Drug Industry Defense for High Prices: Blame Insurance Companies

February 26, 2019

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Source: Washington Post

A line of defense is emerging for top prescription drug companies whose topexecutives will be pulled before Congress on Tuesday to testify about high prices for medicine: They are not to blame.

It’s a corporate version of a “devil made me do it’’ argument.

The industry says it is trapped in a reimbursement system that has become badly distorted, one that rewards companies for jacking up list prices and then offering deep discounts, in the form of rebates, to win favorable treatment by insurance plans.

The French pharmaceutical giant Sanofi, which is facing criticism for soaring prices of insulin, previewed the political strategy last week. When the TV lights kick on before a panel of seven drug company CEOs, the company signaled, it will join those deflecting blame to insurance companies.

Sanofi says that the discounts it gives insurance companies, and the pharmacy benefit manager divisions they own, are not being passed down to consumers.

“It is our belief that growing rebates and declining net prices should result in lower out-of-pocket costs for patients,’’ Sanofi said in a statement to The Washington Post. “Unfortunately, under the current health care system, this is generally not the case and these savings are not consistently passed through to patients in the form of lower co-pays or coinsurance.’’

It’s an echo of broader industry arguments in defense of list prices. In essence, the industry says it has been forced to set list prices higher because pharmacy benefit managers are seeking the biggest discounts possible. The industry argues that the more important figure for policymakers to consider is the “net price,’’ after discounts for insurers are taken into account.

But a big problem for many consumers is that the list price has a real effect on their pocketbooks: They often pay a percentage of list price at the pharmacy counter.

“While biopharmaceutical companies set the list price of a medicine, insurers ultimately determine what patients pay out of pocket,’’ said Holly Campbell, spokeswoman for the Pharmaceutical Research and Manufacturers of America. “We agree the status quo is not working for patients and our health-care system needs to change, but we need to address the right problem.’’

The Trump administration agrees with drug companies. It says it is trying to solve the problem of soaring drug prices by proposing to purge rebates from certain Medicare and Medicaid programs. Many critics say rebates are essentially kickbacks that drug companies pay to insurers to guarantee market share.

The Trump plan to curb rebates is opposed by the insurance industry. After a wave of consolidations, the three biggest pharmacy benefit managers are joined with insurance companies. Optum is part of UnitedHealth Group; ExpressScripts is part of Cigna; and CVS Caremark is joined with Aetna.

The rebate fight makes a ready talking point for the drug industry CEOs who will be undergoing a grilling before the Senate Finance Committee on Tuesday. In addition to Sanofi, top executives from Pfizer, Merck, AstraZeneca, Johnson & Johnson’s Janssen Pharmaceuticals unit, Bristol-Myers Squibb and AbbVie are expected to face tough questioning from Senate Finance Chairman Charles E. Grassley (R-Iowa), and a bipartisan group of senators.

“I hope the drug co CEOs testifying tmrw don’t try to blame everyone but themselves/take no responsibility for their role in fixing the problem,’’ Grassley tweeted Monday.

Insulin prices have been a source of political outrage as three manufacturers — Sanofi, Eli Lilly and Novo Nordisk — have sharply escalated prices in recent years on a drug that has been around for decades and upon which diabetics depend for survival. Of those three companies, Sanofi chief executive Olivier Brandicourt will be the only one at the hearing Tuesday.

On Friday, Grassley and Sen. Ron Wyden (Ore.), the ranking Democrat on the panel, kicked off a Senate Finance Committee investigation of insulin prices, sending letters to the three insulin makers seeking detailed information about recent price increases, which in the case of an Eli Lilly insulin, rose 585 percent from 2001 to 2015.

Insurance companies fired back at drug companies in advance of Tuesday’s hearing. They held a news conference call Monday to highlight high prescription prices. They were joined by groups representing doctors and hospitals.

“The whole middleman debate that big pharma continues to drive is nothing more than a distraction and finger-pointing to blame everybody about their high drug prices but themselves,’’ said Kristine Grow, a spokeswoman for America’s Health Insurance Plans, a Washington trade group. “There is no visibility into how they set those prices or what causes them to go up.’’

“Drugmakers alone have the power to set prices. They do this unrelated to the rebates they negotiate with [pharmacy benefit managers],’’ said JC Scott, president and CEO of the Pharmaceutical Care Management Association, the trade group for PBMs. He cited a federal report that said 40 percent of branded pharmaceuticals in 2015 were not subject to rebates, yet prices on those drugs also continue to rise.

The pharmaceutical industry’s reputation is at rock bottom in public survey. Gallup last year found that prescription drug companies ranked last in a popular opinion poll, with a negative 53 percent rating.

Other controversial practices of drugmakers will be hauled out for public airing Tuesday. AbbVie has employed a variety of legal tactics and patent moves to protect its drug Humira from generic competition. It is the top-selling drug in the world with $19.9 billion in 2018 sales.

On Friday, Grassley and Sen. Ron Wyden (Ore.), the ranking Democrat on the panel, kicked off a Senate Finance Committee investigation of insulin prices, sending letters to the three insulin makers seeking detailed information about recent price increases, which in the case of an Eli Lilly insulin, rose 585 percent from 2001 to 2015.

Insurance companies fired back at drug companies in advance of Tuesday’s hearing. They held a news conference call Monday to highlight high prescription prices. They were joined by groups representing doctors and hospitals.

“The whole middleman debate that big pharma continues to drive is nothing more than a distraction and finger-pointing to blame everybody about their high drug prices but themselves,’’ said Kristine Grow, a spokeswoman for America’s Health Insurance Plans, a Washington trade group. “There is no visibility into how they set those prices or what causes them to go up.’’

“Drugmakers alone have the power to set prices. They do this unrelated to the rebates they negotiate with [pharmacy benefit managers],’’ said JC Scott, president and CEO of the Pharmaceutical Care Management Association, the trade group for PBMs. He cited a federal report that said 40 percent of branded pharmaceuticals in 2015 were not subject to rebates, yet prices on those drugs also continue to rise.

The pharmaceutical industry’s reputation is at rock bottom in public survey. Gallup last year found that prescription drug companies ranked last in a popular opinion poll, with a negative 53 percent rating.

Other controversial practices of drugmakers will be hauled out for public airing Tuesday. AbbVie has employed a variety of legal tactics and patent moves to protect its drug Humira from generic competition. It is the top-selling drug in the world with $19.9 billion in 2018 sales.

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