Obama Proposes That Medicare Be Given the Right to Negotiate the Cost of Drugs

Embedded in President Obama’s budget request to Congress is a paradox. He proposes a major new initiative to develop drugs tailored to the genetic characteristics of individual patients, but he expresses deep concern about the costs of such specialty medicines for consumers and for the Medicare program.

He has asked Congress to let Medicare officials negotiate prices with drug manufacturers — a practice explicitly forbidden by current law. At the same time, the administration, through the National Institutes of Health, is off and running with its “precision medicine” initiative, meant to develop personalized therapies like those now on the market to treat illnesses like cancer and cystic fibrosis at a cost of tens of thousands of dollars. Prices over $50,000 or $100,000 a year are not unusual.

Mr. Obama announced the precision medicine initiative in his State of the Union address and followed up with a $215 million proposal, now under review in Congress. The proposal has received broad bipartisan support and has generated excitement among scientists, who are drafting plans to explore the molecular and genetic basis for disease with a national research cohort of a million or more volunteers.

“The possibilities are boundless,” Mr. Obama said at a recent White House event. Precision medicine “gives us one of the greatest opportunities for new medical breakthroughs that we have ever seen,” he said.

If the initiative is successful, scientists said, it could lead to new diagnostic tests and treatments for cancer, heart disease, diabetes, Alzheimer’s and other illnesses. One-third of the money would be used to seek cancer treatments using genetic information.

The excitement of scientists and patients’ advocates is tempered by the knowledge that personalized medicines already on the market are costly. Patients often pay much of the expense out of pocket.

Dr. Francis S. Collins, the director of the National Institutes of Health, expressed concern about the price of these drugs. “Is that the path that precision medicine inexorably is going to take? I would certainly hope not,” he said.

“Long term,” Dr. Collins said, “it’s likely that this approach can reduce health care costs by providing a more effective way to treat disease in an individualized way, so that treatments are more likely to work for a subset of individuals who have a particular form of a disease or disorder.”

However, he went on, “I’d be reluctant to say that in the short term those kinds of rewards are going to occur. I’d love it if they did.”

Every month researchers report that they have discovered genetic factors that appear to increase the likelihood that a person will develop some type of cancer or other disease. And every month consumer groups, doctors, health insurance companies or state officials express alarm about the skyrocketing cost of the specialty drugs.

“Planning for the precision medicine initiative is going like gangbusters,” said Sharon F. Terry, chief executive of the Genetic Alliance, an advocacy group for patients. “But I have grave concerns about the cost of medicines that will be developed. The prices that we’ve been seeing for these treatments are just not sustainable.”

Mr. Obama pointed to cystic fibrosis as a disease that was being treated effectively with a drug that helps people with specific mutations in a particular gene. One of those patients, William Elder Jr., attended his State of the Union address.

What Mr. Obama did not say is that the list price for a one-year supply of the drug, Kalydeco, is $311,000, according to its manufacturer, Vertex Pharmaceuticals.

Cystic fibrosis clogs the lungs with mucus. Mr. Elder, 27, said in an interview that the cost of his treatments had been covered by insurance, and he described the drug as a godsend. He vividly recalled the day in 2012 when, after numerous hospitalizations, he was able to breathe through his nose for the first time in years. “It was exhilarating,” he said.

Five years after passage of the Affordable Care Act, drug prices are emerging again as a political issue. On a presidential campaign stop in Iowa this month, Hillary Rodham Clinton said the government needed to drive a harder bargain with drug companies. In the latest monthly poll by the Kaiser Family Foundation, the health care priority cited most often, by Democrats and Republicans alike, was making high-cost drugs affordable to people who need them.

The cost of analyzing a person’s genes, using a technique known as DNA sequencing, has declined sharply in recent years, but the cost of medicines that target specific genes or mutations is high and climbing higher.

A few examples show how expensive these drugs have become.

For a standard course of treatment with Blincyto, a new leukemia medicine sold by Amgen, the price is about $178,000, the company said. The government designated Blincyto a breakthrough therapy and gave it accelerated approval in December after finding that it “may offer a substantial improvement over available therapies.”

For Xalkori, a lung cancer drug made by Pfizer for people with a genetic abnormality detected in a government-approved test, the list price is $12,000 a month. Treatments typically last seven months, the company said.

And for Gleevec, a targeted therapy to treat a certain type of chronic myeloid leukemia, Novartis charges $9,210 a month, and most patients will need lifelong therapy, said Eric Althoff, a spokesman for the company.

All four companies — Vertex, Amgen, Pfizer and Novartis — said they had patient assistance programs to provide financial help or free medicines to people who could not afford the drugs.

Despite such programs, Dr. John D. Bennett, president of the Capital District Physicians’ Health Plan, which serves 460,000 people in upstate New York, said: “The rising cost of specialty drugs has the potential to bankrupt our health care system. What good is a miracle drug if you can’t afford it?”

More than 40 million people have prescription drug coverage through Medicare. The overall cost has been significantly less than originally projected in 2003. But an influential federal panel, the Medicare Payment Advisory Commission, told Congress last month that the “use of high-cost drugs poses a big challenge” for the government and for Medicare beneficiaries, who typically pay 25 percent to 33 percent of the cost of specialty drugs.

“It would be unfortunate if we make scientific progress and then price patients out of the drugs we develop through that progress,” said Dr. Peter B. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York.

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