More on drug prices

[explanade]

Even many patients with insurance can't afford the copayments, which cover only a fraction of the high-priced drugs which are becoming more common. In fact, those with middle class incomes are left to their own devices for paying around ten thousand a year and many simply choose to skip the prescribed drug therapies:

The pharmaceutical industry, after a long drought, has begun to produce more innovative treatments for serious diseases that can extend life and often have fewer side effects than older treatments. Last year, the Food and Drug Administration approved 41 new drugs, the most in nearly two decades.


The catch is their cost. Recent treatments for hepatitis C, cancer and multiple sclerosis that cost from $50,000 annually to well over $100,000 helped drive up total U.S. prescription-drug spending 12.2% in 2014, five times the prior year’s growth rate, according to the Centers for Medicare and Medicaid Services. High drug prices can translate to patient costs of thousands of dollars a year. Out-of-pocket prescription-drug costs rose 2.7% in 2014, according to CMS.

For many of the poorest Americans, medicines are covered by government programs or financial-assistance funds paid for by drug companies.

For those in the middle class, it is a different story. Though many patients can get their out-of-pocket costs paid by drug companies or drug-company-funded foundations, some patients make too much money to qualify for assistance. Others are unaware the programs exist. Medicare patients, who represent nearly a third of U.S. retail drug spending, can’t receive direct aid from drug companies.

The upshot is even patients with insurance and comfortable incomes are sometimes forced to make hard choices—tapping savings, taking on new debt or even forgoing treatment.

Patients Struggle With High Drug Prices - WSJ

Drug companies do offer programs to pay for the high copayments for their drugs or they fund foundations which help people make the copayments. Of course these programs result in higher sales as well as public good will.

The interesting case is one small business owner with $200k in income refusing to switch insurance which would have covered expensive drugs.

Copay assistance is only relevant, of course, if insurance is covering the bulk of the drug’s cost. That isn’t the case for Brien Johnson of Sterling, Va.

Mr. Johnson never expected to be unable to afford medicine he needed. He and his wife own a legal-advertising company that has provided a good living.

A few years ago, after his doctor noticed swollen lymph nodes, Mr. Johnson was diagnosed with mantle-cell lymphoma. Treatment with chemotherapy was ineffective. He began taking Imbruvica around December 2013. In about a month, he says, his disease went into remission.

His health insurance paid for it for about a year. Early in 2015, according to Mr. Johnson, the insurer said it wouldn’t continue paying for the drug under the medical portion of his policy, which covers services provided in doctors’ offices. Instead, Imbruvica—an oral drug taken at home—would fall under the policy’s prescription-drug benefit, and that has a maximum yearly payment of $5,000, or only about 4% of Imbruvica’s annual price at the time. The Affordable Care Act banned such limits except for existing health plans for individuals.

Though the Johnsons earned nearly $200,000 a year, the cost would be too much. “If the drug was a couple thousand a month, I could’ve worked it out,” Mr. Johnson says. “But at $12,000 a month, it would have wiped us out in a year.”

His insurance is a Blue Cross Blue Shield policy from Anthem Inc. A spokeswoman for Anthem said the insurer notified Mr. Johnson he could change policies to one that included full prescription-drug coverage, but he chose not to. Anthem agreed to pay for his Imbruvica in 2014 but “clearly communicated that these additional benefits” wouldn’t extend into 2015, said the spokeswoman, Jill Becher.

She said Anthem recognizes the cost of cancer drugs has risen substantially and is “committed to working with our members to ensure that they are able to access the most effective therapy.”

Mr. Johnson says he considered switching his coverage but decided not to because other plans had higher deductibles and he feared his current doctors wouldn’t be available in them.

He got one free month’s supply of Imbruvica from its manufacturers, he says, but was ineligible for continued aid because of his income.

When the drug ran out, his “cancer kicked into a more aggressive level,” he says. He has lost 80 pounds, and his lymph nodes have swollen again.

He made plans for a stem-cell transplant, which his insurance covers, but which carries risks of serious side effects. In mid-December Mr. Johnson, 56, began intensive chemotherapy aimed at putting his disease in remission so he can have the transplant.

“I don’t know how much longer I have to live, and I don’t want to spend my last days fighting Blue Cross Blue Shield over Imbruvica,” Mr. Johnson says.

 

[explanade]

WSJ analyzed the top 30 drugs and found increased revenues, especially in the last year, due to price increases:

Not a problem for its manufacturer. U.S. revenue from the drug has more than doubled in that time, to $2 billion last year.

The key: repeated price increases. The multiple sclerosis drug’s maker, Biogen Inc., raised its price an average of 16% a year throughout the decade—21 times in all.

It is an example of drug companies’ unusual ability to boost prices beyond the inflation rate to drive their revenue, even when demand for the drugs doesn’t cooperate.

A result of this pricing power is that across 30 top-selling drugs sold by pharmacies, U.S. revenue growth has far outpaced demand in the past five years, according to a Wall Street Journal analysis of corporate filings and industry data. Revenue growth averaged 61%, three times the increase in prescriptions.

Attention has focused lately on new drugs with eye-popping prices and on a few whose price a new owner abruptly raised several-fold. But what many drug companies rely on for sales growth is a pattern of steady increases, year in and year out, on older medicines. Wholesale-price increases for the 30 drugs analyzed by the Journal averaged 76% over the five-year stretch from 2010 through 2014. That was more than eight times general inflation.

For 20 leading global drug companies last year, 80% of growth in net profits stemmed from price increases in the U.S., according to a May report by Credit Suisse.

For Prescription Drug Makers, Price Increases Drive Revenue - WSJ

Even the drug company CEOs are surprised how much they've been able to raise prices:

In addition, some drugs long on the market develop customer loyalty that provides a price umbrella. If patients who started on a drug such as Avonex a decade ago are happy with it, they or their doctors may see no reason to switch to a new one that comes along.

At an investment conference in 2009, Biogen’s then-CEO James Mullen was asked whether the company could keep raising Avonex’s price. He said he was surprised at “how unresistant the market has been to price increases.”

Some of the bigger price increases have occurred only in the last two years:

Until about a year ago, price increases were garnering little public attention because spending on drugs had moderated. U.S. expenditures for most prescription drugs grew by an average of 2.7% from 2007 through 2013, according to data from the Centers for Medicare and Medicaid Services. That was a slower growth rate than in several previous years, due largely to greater use of generics as some big-selling drugs lost patent protection.

The moderating price effect from generics now is tapering off. Pharmacy-benefits manager CVS Health Corp. said drug spending by its customers jumped 12.7% last year, more than triple the prior year’s rise.

Price boosts represented more than 80% of this increase, CVS said.

Similarly, Medicare’s spending on its prescription-drug benefit rose 8% last year on a per capita basis, after several years of averaging less than 1%. A leading reason for the surge was “price increases for both brand-name and generic drugs,” Medicare’s board of trustees said in a recent report.