March 5, 2020
A recent report by the Centers for Disease Control and Prevention suggests we may be winning the battle against cancer. But we will lose the war if we don’t do something about the rising cost of drugs in the United States.
At the start of February, the CDC released new statistics showing that life expectancy ticked up for the first time since 2014. This finding is partly due to fewer deaths caused by cancer. Survival rates are increasing thanks to advances in prevention, diagnostics and treatments.
This is cause for celebration. Yet, we must ask ourselves: Can we maintain this progress in light of rapidly increasing drug prices?
The Alliance of Community Health Plans represents the nation’s top-performing nonprofit health plans. We’re focused on improving affordability and outcomes in our nation’s health care system. As part of our work, we routinely collect data from our member companies on how much they spend for various classes of drugs.
We recently took a closer look at the cost of cancer therapies. From 2015-19, oncology costs have more than doubled for our members. Our commercial plans have seen oncology costs increase by 150 percent. Our plans serving Medicare and Medicaid endured oncology cost increases of 157 percent and 141 percent, respectively. For health plans committed to providing affordable coverage and care, these increases are unsustainable.
And yet there is no relief in sight.
According to a recent analysis by Axios, cancer drug prices are on the rise again. The beginning of this year brought a 6 percent increase on the cancer treatment Revlimid, which retails for $22,314 for a supply of 28 capsules (or almost $800 per pill). Similarly, the breast cancer pill Ibrance, which sells for $13,007 for a supply of 21 capsules (or about $620 per pill), will jump by 5 percent.
Immunotherapies have been widely credited as helping reduce the death rate of various cancers. But they carry an astronomical price tag. Kymriah, the CAR-T therapy produced by Novartis, has a list price of $475,000 for one course. That doesn’t include additional costs incurred with administering the drug.
We know that price isn’t the only consideration when discussing cancer care, but it has to be a consideration. Unfortunately, most drug manufacturers refuse to even engage in that conversation.
Big Pharma typically justifies these costs by saying the huge sums fund innovation. That’s not what the evidence shows.
Dr. Peter Bach and his colleagues at Memorial Sloan Kettering examined the prices of top-selling drugs in the nation. They found the premiums “pharmaceutical companies earn from charging substantially higher prices for their medications in the US compared to other Western countries generates substantially more than the companies spend globally on their research and development.”
Bach and his team concluded: “This finding counters the claim that the higher prices paid by US patients and taxpayers are necessary to fund research and development. Rather, there are billions of dollars left over even after worldwide research budgets are covered.”
So where is this excess money going? Profits.
Congress’ independent watchdog, the nonpartisan Government Accountability Office, looked into the drug industry’s spending in 2017. It found that profit margins grew to up to 20 percent for the largest drug companies, more than double the average profit margin of the largest 500 industrial companies.
In comparison, margins for the entire insurance industry in 2018 were 3.3 percent, according to an annual survey conducted by the National Association of Insurance Commissioners. Remember, health plans must live within financial caps, known as medical loss ratio limits.
ACHP members are nonprofit plans, typically operating on 2 to 3 percent margins. They’re in the business of making health care better, not inflating profits. But delivering on that mission is made ever more difficult by the drug industry’s ability to set unjustifiably high prices with no check.
The time to do something is past due. Drug pricing remains one of the top issues for voters and a major pain point for patients. Congress has been debating a number of ideas but has not yet been able to enact comprehensive reforms.
What should be done? First, we need more transparency in the pharmaceutical marketplace.
One of the key reasons drugmakers charge outrageous prices is because they can. So far this year, the prices of more than 2,200 drugs have risen, according to analysts at Raymond James. Shining a light on how companies set and increase prices is a critical first step to reining in the most abusive practices.
Second, increase competition. The lack of competition is a key driver of rising drug prices. At the end of last year, Congress finally passed legislation that will close loopholes that keep generic competitors off the market. But more work is needed, particularly for biologic drugs, many of which are used to treat cancer. Lower-cost versions, known as biosimilars, remain inaccessible as a result of Big Pharma patent abuses.
Ultimately, the true measure of legislative and regulatory action will be the impact on prices. Well-intentioned efforts that merely shift costs will not bring patients and families the relief they need. Creative payment plans for health outcomes may offer an alternative path, but we are a long way from recouping significant savings.
It is exciting to consider the notion that cancer may go from being a death sentence to a chronic condition, thanks to modern breakthroughs. But these cures will only work if patients, health plans, employers and government purchasers can actually afford them.
Ceci Connolly is president and CEO of the nonprofit Alliance of Community Health Plans, a national consortium of 25 nonprofit health organizations, and a former national health correspondent for The Washington Post.
Bobby Clark is a principal at HCM Strategists and consults for ACHP. He previously served as a senior health policy adviser in the House of Representatives and the Department of Health and Human Services during the Obama Administration.