AARP, GAO, HHS Examine Increasing Rx Drug Prices

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By Bronwyn Mixter

Nov. 23 — Increasing prescription drug prices, especially the price of specialty medications, continue to be a burden on patients and government programs, according to two reports released Nov. 20.

A report from the AARP found that retail prices for more than one hundred specialty prescription drugs increased by nearly 11 percent in 2013. A separate report from the Government Accountability Office found that expenditures for new drugs in Medicare Part B were concentrated among a few drugs, mostly biologics, and most were costly for beneficiaries.

The reports come as the Department of Health and Human Services held a forum Nov. 20 on prescription drug prices. At the forum, Andy Slavitt, acting administrator of the Centers for Medicare & Medicaid Services, said, “As we encourage the development of new generations of highly targeted, personalized therapies, we need strategies for ensuring access to these innovations. It is in all of our interest to find ways to improve affordability and access for patients, support and increase innovation in the industry, and, most importantly, make people healthier.”

Slavitt said that in 2014, the CMS spent $140 billion on prescription drugs, which doesn't include spending on prescription drugs for the Children's Health Insurance Program and the Affordable Care Act marketplaces. Spending on medicines increased 13 percent in 2014, compared with 5 percent for health-care spending growth overall, the highest rate of drug spending growth since 2011, he said.

“Drug costs are not just the states and federal government's fastest growing cost, but through Part B and D premiums, co-insurance and deductibles, our beneficiaries pay 16 percent of the bill, making this a real kitchen table issue for working families and retirees,” Slavitt said. “One element of the challenge is specialty drugs, which are a small fraction of prescriptions but nearly a third of all costs, and growing very rapidly.”

Slavitt also said the prices of generic drugs “available for years have increased substantially without any additional health benefits to patients.”

“We need better insights and visibility as generic medication prices begin to grow,” he said.

Value-Based Payments, Transparency 

The CMS is moving towards value-based payments where the agency rewards physicians, hospitals and other providers for delivering better health care, spending the agency's money more wisely and keeping people healthier, Slavitt said.

“We have committed that within the next two years, paying through these alternative payment models will be the dominant way we reimburse for care,” Slavitt said.

Slavitt also said transparency is important when it comes to drug prices. “We don't have a common understanding of the data and know that drug costs are often unclear,” he said. “The truth is we don't have enough public information on the effectiveness of new drugs in the real world or about prices and rebate structures.”

AARP Report 

Retail prices for over 100 widely used specialty prescription drugs increased by nearly 11 percent in 2013, according to an AARP Public Policy Institute report released Nov. 20.

Specialty drugs generally include drugs used to treat complex, chronic health conditions, AARP said. They often require special care in how they are administered to patients, as well as in how they are handled and stored. Many specialty drugs treat conditions that are common among older people, including rheumatoid arthritis, multiple sclerosis and cancer.

The average annual cost of a specialty medication used on a chronic basis exceeded $53,000 in 2013, the AARP report said. This cost was greater than the median U.S. household income of $52,250, more than twice the median income of $23,500 for people on Medicare and almost three-and-a-half times higher than the average social security retirement benefit of $15,526 over the same time period.

“Specialty drugs are among the most expensive on the market and are expected to be the fastest growing group of drugs over the next decade,” Debra Whitman, AARP's chief public officer, said in a statement. “These exorbitant prices and price increases can be financially disastrous, especially for people on fixed incomes. Americans cannot continue to absorb the astronomical costs associated with these products indefinitely.”

The AARP report also found that specialty drug prices are considerably higher than other drug prices. In 2013, the average annual cost for specialty prescription drugs was 18 times higher than the cost of brand name prescription drugs and 189 times higher than the cost of generic prescription drugs, the report said.

Policymakers interested in reducing the impact of high drug prices should focus on solutions that balance the need for pharmaceutical innovation with the need for improved health and financial security of consumers and taxpayer-funded programs like Medicare and Medicaid, the report said.

The AARP report examined the retail prices of 115 specialty prescription drugs most widely used by older Americans. The analysis included 47 drug manufacturers and covered 30 therapeutic categories. The vast majority (85 percent) of the 115 specialty drugs studied are used to treat chronic health conditions.

GAO Report 

Expenditures for new drugs in Medicare Part B were concentrated among a few drugs, mostly biologics, and most were costly for beneficiaries, according to a report released Nov. 20 by the Government Accountability Office.

Sixty-one percent of the 83 new Part B drugs approved by the Food and Drug Administration from 2006 through 2013 were biologics, compared to 16 percent of new non-Part B drugs, the GAO said. Biologics are more likely to be physician-administered and therefore paid for by Part B because they are usually injected or infused, their administration requires monitoring and individualized dosing and they have unique storage requirements.

The GAO said 53 percent of new Part B drugs were used to treat cancer or blood diseases, or were used in diagnostic imaging.

New Part B drugs were more likely than new non-Part B drugs to have used an FDA-expedited review program or to have received an orphan drug designation, which applies to drugs that treat rare conditions and are received by a relatively small number of people, the GAO said.

The GAO said it identified expenditures in 2013 for 75 of the 83 new Part B drugs and found that expenditures for these 75 drugs were concentrated among three drugs, including Lucentis, Eylea and Prolia. These three drugs accounted for 53 percent of the $5.9 billion Medicare and its beneficiaries spent on new Part B drugs, the report said.

Lucentis and Eylea are used to treat an eye condition called age-related macular degeneration. Lucentis is made by Roche Holding AG, which is based in Basel, Switzerland, and Eylea is made by Regeneron Pharmaceuticals Inc., which is based in Tarrytown, N.Y. Prolia is used to treat osteoporosis and is made by Amgen Inc., which is based in Thousand Oaks, Calif.

The 20 highest expenditure drugs accounted for 92 percent of 2013 expenditures on new Part B Drugs and for 26 percent of total expenditures for Part B drugs, the GAO said. Nearly two-thirds of new Part B drugs had expenditures per beneficiary in excess of $9,000 in 2013. Beneficiaries' share of the cost of these drugs ranged from $1,900 to $107,000 per drug in 2013, though many of these drugs received orphan designation and had low utilization, the report said.

Total Part B drug expenditures grew at an average annual rate of 4.4 percent from 2007 through 2013, and this growth was driven primarily by new Part B drugs, the GAO said.

Importation from Canada 

Meanwhile, Sens. Charles E. Grassley (R-Iowa) and John McCain (R-Ariz.) Nov. 23 said they sent a letter to HHS Secretary Sylvia Mathews Burwell urging her to use her full authority to increase the importation of prescription drugs from Canada and other countries for the benefit of U.S. consumers.

“As public concern over rising costs of prescription drugs continues, there is a need to reduce the financial burden that prescription drugs are placing on Americans,” the letter said. “Given the priority that voters place on addressing the high cost of prescription drugs, we believe that it is time Congress and the Administration work together to take concrete steps to address pricing abuses.”

The senators urged importation under certain circumstances, including significant and unexplained increases in price and that the drug is produced in another country by the branded manufacturer that initially developed the drug or by a “well-known generic manufacturer” that commonly sells pharmaceuticals in the U.S.

The senators also asked the HHS secretary to outline whether she needs additional statutory authority to undertake prescription drug importation to protect American consumers.

To contact the reporter on this story: Bronwyn Mixter in Washington at bmixter@bna.com

To contact the editor responsible for this story: Allison Gatrone at agatrone@bna.com

The AARP report is at http://www.aarp.org/health/drugs-supplements/info-08-2010/rx_price_watch.html.

The GAO report is at http://www.gao.gov/products/GAO-16-12.

The CMS leader's remarks are at http://src.bna.com/bd0.

Grassley and McCain's letter is at http://www.grassley.senate.gov/sites/default/files/news/upload/Grassley-McCain%20%20Letter%20to%20HHS%2C%2011-20-15.pdf.