price increases exceeding 20 percent last year.

Still, this year’s increase is half the rate in 2014, which spiked to 12.6 percent, the largest price jump since 2003.

What was different in 2015 is that the overall boost in costs was moderated by more restrictions from pharmacy benefit managers and insurers. These companies exerted more control over the drugs their costumers could get access to, as they were more willing to refuse coverage of expensive medications than in the past.

Related Post: Senate digs into why drug prices are so high

This trend will likely continue as drug prices continue to rise in the coming years, forcing many customers to become more flexible with accepting generic drugs over their name-brand counterparts.

Cumulatively from 2013 to 2018, prescription drug spending is expected to rise by an average of 7.3 percent annually, according to a report from the Department of Health and Human Services.

This is down from the spike observed in 2014 but is still higher than before 2013, when the country observed unusually slow growth — spending rose about 2 percent between 2008 and 2012.

For this reason, drug spending will continue to be a growing concern for clinicians, insurers and customers alike.

Drugmakers Pfizer and Allergan Merge for Tax Break

Two of the pharmaceutical industry’s largest producers will merge into one powerhouse drug company in 2016. It’s a move largely, if not exclusively, motivated by tax.

American company Pfizer, Inc. announced it will merge with Ireland’s Allergan PLC in a $155 billion deal. The combined drug company, which will be renamed Pfizer PLC, will be the largest drugmaker in the world by sales.

Related Post: Pfizer to Attempt Over the Counter Version of Lipitor

In addition to acquiring Allergan’s diverse drug portfolio in the transaction, Pfizer will be moving the company domicile from the U.S. to Ireland, a strategy known as inversion.

Pfizer expects the move will grant the new firm a tax rate between 17 or 18 percent, down from its current rate of 25 percent. This is the largest so-called inversion deal to date.

Outside of on paper, the company will remain a predominately American one, with both its prime stock exchange listings and its corporate headquarters remaining in New York City.

Pfizer CEO Ian Read, who will become the leader of the new company, asserts the merger is not simply a tax transaction.

“We’re doing this because of the strategic importance of franchises, revenue growth we think we can get both in the U.S. and internationally, and the importance of combining the research approaches,” he said.

Allergen CEO Brent Saunders, who will become President and COO of the new company, likewise emphasized the merger’s opportunity for growth.

“Our robust research and development with Pfizer’s leading innovative and established businesses, vast global footprint and strength in discovery and development research [will] create a biopharma leader,” he said.

The new company’s portfolio will include Botox, Viagra, pneumonia vaccine Prevnar, and breast cancer drug Ibrance as well as treatments for Alzheimer’s, allergies and rheumatoid arthritis. The company will also have a combined pipeline of 100 mid-to-late stage programs in development.

Related Post: Costs Spike as Pharma Companies Reprice Old Drugs

With so many different types of drugs in the company’s wheelhouse, executives said they would likely consider splitting into two in the future, but would not do so until 2018 so they can first focus on properly merging with Allergen.

The company executives said they anticipate an additional $2 billion in efficiencies from the deal within the first three years. The deal will also initially dilute Pfizer’s earnings per share in the first year, but it will boost them by more than 10 percent by 2019 and almost 20 percent by 2020.

Costs Spike as Pharma Companies Reprice Old Drugs

Imagine for a moment that something as vital to your health as medicine suddenly jumped in price from $10 to $300.

It is no secret medical costs in general are on the rise, but a large portion of this growth can be attributed to the increase in prescription drug prices alone.

A Health Affairs article, which cited figures from the Centers for Medicare & Medicaid Services, noted drug costs increased 12.6 percent in 2014, significantly exceeding other medical expenses.

Related Post: Trump Administration Tackles Drug Advertising

This trend continued this year, with an annual percentage increase of 4.7 percent in 2015 for prescription drugs, while hospital-care expenses rose by only 1 percent and physician and clinical services dropped by 1 percent.

The spike in drug costs comes not only from expensive new drugs for diseases like cancer, hepatitis C and high cholesterol, but also largely from a shifting in the market.

In a new business strategy, many pharmaceutical companies have purchased or earned sole selling rights to old neglected drugs, some of them generic, and turned them into high-priced “specialty drugs.”

Recent examples of this strategy are numerous. Turning Pharmaceuticals raised the price of Daraprim, which treats toxoplasmosis, from $13.50 to $750 immediately following the company’s acquisition of the drug in August.

Valeant Pharmaceuticals International, a specialty drug company based in Quebec, came under fire from Congress this year when it raised the price of the two heart medications it had bought the rights to sell: Nitropress and Isuprel. The company raised the price of Nitropress 212 percent and Isuprel 525 percent.

Many of these pharmaceutical companies claim the price hikes are necessary in order to be able to funnel more money into research and development for new drugs. But not all companies honor this commitment.

While some multinational pharmaceutical companies spend double digits as a percentage of sales, Valeant’s 2014 annual report shows the company spent $246 million on research. That is just 3 percent of overall sales.

One program created by the U.S. Food and Drug Administration is aimed at discourage such behavior and encouraging more research and development on old, generic drugs which pre-date the process of formal approval.

After testing common drugs and potentially improving them to decrease any side effects, companies are rewarded with a temporary monopoly on pricing power as most rival drugs are eased or kicked off the market.

Related Post: Senate Digs Into Why Drug Prices Are So High

While this program may be improving older drugs on the market, it comes at a cost. For example, rights to colchicine, a remedy for gout, were granted to URL Pharma, a small drug maker in Philadelphia, which was soon purchased by Asia’s largest drug maker, Takeda Pharmaceutical Co. Once in the hands of Takeda, the drug made the company $1.2 billion, as the commercial price spiked by 2,000 percent.

As this becomes a growing issue, it remains to be seen if the government will intervene to alleviate the problem. Small steps have been taken in Congress but no larger reforms are underway at the moment.

For now, it seems enough that these companies have gained attention in the news. Stock prices dipped for each of the companies spotlighted for their recent drug price hikes.