Federal action to lower the cost of drugs

The pharmaceutical industry in the United States produces more groundbreaking medical treatments than it does in any other nation. Particularly noteworthy are advances in the treatment of previously incurable cancers and debilitating genetic disorders.

Yet these laudable successes increasingly have been overshadowed by a growing crisis in the affordability of prescription-brand drugs, particularly the cutting-edge biological and gene-based treatments. A quick glance at our national health care spending illustrates the magnitude of the problem.

In 2017, U.S. health care spending was $3.5 trillion, or $10,739 a person, consuming nearly 18 percent of gross domestic product. In comparison, the next nine countries, ranked by spending, averaged half the cost. Annual spending on pharmaceuticals now account for $500 billion, roughly 17 percent of total U.S. health care cost. Worse, the compound annual growth rate for prescription brand drugs is 15 percent each per year, far exceeding increases in either physician or hospital costs.

To mitigate this growing crisis, the federal government must implement market-based solutions to lower the cost of prescription drugs without stifling innovation. Specifically, it must address dysfunctional markets, excess direct-to-consumer marketing and well-intentioned-but-counterproductive government regulations.

First, unlike the market for other goods and services, conventional economic rules such as supply and demand, or free and fair competition, to regulate prices do not apply to the pharmaceutical industry. Patients have little say over their drug purchases and because of intermediaries (such as pharmacy benefit managers) who add roughly 40 percent to the cost of brand drugs, there is no rational market in pharmaceuticals. This flawed market is exacerbated by the pharmaceutical industry’s active efforts to suppress emergence of generic drug brands and frequent strategies to extend the exclusivity of patented drugs (for example, there is no generic version of the 100-year-old drug insulin).

Second, direct-to-consumer advertising and drug company co-pay coupons drive up medication costs by encouraging patients to ask their physicians for expensive specialty drugs rather than cheaper, and often equally effective, generics. In 2015, $5.2 billion was spent on direct-to-consumer advertising of prescription drugs; the majority of such television ads are tax deductible as business expenses. Currently, nine out of 10 drug companies spend more on marketing than on research and development. The U.S. is one of only two nations in which direct-to-consumer advertising of drugs is legal.

Third, medication prices also are inflated by well-meaning government regulations that reward clinically insignificant modifications of common drugs, such as insulin, to retain exclusivity and preempt competition, often with drastic effects on prices. Meanwhile, U.S. manufacturers are free to set the price of their drugs without government constraints. There also are prohibitions against drug importation, further blunting market forces, and Medicare is unable by law to effectively negotiate drug prices. All of this, paradoxically, has led to the U.S. public’s subsidizing of other nations’ drug costs.

While these challenges are daunting, there are bipartisan and practical steps that can be taken to lessen prescription drug costs while maintaining innovation.

First, the federal government should reform the Orphan Drug Act of 1983, which has led to exorbitant price increases by reducing the patient-number threshold needed to qualify as an “orphan” disease. It also would be wise to end the 2006 Food and Drug Administration’s Unapproved Drug Initiative, which has led to frequent drug shortages and substantially higher prices.

Conversely, the FDA should permit reduced medication vial sizes, encourage multiuse vials and significantly extend the recommended shelf lives of medications to decrease unnecessary waste. There is frequently no evidence to justify drug expiration dates and it often grossly underestimates shelf life. It would be advantageous for the FDA to allow select importation of drugs when market distortions exist leading to shortages.

It is also essential to curtail unscrupulous consumer marketing. Congress should eliminate the tax deductibility of such advertising and a rigorous industry code of conduct should be adopted for the marketing of pharmaceuticals.

Finally, health care should continue its gradual move from a fee-for-service system that rewards volume to a value-based payment system that rewards better outcomes for lower costs (i.e., value). Pharmaceutical companies that invest large amounts of money to develop new drugs should be rewarded with patents, but patents are not a license for unrestrained pricing. Pricing of brand drugs should be based upon the drug’s proven value.

By taking these few modest measures, the nation can attain a future where we retain affordable health care while preserving a robust culture of medical innovation.

Physician Charles J. Lockwood is senior vice president for USF Health, dean of the Morsani College of Medicine and a professor of obstetrics/gynecology and public health at the University of South Florida. Lockwood previously was dean at the Ohio State University College of Medicine and chaired OB/GYN departments at Yale and New York University.

His research has been funded by two decades of federal and foundation support. He has published more than 290 peer-reviewed publications, 170 editorials, 87 chapters and invited reviews and edited five textbooks, three with multiple editions.

You May Also Like
CLA Announces career advancements in Tampa Bay

CLA (CliftonLarsonAllen), the eighth largest accounting firm in the United States, announced nationwide career advancements for professionals, including 22 in Tampa Bay. The individuals advancing in Tampa Bay include: Elizabeth

Read More
Moffitt Cancer Center promotes an internal member to general counsel

Moffitt Cancer Center has named Chip Fletcher general counsel. Fletcher has served as the cancer center’s deputy general counsel since 2018, and has provided legal and government relations support for

Read More
Success After Service: How Orgs Are Collaborating to Help Veterans Land Better Careers

What I love most about my work with Action Zone is that every day, I get to help veterans build successful and financially rewarding lives when they return to civilian

Read More
Johns Hopkins University
Hillsborough County to consider land swap to house Sheriff’s office at current Grow Financial HQ

Hillsborough County Commissioners will consider a land swap, at a meeting June 20, that would facilitate a move for the Sheriff’s office, in Ybor City, to a larger site where

Read More
Other Posts
Great Places and Spaces: Gas Plant District redevelopment (RENDERINGS)

The Tampa Bay Rays and Hines revealed new renderings of the Gas Plant District redevelopment including visions for an activated Booker Creek, Class A office space and an art installation. 

Read More
Redefining Refuge’s courageous battle against sex trafficking 

 Did you know that for many years, minor children were arrested for prostitution in the state of Florida despite being forced to engage in inappropriate and horrific behavior against their

Read More
Is the end of the non-compete agreement? Think again.

By Michelle M. Gervais, partner at Blank Rome Politics aside, according to President Biden, the banishing of non-compete agreements is rooted in the argument that “…Capitalism without competition isn’t capitalism;

Read More
USF and Florida Institute of Oceanography acquires a ‘Taurus’ for the sea

Researchers at University of South Florida and Florida Institute of Oceanography have acquired an operated vehicle, appropriately named Taurus, for deep sea exploration. Taurus can dive up to 2.5 miles

Read More