Published by CQ Press, an Imprint of SAGE Publications, Inc. www.cqresearcher.com Prescription Drug Costs Do research expenses justify eye-popping prices?

ecent high-profile Senate hearings have highlighted a phenomenon many Americans know well: the soaring price of prescription drugs, some needed to keep patients alive. New blockbusters routinely cRost more than $100,000 for a course of treatment, and similar “me too” drugs for the same conditions later launch at almost identical prices. Drug manufacturers blame the rising cost of re- search and development, but critics blame excessive profit-seeking and exorbitant marketing budgets. Meanwhile, prices for some common, decades-old generics also are rising as competition in that part of the industry collapses. The price of the antibiotic tetra- cycline, for example, rose more than 7,500 percent in two years. Martin Shkreli, former CEO of Turing Pharmaceuticals, invoked his 5th Amendment right not to testify at a A majority of Americans say keeping drug prices affordable should Feb. 4 congressional committee hearing examining prescription drug price gouging. After acquiring the rights to manufacture the life-saving generic drug be the top national health care priority, and all three remaining Daraprim, Turing raised its price by 5,000 percent. presidential candidates have promised relief. To help slow the I rising costs, states are introducing bills and ballot measures to THISREPORT N THE ISSUES ...... 459 require drug makers to disclose their actual costs and, in some S BACKGROUND ...... 465 cases, cap prices. I CHRONOLOGY ...... 467 D CURRENT SITUATION ...... 472 E CQ Researcher • May 20, 2016 • www.cqresearcher.com AT ISSUE...... 473 Volume 26, Number 20 • Pages 457-480 OUTLOOK ...... 474 RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR BIBLIOGRAPHY ...... 478 EXCELLENCE ◆ AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD THE NEXT STEP ...... 479 PRESCRIPTION DRUG COSTS

May 20, 2016 THE ISSUES SIDEBARS AND GRAPHICS Volume 26, Number 20 EXECUTIVE EDITOR: Thomas J. Billitteri • Do high development costs Drug Spending Continues [email protected] 459 justify soaring drug prices? 460 to Climb ASSISTANT MANAGING EDITORS: Kenneth • Should patent rights be Outlays are expected to ex- Fireman, [email protected], changed? pand through 2024. Kathy Koch, [email protected], Chuck McCutcheon, • Should the United States Medicare’s Share of Drug [email protected], adopt cost-containing measures 461 Scott Rohrer, [email protected] used in other industrialized Bill Soars countries? The federal insurer covered SENIOR CONTRIBUTING EDITOR: 29 cents per dollar spent in Thomas J. Colin 2014. [email protected] BACKGROUND CONTRIBUTING WRITERS: Brian Beary, 464 Majority Backs Stiffer Marcia Clemmitt, Sarah Glazer, Kenneth Jost, “Patent” Medicines Price Rules Reed Karaim, Peter Katel, Barbara Mantel, 465 Three in five Americans say Tom Price Some 19th-century companies government should further hawked secret, addictive SENIOR PROJECT EDITOR: Olu B. Davis nostrums. regulate drug prices. ASSISTANT EDITOR: Ethan McLeod Chronology Patent Puzzles 467 INTERN: Molly McGinnis 468 Laws passed in the 1980s Key events since 1905. FACT CHECKERS: Eva P. Dasher, commercialized and expanded Drug Ads Cause Headaches Michelle Harris, Nancie Majkowski, drug-patent rights. 468 for Physicians Robin Palmer Seeking Alternatives Critics, manufacturers differ on 470 Policymakers sought to curb whether TV commercials help rising prices and copycat drug consumers. development in the 1990s. 470 Drug-Vial Waste Costs Billions An Imprint of SAGE Publications, Inc. “This is a calculated way of CURRENT SITUATION increasing revenue.” VICE PRESIDENT AND EDITORIAL DIRECTOR, HIGHER EDUCATION GROUP: Price Controls At Issue: Michele Sordi 472 At least 11 states are consid- 473 Should Medicare be allowed EXECUTIVE DIRECTOR, ONLINE LIBRARY AND ering bills to raise pricing to negotiate drug prices? REFERENCE PUBLISHING: disclosure requirements. Todd Baldwin Sticker Shock FOR FURTHER RESEARCH Copyright © 2016 CQ Press, an Imprint of SAGE Pub- 474 Makers of expensive hepatitis lications, Inc. SAGE reserves all copyright and other C treatments face scrutiny For More Information rights herein, unless pre vi ous ly spec i fied in writing. over pricing. 477 Organizations to contact. No part of this publication may be reproduced electronically or otherwise, without prior written 474 Congress Debates Bibliography permission. Un au tho rized re pro duc tion or trans mis - Democratic House members 478 Selected sources used. sion of SAGE copy right ed material is a violation of seek to withdraw companies’ federal law car ry ing civil fines of up to $100,000. marketing rights to unreason- ably priced drugs. 479 The Next Step CQ Press is a registered trademark of Congressional Additional articles. Quarterly Inc. Citing CQ Researcher CQ Researcher (ISSN 1056-2036) is printed on acid-free OUTLOOK 479 Sample bibliography formats. paper. Pub lished weekly, except: (March wk. 4) (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) Good News, Bad News 474 and (Dec. wks. 3, 4). Published by SAGE Publications, Forthcoming groundbreaking Inc., 2455 Teller Rd., Thousand Oaks, CA 91320. Annual drugs likely will have high full-service subscriptions start at $1,131. For pricing, costs, experts say. call 1-800-818-7243. To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress. com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Thousand Cover: Getty Images/Mark Wilson Oaks, California, and at additional mailing offices. POST - MAST ER: Send ad dress chang es to CQ Re search er, 2600 Virginia Ave., N.W., Suite 600, Wash ing ton, DC 20037. 458 CQ Researcher Prescription Drug Costs BY LESLIE ALLEN

and 21st-century medicines. We’re not about repricing THE ISSUES drugs from the 1950s to make he drug was a lifesaver: a profit.” 4 For years, a steady sup- But the actions of Turing T ply of Daraprim had and a few other outliers have kept Reva Jones of Baltimore shone a spotlight on the free from the devastating effects much larger issue of skyrock- of toxoplasmosis, an infection eting costs for both brand that can cause brain damage and non-brand, or generic, and blindness. The price had drugs. Between 2013 and risen in recent years, but at 2015 the cost of more than s i

$13.50 a pill, it was still an af- r two dozen prescription drugs r fordable, effective solution for o grew 400 percent or more, M

l her and thousands of others u and by more than 1,000 per- a

P 5 with immune systems weak- cent for a few drugs. d i v

ened by chemotherapy, HIV a But the price surge is not D infection, organ transplants or / a new phenomenon: Before g r other conditions. e moderating somewhat during b m

Then last September, the o the 2007-09 recession, prices o l

medication stopped arriving B for 416 brand-name drugs rose / from Jones’ mail-order phar- s anywhere from 100 percent e g macy. She and her family a to, in some cases, more than m I

learned the price had suddenly y 1,000 percent between 2000 t t skyrocketed, and they suspect- e and 2008, according to a re- G ed the insurance company A scientist analyzes drug samples at a Gilead Sciences port by the Government Ac- 6 was refusing to cover it. But laboratory in Foster City, Calif. After an 18-month countability Office (GAO). before she had time to inves- investigation, the Senate Finance Committee concluded Since 2008, brand-name drug tigate, Jones’ supply ran out. in December that Gilead — in developing the costly new prices have risen 164 percent “She became more and hepatitis C drugs Sovaldi and Harvoni, in part using overall. 7 public funds — “focused on maximizing revenue even as more confused and couldn’t the company’s analysis showed a lower price By 2018, total prescription walk or bathe or take care of would allow more patients to be treated.” drug spending is projected to herself,” recalls her daughter, rise to $535 billion, representing Louise. By the time the family got Jones the sole U.S. supplier of Daraprim, and 16.8 percent of annual health care costs to Johns Hopkins Hospital in Baltimore, promptly raised the price by 5,000 per- — up from 7 percent in the 1990s — 3 she couldn’t speak. cent. Since then, the startup and its most of it due to rising drug prices. 8 Dr. Annie Antar, who led the Hopkins then-CEO — former hedge fund man- Some modern drugs — many de- team caring for Jones, soon discovered ager Martin Shkreli (later arrested on veloped through taxpayer subsidized that besides jacking up the price, drug- fraud charges in an unrelated case) — research — provide enormous benefits maker Turing Pharmaceuticals had also have been Exhibit A in a growing scan- and sometimes even cures. But the ris- drastically curtailed Daraprim’s distrib- dal over alleged price gouging by some ing prices raise fundamental questions ution. 1 “It took almost five days to get drug companies. about the current system’s sustainability, a supply,” Antar says. When the bottle Turing’s business model represents because they are straining federal and of 90 pills finally did arrive, it was an extreme example of what many state health care budgets and raising priced at $67,500, or $750 a pill. 2 see as excessive profit-seeking and has out-of-pocket costs for both the insured Daraprim (pyrimethamine) is the been widely condemned by other drug- and uninsured. 9 only treatment approved for toxoplas- makers, as well as patients and members More basically, experts are beginning mosis. Few Americans had even heard of Congress. “This is not what we do to question whether the free-market of the 62-year-old drug until last August, in the biotech industry,” Alnylam Phar- model of drug pricing conflicts with when Turing acquired the rights to maceuticals’ CEO John Maraganore told medical ethics, especially if companies manufacture it from Impax Laboratories, CNBC. “We’re about innovation, patience are earning what society sees as un-

www.cqresearcher.com May 20, 2016 459 PRESCRIPTION DRUG COSTS

buster medicines developed with public Drug Spending Continues to Climb money. Per capita U.S. spending on prescription drugs rose more than Two such blockbusters are the costly new hepatitis C drugs Sovaldi and Har- 11 percent from 2013 to 2014, the latest year tallied by the U.S. voni. After an 18-month investigation, Centers for Medicare and Medicaid (CMS), while inflation grew the Senate Finance Committee concluded less than 1 percent during that period. The agency projected a in December that the developer of the 7 percent increase in 2015 and average growth of about 5 percent two drugs, Gilead Sciences, pursued a annually over the next nine years. Spending slowed in the 2000s strategy “focused on maximizing revenue because many drug patents expired and generic prices and drug even as the company’s analysis showed purchases fell during the 2007-09 recession. Spending then a lower price would allow more patients declined in 2010 and 2012 as Americans increasingly relied on to be treated.” 13 Under a never-used generic medications. federal provision, the government can withdraw the exclusive marketing rights Actual and Projected Average Annual Changes in awarded to drug companies if they have Prescription Drug Spending Per Capita, unreasonably priced their products. 15% 2000-2024 Exacerbating the drug pricing situ- 12 Actual Projected ation — and contrary to normal market 9 forces — price tags on some generics 6 have risen steeply as well. Typically, 3 prices for such non-brand versions of 0 patent-expired drugs decline over time -3 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 as competitors emerge. Yet, from 2013 to 2015, the common antibiotic tetra- Sources: Rabah Kamal and Gary Claxton, “Recent trends in prescription drug cycline, for instance, rose 7,567 percent, spending, and what to look out for in coming years,” Kaiser Family Foundation, while the cost of the antidepressant Dec. 9, 2015, http://tinyurl.com/zjlsmsr; “What are the recent and forecasted amitriptyline climbed 2,475 percent. 14 trends in prescription drug spending?” Kaiser Family Foundation, http://tinyurl. com/hgf8mmv; Marilyn Werber Serafini, “National Health Spending Grew Slowly Experts blame the rising cost of gener- In 2010,” Kaiser Health News, Jan. 9, 2012, http://tinyurl.com/h34llv2; inflation ics on manufacturing problems, drug figure from U.S. Bureau of Labor Statistics, http://tinyurl.com/zjp4mte shortages and, primarily, industry con- solidation, resulting in fewer suppliers reasonably high profits on products that drugs tested on people ever make it to to meet growing demand. 15 patients need to survive. market, according to the Pharmaceutical “In some corners of the generic industry, For example, the latest drug for Research and Manufacturers of America prices are rising by eye-popping numbers, leukemia, a blood cancer, runs $768,000 (PhRMA), the industry’s main trade asso- and there’s no magic as to why: low a year, and the critical cystic fibrosis ciation. And drugmakers point out that competition,” says Aaron Kesselheim, an drug Kalydeco up to $373,000. 10 The discounts and rebates lower the effective associate professor of medicine at Harvard annual cost of the newest lung cancer cost to patients, most of whom have Medical School who studies prescription drug is $168,000 and the cancer drug insurance to help cover costs. Publicly drug costs, availability and regulation. Revlimid about $150,000. 11 Prices also traded companies also cite pressure from “When competition breaks down, com- have risen steeply even for older brand- shareholders to keep earnings high. panies can raise prices, and natural mo- name drugs, such as the leukemia drug But critics of industry pricing practices nopolies occur. It’s not illegal.” Gleevec, which listed at $26,400 a year say companies are seeking unreasonably Still, recent price hikes for decades- when it was introduced in 2001; it now high profits and criticize drugmakers’ old drugs have sparked widespread out- costs more than $120,000, wholesale. 12 free-flowing marketing budgets, up rage. Last December, during a Senate In justifying the price increases, man- sharply since the government allowed Special Committee on Aging hearing on ufacturers cite enormous research and direct-to-consumer drug advertising in the issue, senators from both parties di- development (R&D) costs, along with 1997. (See sidebar, p. 468.) Critics also rected their ire at Turing and another the high risk that the drugs won’t make say the industry’s R&D expense estimates small company, Valeant Pharmaceuticals it through the years-long process of are too high. In addition, many experts International, which has steeply increased gaining Food and Drug Administration question who should profit, through the price of several older drugs, including (FDA) approval. Only 12 percent of patents and licensing, from new block- critically important heart medications. 16

460 CQ Researcher Critics allege that Turing intentionally restricted access to Daraprim so the Medicare’s Share of Drug Bill Soars company, the drug’s sole manufacturer, Medicare covered 29 cents of every dollar spent on prescription could keep prices high and prevent a drugs in 2014, up from less than 2 cents in 2004. Health-policy potential competitor from obtaining experts attribute the increase in part to implementation of a Medi- enough of the drug to create a generic version. 17 In a statement, Turing said care prescription drug benefit in 2006. The share of spending it is committed to ensuring access to covered by private insurers shrank from 49 cents to 43 cents. Daraprim for any patient who needs Percentage of U.S. Prescription Drug Spending by Source, it by lowering the price. 18 2004 and 2014 Reva Jones’ daughter Louise blames the long delays in obtaining the drug 2004 2014 for her mother’s slower-than-expected recovery. Years ago, when her mother had first developed symptoms of the infection, prompt treatment with Dara- prim had allowed a speedy recovery, she says. “But this time it’s different.” “I love my mother, and this makes me so angry,” says Louise, who once donated a kidney to her. “I think this PrivPrivate Insurance Out of pocpocket is all about greed.” MedicaidMedicaid Americans also pay significantly OtherOther more than consumers in other countries MedicareMedicare for the same drugs. 19 Daraprim costs less than a dollar per pill in the United Sources: “Table 16, Retail Prescription Drugs Expenditures,” National Health Expenditures tables, Centers for Medicare & Medicaid Services, updated Dec. 3, Kingdom. 20 In India, more than a 2015, http://tinyurl.com/zp7vbz7; “Visualizing Health Policy: Recent Trends in dozen drugmakers manufacture and Prescription Drug Costs,” Kaiser Family Foundation, April 5, 2016, sell generic versions of the drug for http://tinyurl.com/hoc35s4 as low as 4 cents per pill. 21 Unlike other countries, which have universal cluding coverage of high-priced drugs pay only for the cost of developing health care systems that directly or in- if lower-priced alternatives exist. that product. directly regulate and subsidize drug As patients, physicians, drugmakers, Both the industry and its critics agree prices, the United States mainly leaves ethicists and lawmakers discuss sky- the FDA approval process is challeng- drug pricing to market forces. 22 rocketing drug prices, here are some ing. Clinical trials alone take six or But Americans’ traditional advocacy of the questions they are debating: seven years of the average 10-year of free markets and wariness of gov- drug-development process, according ernment involvement increasingly are Do high development costs justify to PhRMA, the big industry trade group, bumping up against calls for action, soaring drug prices? and compounds that make it to market with a majority of Americans now citing One of the most contentious areas represent a tiny fraction of the “thou- drug prices as their top health concern, of debate surrounding drug pricing is sands and sometimes millions” that are according to polling by the nonpartisan the high cost of research and devel- screened during the early phases of Henry J. Kaiser Family Foundation. 23 opment — inventing and testing a new investigation. 24 Experts suggest a variety of measures drug and shepherding it to the market But experts disagree on the extent to deal with high drug prices, including through the FDA approval process. to which research and development requiring more transparency about how Drugmakers say high R&D costs costs contribute to rising drug prices. drugmakers set prices; lifting a federal justify rising prices, while critics want PhRMA and drug company represen- ban on Medicare negotiating with drug- more disclosure about those costs. tatives say it costs about $2.6 billion to makers for discounted prices; and al- The industry says it needs to cover steer the average drug to market, ac- lowing the importation of lower-cost past costs, for both drugs that get ap- cording to figures from a 2014 study by drugs from abroad. Some medical ex- proval and those that fail; critics say the Tufts Center for the Study of Drug perts, insurers and others favor ex- the revenue from a new drug should Development, which is heavily funded

www.cqresearcher.com May 20, 2016 461 PRESCRIPTION DRUG COSTS

by the pharmaceutical industry. 25 The might otherwise have earned in non- These critics point out that, directly figure was nearly $1 billion higher than drug-related investments while a drug or indirectly, American taxpayers are a 2012 estimate by the London-based was in development. Critics say those the single largest investor in the phar- Office of Health Economics, which re- hypothetical returns are unrealistically maceutical industry. The government ceives drug industry funding as well. 26 high and point out that research is the subsidizes the development of many The $2.6 billion figure also reflects, with backbone of the drug business. 30 new drugs twice: by providing tax credits adjustments for inflation, a 145 percent Of the remaining $1.4 billion, several to help cover the cost of clinical trials increase over the Tufts Center’s own factors accounted for the big jump in and by funding research at drug research 2003 estimate of $802 million. A sys- R&D estimates, according to Joseph A. centers across the country through the tematic review in 2010 of studies of DiMasi, the Tufts study’s lead author: National Institutes of Health, whose pro- drug R&D costs found estimates ranging “Clinical trials are becoming more com- posed 2017 budget is $33.1 billion. 33 from $161 million to $1.8 billion per plex,” he says. There is also more testing According to one recent analysis, successful drug. 27 against comparable existing drugs, DiMasi more than half of the groundbreaking The Tufts research looked at 106 says, and medical cost inflation. drugs developed in recent decades orig- new drugs tested in humans between Increasingly complex approval pro- inated in publicly funded research cen- 1995 and 2007, but it did not disclose cedures are responsible for “a substantial ters. 34 Another recent study said “public- the particular drugs, the drugmakers increase in clinical failure rates,” which sector research has had a more immediate or the data supporting the findings. 28 contributes to a large share of the in- effect on improving public health than “Those data are secret, and no one crease in costs, DiMasi says. Fewer than was previously realized.” 35 else gets to really see or verify them,” 12 percent of new drugs make it to The Tufts study did not address the role of public funding of basic research in the development of new drugs. It looked only at “entirely private-sector research costs,” DiMasi says. Fueled by the Senate’s investigation into Gilead’s pricing strategy for its new hepatitis C drugs, industry critics increas- ingly are challenging companies’ R&D n

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G and other groups that advocate for in- Doctors Without Borders employees and volunteers protest at Pfizer creased affordability, transparency and headquarters in New York City on April 23, 2015, against the drugmaker’s high vaccine prices in developing nations. Drug manufacturers say rising research other reforms in the health care system. and development costs force them to raise prices, but critics blame excessive Drug industry representatives also jus- profit-seeking and marketing budgets. A majority of Americans say keeping tify the high prices by noting the cost- drugs affordable should be the top national health care priority, and all three cutting and lifesaving importance of new remaining presidential candidates have promised relief. drugs, such as the hepatitis C drugs. said Aaron Carroll, a professor of pe- market now, compared with 21.5 percent “Curing hepatitis C not only dramat- diatrics at Indiana University who writes in the earlier study. 31 ically improves patients’ lives but has on health policy. 29 Critics of the study note that many the potential to save the U.S. health care Carroll and other skeptics of the Tufts new cancer drugs are eligible for ex- system as much as $9 billion per year estimate question the study’s methodol- pedited clinical trials, which helps lower by preventing expensive hospitalizations ogy. For example, they say, the Tufts development costs. Companies also re- and avoiding thousands of liver trans- researchers assigned $1.2 billion — almost ceive special tax credits that cover half plants that routinely cost over $500,000 half their total R&D estimate — to op- of the cost of clinical trials, they say, each,” PhRMA’s then-President and CEO portunity costs: the returns investors further reducing development costs. 32 John Castellani said in 2014. 36

462 CQ Researcher Should patent rights be changed? that competition should bring down companies can’t patent the drugs be- FDA approval signals a new drug’s prices. Newer drugs often cost con- cause they’re no longer new,” he says. safety and evidence of effectiveness, siderably more than comparable but Roin proposes giving drugmakers but not its therapeutic or monetary slightly older ones, and their prices re- lengthier exclusivity periods so they value compared with other drugs for main high. 42 will have more incentive to develop the same condition. U.S. patent law also influences drug drugs from these discarded patented When it approves a drug, the FDA pricing by allowing drug companies compounds. But Boston University law gives the manufacturer exclusive rights to file for a patent, valid for 20 years, professor Kevin Outterson has recom- to market the drug for a period of time, during which time other companies mended government funding to de- usually five years. During that period, cannot make, use or sell the drug. velop such unpatentable lost drugs. 46 the drug is protected by law from com- Drug patent exclusivity periods may Under the so-called Bayh-Dole Act peting brand-name products or low- or may not run concurrently with FDA- of 1980, the federal government gives priced generics, so pharmaceutical com- granted exclusivity periods. 43 academic and nonprofit research centers panies are free to set prices as high as However, in a practice known as the right to patent drugs developed the market will bear. 37 Most spending “evergreening,” or “product-hopping,” based on federally funded basic re- on brand-name prescription drugs, drug companies whose patents are search. Those institutions can then li- which represent only about one-fifth about to expire can receive new patents cense or sell the patents to pharma- of all prescription drugs, occurs during by slightly tweaking the drugs’ makeup, ceutical companies. But the law also these exclusivity periods. 38 thus renewing the drug’s exclusivity allows government agencies to take The exclusivity period may be longer period and keeping lower-priced gener- over those patents to ensure the public or shorter depending on the circum- ic versions from entering the market. pays reasonable prices for drugs de- stances of approval and the drug. For “There is a consistently low threshold veloped with government funding. 47 example, under the Affordable Care Act for granting patents,” Harvard’s Kessel- Those “march-in” rights have never (ACA) of 2010, complex drugs known heim says. “Many are not innovative been enforced, however. as biologics, made from living cells, are at all but, instead, [are] high-cost and Some critics suggest bypassing the protected from competition for 12 years low value.” patenting process altogether, particularly because of their lengthier development “Pay-for delay,” another controversial if public funding or a billionaire phil- periods and higher associated costs. 39 practice in drug patenting, occurs when anthropist’s donation, for example, sub- But some critics argue that some branded drugmakers pay potential sidized clinical trials that led to one new drugs, such as so-called follow- generic competitors to delay introduc- or two breakthrough drugs. on drugs — introduced after a com- tion of lower-priced products. The Fed- “Imagine if a major new cancer drug parable drug has gained FDA approval, eral Trade Commission (FTC), which was available for less than $1,000 a year and often nicknamed “me-too” drugs identified 29 potential pay-for-delay when the drugs being developed through — involve little innovation and do not deals in 2013 worth $4.3 billion, has the patent system were selling for $150,000 justify a lengthy exclusivity period. “A sued several drugmakers over the prac- or more,” says economist Dean Baker, drug which provides little or no in- tice. 44 That same year the Supreme co-director of the liberal Washington- cremental value over existing products Court said pay-for-delay agreements based Center for Economic and Policy gets the same ability to charge a mo- may violate antitrust rules, although it Research, who has written extensively nopoly price for an extended period did not address whether the agreements on drug research financing. “That would of time as a lifesaving breakthrough,” were unlawful. 45 really be a shock to the industry.” according to Alfred Engelberg, founder The patent process also affects drug of the Engelberg Center for Health Care prices by creating so-called lost drugs. Should the United States adopt Reform at the Brookings Institution, a These are created when drugmakers, cost-containing measures used in centrist think tank in Washington. 40 early in the development process, patent other industrialized countries? Tufts’ DiMasi and other researchers thousands of drug compounds, some Overall, Americans pay significantly say follow-on drugs deserve exclusivity of which they ultimately will discard, more for prescription drugs than citizens because they may offer more treatment says Benjamin Roin, an assistant pro- of other countries — more than twice options and keep prices down by en- fessor at the Massachusetts Institute of as much as in most other developed hancing competition. 41 Technology’s Sloan School of Manage- nations and more than three times as But several studies have found that ment. “Discarded compounds could be much as citizens in Denmark, New the pricing of these drugs defies con- valuable drugs in the future, but when Zealand and Israel. 48 For the 20 top- ventional economic theory, which holds later research reveals this potential, selling drugs, Americans pay an average

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pharmaceutical industries in other de- Majority Backs Stiffer Price Rules veloped countries, mainly by reducing About three-fifths of American adults say the government needs to money available for R&D. And a lit- do more to regulate prescription drug prices, while a fifth say the erature review for the nonprofit Institute of Medicine — part of the National government uses a proper level of regulation. Academies of Sciences — concluded Percentage of U.S. Adults with Views on that a similar outcome could be ex- Prescription Drug Price Regulation* pected if pricing controls were instituted in the United States. 55 Not as much as is needed 62% But others believe that reference pricing would not stifle innovation. Ac- cording to Austin Frakt, a health econ- About the right amount 20% omist with Boston University and the Veterans Administration, “Such a drug might be placed in a new class and Too much 13% therefore could be priced high.” 56 Congress has defeated repeated ef- * Data exclude refused or “don’t know” responses. forts by Democrats to legislate drug Source: Bianca DiJulio, Jamie Firth and Mollyann Brodie, “Kaiser Health price caps and to authorize Medicare 57 Tracking Poll: October 2015,” Oct. 28, 2015, http://tinyurl.com/h6zlze5 to negotiate discounted prices. “These issues come up again and of three times as much as British con- Administration, for instance, the govern- again,” says conservative economist sumers. 49 ment would save $16 billion a year. 51 Douglas Holtz-Eakin, former director Patients in other countries usually Governments in other countries use of the nonpartisan Congressional Bud- receive prescription drugs covered by a variety of strategies to keep drug get Office under Republican President universal health insurance programs prices down, including negotiating with George W. Bush. “The last thing I subsidized by taxpayers. In the United drugmakers. They also guide coverage would want to see is Congress getting States, where income taxes are much and pricing decisions for new drugs involved. It’s not good for anyone,” lower, public insurance programs are by relying on “reference pricing” — Holtz-Eakin said. Instead he would available only to senior citizens, low- grouping drugs with the same or similar streamline the FDA to cut the cost of income Americans, people with dis- therapeutic effect into classes. For example, getting prescription drugs approved. abilities, veterans and active U.S. military Advil, Motrin and other ibuprofen-based In 2003 Holtz-Eakin developed cost personnel. More than half of Americans drugs might be grouped into a single estimates for the Medicare Part D pre- rely on private insurance plans, which class. The reference price then becomes scription drug benefit. Originally pro- have little bargaining clout with big the standard price insurers will cover, jected to cost $122.88 billion a year by pharmaceutical companies. 50 usually based on the lowest-priced prod- 2012, actual costs for the program in And a variety of regulations constrain uct or an average of all the products 2012 were $55 billion. Holtz-Eakin in big public plans in the United States. in a class. 52 Makers of competing drugs 2014 called Part D “the best-functioning For instance, the Veterans Health Ad- may charge more or less, but patients federal entitlement program, one that ministration and the Medicaid program pay out-of-pocket for any costs above the actually provides the benefits promised for low-income Americans can limit the reference price. 53 at a low cost.” 58 prices they pay to drug companies. But In a systematic review of 16 studies Almost two-thirds of Americans say in a compromise involving drug manu- of reference pricing published between the government should act to lower facturers and other parties, Congress 2002 and 2011 in six countries, re- drug prices, according to a 2015 poll prohibited Medicare from negotiating searchers concluded that the policy re- by the Kaiser Family Foundation. 59 lower group prices for its Part D pre- duced drug prices by up to 24 percent (See graph, above.) scription drug insurance program, which and reduced expenses for both patients For many medical experts, the issue lawmakers created in 2003 and now and insurers. The review also found comes down to the relative value of covers 70 million older Americans. that reference pricing did not result in available drugs — how different drugs According to federal and academic more doctor visits or hospital stays. 54 for the same conditions compare in data, if Medicare Part D benefited from Critics of reference pricing contend terms of therapeutic value and cost. the same discounts as the Veterans that it has stifled innovation in the “Americans at the same time are

464 CQ Researcher getting tremendously ripped off with new regulations to control soaring one-page sheets created by nostrum drugs and also getting tremendous value, cancer-drug prices. 64 makers to tout their products. 67 and we almost never know when we’re Several insurance companies and These patent medicines were not getting ripped off and when we’re getting pharmacy benefit managers — which protected by patents as defined by real value,” said Steven Pearson, a lec- administer drug programs for groups current law, which would have required turer at Harvard Medical School. 60 of plans — are striking “value-based” the makers to disclose the products’ To help answer that question, Pearson deals with manufacturers. In May, health formulas. Rather, “patent” was a term founded the nonprofit Institute for Clinical insurer Cigna Corp. announced that denoting the formula’s secrecy; tech- and Economic Review in Boston, which makers of new cholesterol drugs will nically, patent medicines were “propri- reviews the clinical and cost effectiveness provide discounts if the drugs do not etary” products with copyright-protected and other potential benefits of new drugs, work as well as expected. 65 trademarks. 68 But those secret formulas along with projected budget impacts of Medical experts generally agree that often included opium, cocaine and the drugs at their list prices. The infor- new perspectives on drug pricing will other highly addictive ingredients that mation yields a “value-based price bench- take hold slowly. “America doesn’t do ensured continued sales. 69 mark” that, he says, insurers are beginning things in one fell swoop,” Pearson says. Nostrum makers also cast a wide to use to help them decide reasonable “But we’re not using our resources net across disease categories to protect prices for reimbursing patients. wisely, and maybe we are ready to their profits. William “Old Bill” Rocke- PhRMA, the drug industry lobbying have this conversation.” feller, father of Standard Oil founder group, says the concept “is based on John D. Rockefeller hawked bottled untested, short-term budget-impact “Nujol” as a cancer cure — and later, thresholds that do not reflect overall as a cure for constipation, cholera, bron- health care value and are biased against chitis and various other complaints. 70 61 BACKGROUND new innovative medicines.” The “ethical” sector of the industry, Other efforts are underway to in- which disclosed its drug formulas and clude value-based information on new marketed only to physicians, argued that drugs, especially for ultra-expensive “Patent” Medicines patenting drugs was quackery. 71 Since new cancer drugs. The Memorial Sloan its founding in 1847, the American Med- Kettering Cancer Center in New York he tension between commerce and ical Association (AMA) asserted that all City has introduced an interactive online T societal perceptions of ethical practice drug formulas, along with other medical tool, the Drug Abacus, which describes is a long-standing theme in American knowledge, should be made public. 72 the attributes of 54 new cancer drugs drug manufacturing and pricing. During In 1881, patent medicine manufac- and offers comparisons within classes. most of the 19th century, few people be- turers formed their own trade group, The American Society of Clinical On- lieved in the effectiveness of drugs, which the Proprietary Association of America. cology also has published value-based came to be known as patent medicines. By 1902, nearly one-fourth of New comparative data on cancer drugs. 62 “If all the medicines in the world York City physicians were prescribing Doctors at Sloan Kettering touched were thrown into the sea, it would be patent medicines, and the AMA could off a national debate about drug pricing all the better for mankind and all the not persuade medical journals to stop in 2012, when they wrote an op-ed for worse for the fishes,” the eminent physi- running ads for them. 73 The New York Times detailing the center’s cian Oliver Wendell Holmes Sr., father During the early 1900s, several forces refusal to recommend a new cancer of the Supreme Court justice, famously combined to shift power in the drug drug they said was no more effective remarked in 1842. 66 industry. Muckraking journalists detailed than existing drugs but was twice as At the time, practitioners, who often the outright fraud perpetrated by the expensive. “In most industries something prepared their own remedies, were facing patent medicine companies, often with that offers no advantage over its com- stiffening competition from companies lethal results for unsuspecting Ameri- petitors and yet sells for twice the price that concocted nostrums containing secret cans. And Progressive-era activists cru- would never even get on the market,” ingredients whose curative powers man- saded for change. the doctors wrote. “But that is not how ufacturers promoted relentlessly in news- In 1906 Congress passed the Pure things work for drugs.” 63 papers, health guides and advice columns. Food and Drug Act, which made it illegal Sloan Kettering’s action prompted Supporting these patent medicines were to misrepresent the ingredients in foods similar objections from other doctors. robust advertising budgets that formed or medicines. 74 But the law did not re- Last July more than 100 oncologists the financial backbone of many news- quire manufacturers to verify claims about from around the country called for papers. Other papers got their start as their products’ effectiveness or safety.

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Before long, nostrum makers were again Prescription-only sales, which took culosis, earned Waksman the Nobel making outrageous claims. 75 decision-making out of the hands of Prize. Ultimately, the drug was licensed Meanwhile, though, the AMA began consumers, allowed drugmakers to cut to several companies and sold gener- setting standards for drugs and testing their advertising budgets and focus their ically; its price plummeted, just as peni- them in its own laboratory. It also for- marketing efforts on physicians. 79 cillin’s had. 82 mulated strict rules on newspaper ad- Few science-based drugs, and even Drug companies realized that to profit vertising of nostrums, with which many fewer therapeutically effective ones, from new miracle drugs, they had to newspapers complied despite the loss came on the market during the first adopt a new business model: They quick- of revenue. 76 half of the 20th century. Of those that ly developed a host of new antibiotics, The goal was to keep information did, by far the most significant were similar to streptomycin and penicillin, about nostrums from consumers “and antibiotics, wonder drugs that could patented them and refused to license re-channel drug purchasing through speedily cure until-then deadly infec- them to other companies. Then they physicians,” Princeton University sociol- tions. Penicillin, isolated in 1929, was marketed these so-called me-too drugs ogist Paul Starr wrote in The Social Trans- the first of them. During World War II, as new and improved versions of the formation of American Medicine. 77 Still, the government developed techniques generic originals. 83 The companies dis- the FDA, created in 1931, did not establish for its mass production, making peni- patched representatives, called detail men, to personally explain to doctors why their new antibiotic was superior to its competitors. During the 1950s, the main antibiotic-producing drugmakers spent more than half of their advertising budget on detailing. 84 With so many similar antibiotics jostling for market share, prices would

o be expected to drop. Instead, they n a i

l soared, largely because detail men were g

u able to keep physicians interested in P

l l i new products. B /

s Similarly, when whole new classes e g

a of drugs — antidepressants, antacids, m I

blood-pressure medicines and others y t t

e — were introduced in the 1950s, other G Zane Pauley of Whitmore Lake, Mich., holds up a list of prescription drugs he plans to firms rushed in with copycat drugs, buy in Canada. By the mid-1990s busloads of older Americans were making highly marketed as new and improved, and publicized buying trips to Canada and Mexico, where drug prices were much lower sold them at the higher prices. 85 In than in the United States. In 2003 Congress narrowly voted to create the Medicare defiance of textbook economic principles, Part D prescription program but barred Medicare from negotiating drug prices. prices remained high. Between late 1959 and 1963, the rules for labeling certain drugs “by pre- cillin the most common treatment for powerful Sen. Estes Kefauver, D-Tenn., scription only” until 1938. 78 battlefield injuries. 80 After the war, the chairman of the Senate Antitrust and The Food, Drug, and Cosmetic Act government licensed generic penicillin Monopoly Subcommittee, shifted the of 1938 required drugmakers to demon- to several firms, which competed fierce- panel’s focus from attacking organized strate their products’ safety before mar- ly for market share. As a result, the crime to the drug industry’s profit mar- keting them. While previous food and price of a pound of penicillin fell gins, advertising practices and patent drug legislation had focused on the from $3,995 to $282 between 1945 law abuses. 86 In one hearing, a former food supply, this law for the first time and 1950. 81 research director for a major drugmaker focused on scientifically based drugs. Something similar happened after admitted that a desire for copycat drugs It passed in the wake of a national Selman Waksman, a New Jersey soil that “promise no utility” drove more tragedy: More than 100 people, mostly scientist, developed the first of a new than half of his company’s research. 87 children, had died after taking a sulfa- class of antibiotics from bacteria-killing Kefauver wanted legislation to rein based antibiotic that contained a solvent microbes found in soil. Streptomycin, in such abuses, but the 1962 amendments used in antifreeze. the first effective treatment for tuber- Continued on p. 468

466 CQ Researcher Chronology

1997 1850s-1905 1980-1984 FDA allows drug companies to The heyday of patent medicines Biotechnology revolution and advertise their products directly to ushers in widespread, unregu- other innovations send new- consumers. . . . FDA Modernization lated advertising. drug prices higher. Act allows pharmaceutical companies to advertise “off-label” uses. 1905 1980 Collier’s magazine publishes an Bayh-Dole Act allows universities and 2000 exposé of patent medicines by laboratories conducting government- Maine passes a law that would trigger Samuel Hopkins Adams, one of funded research to patent their in- price controls if drug makers did not several muckraking journalists ventions, but allows government to lower prices in the state. Companies crusading against deception in the withdraw inventors’ intellectual challenge the law in court. business. property rights if they price the drugs unreasonably high. 2003 • The Medicare Prescription Drug, 1983 Improvement and Modernization Orphan Drug Act offers incentives Act provides a prescription drug 1906-1959 to encourage drugmakers to develop benefit for senior citizens but bars Congress regulates drugs and treatments for rare diseases. Medicare from negotiating with investigates drug companies’ pharmaceutical companies for wrongdoing. 1984 discounted drug prices. . . . U.S. Hatch-Waxman Act establishes a Supreme Court lifts injunction 1906 pathway for streamlined FDA blocking Maine from implementing Pure Food and Drug Act makes it approval for generic drugs. its prescription drug program but illegal to misrepresent ingredients leaves the program vulnerable to in foods or medicines. • further legal challenges.

1938 2010 Food, Drug and Cosmetic Act 1987-Present Patient Protection and Affordable bans false therapeutic claims in High and sharply rising drug Care Act includes prescription drug pharmaceutical labeling. prices prompt calls for reform. coverage as an “essential benefit” insurers must offer. 1951 1987 Durham-Humphrey Amendment FDA approves AZT as the first 2013 defines over-the-counter and drug to treat HIV infection. AIDS Supreme Court rules that “pay-for- prescription-only drugs. activists and others protest for delay” deals, in which drugmakers years over the drug’s high price. pay rivals to keep cheaper generic 1958 versions of brand-name drugs off A Federal Trade Commission in- 1993 the market, may violate antitrust vestigation into antibiotic pricing Republicans and the health care rules. . . . Gilead Sciences introduces finds overwhelming evidence of industry join to stop President Bill Sovaldi and Harvoni (2014), treat- companies fixing prices and reaping Clinton’s proposed Health Security ments for hepatitis C, at $1,000 a pill. unreasonable profits. Act, which, among other things, calls for a federal advisory body 2015 1959 to evaluate new drug prices. The average price of existing brand- Testimony begins at Senate Antitrust name drugs rises by 16.2 percent and Monopoly Subcommittee hear- 1994 during the year, up 98 percent ings led by Estes Kefauver, D-Tenn. To help drugmakers, Uruguay since 2011. Over four years, the hearings ex- Round Agreements Act extends pose profit-seeking at the expense patent protection from 17 years to 2016 of safety and effectiveness within 20 years from the date the manu- Several states introduce bills re- drug industry. facturer first file a patent application. quiring drugmakers to disclose data on pricing decisions.

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Drug Ads Cause Headaches for Physicians Critics, manufacturers differ on whether TV commercials help consumers.

n one TV commercial, a middle-aged couple contentedly magazine and radio ads. Drug advertising on social media, not strolls on a beach, waves lapping at their feet, as a voiceover included in the totals, is on the upswing as well. I extols the benefits of an unnamed drug. A Web address Critics such as the American Medical Association (AMA), the flashes across the screen. nation’s largest physicians’ group, say drug ads drive up prices by Flick the remote, and an action-filled ad features a giant, helmet- redirecting patients away from more reasonably priced, and often clad big toe charging down the gridiron. “Tackle it!” the narrator more appropriate, medicines. In November 2015, the AMA voted exhorts, as the crowd roars approval for the toenail-fungus drug in favor of a ban on direct-to-consumer advertising of prescription Jublia. The ad, which ran during the 2015 Super Bowl after singer drugs. But the vote was largely symbolic, because any such ban Katy Perry’s halftime performance, did not mention that a course would require Congress to pass a bill — an unlikely event. 5 In of treatment costs thousands of dollars and that studies have found addition, any legislation would face constitutional challenges based it cures the fungus in fewer than 20 percent of cases. 1 on First Amendment protections for commercial speech. Ads for costly brand-name prescription drugs promise relief Nevertheless, Democratic members of Congress have become for whatever ails Americans. Besides the United States, only involved. In March, Sen. Al Franken, D-Minn., introduced a bill New Zealand allows so-called direct-to-consumer advertising for to eliminate a corporate tax deduction drugmakers take for the prescription drugs, which the U.S. Food and Drug Administration money they spend on advertising. (FDA) greenlighted in 1997. Pharmaceutical companies “have been spending billions of Pharmaceutical companies are spending more than ever on advertising dollars trying to encourage Americans to buy the drug ads, prompting physicians’ groups and some members of most expensive drugs — even when cheaper, equally effective Congress to call for restrictions on such advertising due to drugs are on the market,” Franken said. 6 Democratic presidential concerns that the ads are driving up demand for expensive front-runner Hillary Clinton also has called for ending tax breaks drugs. In 2015, drug-ad spending on TV and in other media for prescription drug advertising. 7 Presumptive Republican nominee reached $5.2 billion, up more than 60 percent over the previous Donald Trump’s health care plan does not address the issue. 8 four years. 2 Between 2014 and 2015 alone, the amount rose In February, Rep. Rosa DeLauro, D-Conn., introduced legislation by nearly $1 billion. A quarter of last year’s total was spent on that would impose a three-year moratorium on advertising new ads for just five high-priced drugs, used to treat common conditions prescription drugs. DeLauro said, among other things, that new such as arthritis, muscle pain and erectile dysfunction. 3 Drugmakers drugs have a higher risk of unidentified side effects. 9 spent more than $100 million each on 16 drugs in 2015 — As of May, neither bill had a Republican co-sponsor, and, including $117 million on Jublia, the toenail-fungus fighter. with the GOP in control of both chambers, neither was likely This year, total spending on drug ads will be even higher, to move forward. according to drug industry market reports. 4 The lion’s share In general, the FDA cannot require drugmakers to submit of the money goes to television “spots” but also to newspaper, ads for review before they air, although drugmakers often seek

Continued from p. 466 living longer. 91 At the same time, to the Pure Food and Drug Act required Patent Puzzles health insurance coverage for medicines only that drugmakers seeking new drug grew in the 1970s, leading to greater approvals provide substantial evidence he first major era of drug discovery consumer demand for more drugs. 92 of effectiveness and safety, based on T ended in the mid-1960s. In the 1970s, Aided by a post-World War II surge sound studies. 88 as discoveries in genetic engineering led in government-funded drug research, The issue had surfaced amid a to the creation of new drugs, the biotech- scientists promised new cures. 93 But tragedy in which European babies were nology revolution in medicine began lawmakers and the public began to born with missing or shrunken limbs gaining steam. 90 Meanwhile, new medical question who should profit, through to mothers who had taken a common challenges and old regulatory ones de- control of patents and licensing, from sedative containing the drug thalido- fined the drug pricing landscape. new medicines developed with public mide during pregnancy. The same thing Researchers increasingly began fo- funds. Before the 1980s, the government did not occur in the United States be- cusing on chronic diseases — heart argued mostly that it — and the public cause a courageous FDA medical officer, disease, cancer, stroke, diabetes and — should. However, for various reasons Frances Oldham Kelsey, had stalled dementia — that had become the lead- there had been little commercialization approval of the drug. 89 ing causes of death as Americans began of government-owned inventions. 94

468 CQ Researcher guidance from the agency before releasing an ad. The FDA de- Brad Shapiro, a University of Chicago economist and drug mar- mands that newly released ads be pulled if it believes they keting researcher, summed up the pros and cons of drug advertising. violate the law by misrepresenting data or otherwise violating “If they are truly sick people, then the ad did a good thing by the law. The FDA is investigating whether many ads — including getting them to their physician,” he told the Deseret News. “If they those that feature cartoon characters — distract consumers from are hypochondriacs who will pester their physicians into giving understanding the risks associated with some drugs. 10 them unnecessary treatment, then the ads are a bad thing.” 15 Under current FDA regulations, ads are not required to — Leslie Allen provide information about a drug’s cost, effectiveness or alter- natives. Companies, however, must disclose all potential side 1 Elisabeth Rosenthal, “Ask Your Doctor if This Ad Is Right for You,” The New effects, although they can avoid disclosing side effects or risks York Times, Feb. 27, 2016, http://tinyurl.com/hzrjbwp. by not naming the drug being advertised and by directing 2 Rebecca Robbins, “Drug Makers Now Spend $5 Billion a Year on Advertising. viewers to a website instead. 11 Here’s What That Buys,” STAT, March 9, 2016, http://tinyurl.com/jfcxpoe. Drug companies oppose any additional limits on advertising. 3 Ibid. 4 Pharmaceutical Research and Manufacturers of America (PhRMA), Ibid. 5 Ed Silverman, “Why doctors’ call to ban drug advertising is a dead end,” the drugmakers’ trade group, said on its website that advertising STAT, Dec. 8, 2015. http://tinyurl.com/z7xvmd8. “brings patients into their doctors’ offices and starts important 6 Al Franken, “Sen. Franken Presses to End Marketing Tax Breaks for Rx Drug doctor-patient conversations about health that might otherwise Companies,” press release, U.S. Senate, March 3, 2016, http://tinyurl.com/zgq4fmu. not take place.” 12 7 “Factsheets: Hillary Clinton’s Plan to Lower Prescription Drug Costs,” Hillary The ads also push patients to manage chronic conditions for America, 2016, http://tinyurl.com/zr7vvpo. 8 “Healthcare reform to make America great again,” Donald J. Trump for in a responsible and timely way, by reminding them about the President, http://tinyurl.com/z6xmsyo. 13 drugs’ availability, PhRMA said. 9 Ed Silverman, “Lawmaker Seeks Moratorium on Consumer Drug Ads,” STAT, About half of respondents to a 2015 Kaiser Family Foundation Feb. 22, 2016, http://tinyurl.com/z948h38. poll said prescription drug ads generally were helpful, although 10 Ed Silverman, “FDA Wants to Know Whether Animated Ads Distort Drug Risks,” STAT, March 2, 2016, http://tinyurl.com/z6dguqm/. fewer than half said the ads did a good job of explaining drugs’ 11 Rosenthal, op. cit. benefits and potential side effects. Nearly three in 10 said they 12 “Direct to Consumer Pharmaceutical Advertising,” PhRMA, http://tinyurl. had talked to a doctor about a particular drug because of an ad com/zotjsqj. they had seen or heard. At the same time, almost nine in 10 of 13 Robbins, op. cit. those interviewed wanted the FDA to review drug ads for accuracy 14 Bianca DiJulio, Jamie Firth and Mollyann Brodie, “Kaiser Health Tracking Poll: October 2015,” The Henry J. Kaiser Family Foundation, Oct 28, 2015, before they are broadcast. And a large majority of those interviewed http://tinyurl.com/h6zlze5. said the affordability of prescription drugs for serious conditions 15 Chandra Johnson, “Do prescription drug ads help or hurt consumers should be the government’s top health care priority. 14 seeking relief?” Deseret News, April 10, 2016, http://tinyurl.com/jke8kms.

In 1980, Sens. Birch Bayh, D-Ind., companies and hurt small businesses development process was costly and the and Robert Dole, R-Kan., co-sponsored in many industries. Sen. Russell B. Long, patients too few to justify the investment. legislation to spur commercialization D-La., asked why U.S. taxpayers should Soon after Bayh-Dole became law of government-funded inventions of “pay twice: first for the research and Congress again used intellectual property various kinds, including medicines. The development and then through mo- rights, this time to address the lack of law allowed universities and labs that nopoly prices.” The law did allow the development of orphan drugs. 97 The invented products and drugs to patent government to seize a drug patent if Orphan Drug Act of 1983, along with them. Those facilities in turn could the owner did not charge reasonable federal grants and tax credits for clinical commercialize their discoveries, license prices or use the invention to “alleviate trials, gave drugmakers a longer period them to drugmakers or sell them to health or safety needs.” 96 — seven years — of market exclusivity. pharmaceutical companies. 95 But even with the incentives provided The new law led to a surge in orphan The law, which applied to government- by the Bayh-Dole Act, few drug companies drugs, which now constitute nearly funded inventions, drew harsh assess- were interested in using government- one-fourth of all new biologic drugs ments. Adm. Hyman Rickover, com- funded research to develop treatments on the market. mander of the U.S. nuclear submarine for certain rare diseases. Such treatments Fueling the surge, ironically, was fleet, predicted that it would help large were called “orphan drugs” because the more widespread use: Once approved

www.cqresearcher.com May 20, 2016 469 PRESCRIPTION DRUG COSTS

Drug-Vial Waste Costs Billions “This is a calculated way of increasing revenue.”

n February, Lena Haddad, 53, visited a doctor’s office in Medical Journal in March. That figure includes $1 billion or Bethesda, Md., to receive her weekly dose of Velcade, an more in markup costs added by hospitals and physician’s offices I injectable cancer medication for multiple myeloma and lym- for the medicine. 6 phoma. After opening the $1,034 vial of the drug and drawing Reacting to the study, Democratic Sens. Jeanne Shaheen of New Haddad’s full dose, her nurse discarded the rest of the medicine Hampshire and Amy Klobuchar of Minnesota urged FDA Com- — about half the vial, or roughly $500 worth of Velcade. 1 missioner Robert Califf to explore ways to reduce waste and help “You can’t use the remainder for the patient the next time companies find more cost-efficient ways to offer cancer medications. she comes in or use it on another patient, so it has to be “Families fighting cancer should not have to worry about being discarded as waste,” the nurse said. 2 able to afford the next dose of medication,” they wrote. 7 Centers for Disease Control and Prevention (CDC) guidelines The FDA said it will respond directly to the senators about say single-use vials should be used only for a single patient their letter. and open vials should not be stored for future use. The guidelines In reviewing vial sizes, the agency focuses “on safety, not say using opened vials on multiple patients could contaminate cost,” an FDA spokesman said in a statement, because the agency the vials and spread infection. 3 is not authorized to consider cost. It does not mandate specific Care providers can share some vials among multiple patients vial sizes, but vial-volume guidelines published last June urge within six hours after opening them, but only if handled by spe- manufacturers to supply slightly more medicine in vials than is cialized pharmacies, according to the nonprofit U.S. Pharmacopoeia indicated on the label to ensure sufficient dosages. However, the Convention, which creates global public health care standards. 4 guidelines also say single-dose vials should “not contain a significant Some medical researchers say that in packaging injectable volume beyond what would be considered a usual or maximum cancer medicine in large, single-size vials, drugmakers are driving dose” for the product or be so small that providers must use up health care costs by forcing hospitals and physicians to pay multiple vials to administer a typical dose. If a proposed vial size for medicine they must discard — costs they then pass on to does not meet those specifications, the agency can ask the manufacturer patients, insurers or Medicare and Medicaid. to justify its proposal or change the vial size. 8 Drugmakers defend their production methods, saying they work The authors of the March study were highly critical of drug with regulators to make sure packaging meets the needs of a manufacturers. Under the U.S. health care system, they wrote, diverse patient population. An official from Takeda Pharmaceuticals, drug makers have an incentive to sell more medication than which makes Velcade, said the company “worked closely” with is necessary and providers have a profit incentive to buy more the Food and Drug Administration (FDA) to ensure that vials medication because they can mark up the cost and send the provide enough medicine for patients of “almost any size.” 5 bill to patients or insurers. 9 Public and private health insurers will spend at least $2.8 billion Dr. Leonard Saltz, a co-author of the study and chairman of paying for unused injectable cancer medications in 2016, according a Sloan Kettering committee that determines which drugs the to a study by researchers at Memorial Sloan Kettering Cancer hospital will stock in its pharmacy, says he has watched for Center and the University of Chicago, published in the British years as some drug makers raised cancer medication prices and for a rare disease, these drugs can be patents on brand-name equivalents expire. pharmaceutical companies to bring many prescribed to a much wider population The law removed the requirement for important, new drugs to market. 100 for “off-label,” or other uses. Highly new clinical trials — and paved the way Drugs that helped control the ravages subsidized medicines also are the most for the rapid growth of generic drugs in of the human immunodeficiency virus costly drugs on the market today. 98 the prescription drug industry. 99 (HIV), which causes AIDS, were especially Responding to very high prices for prominent. The virus was discovered in such brand-name, patented drugs, Rep. 1983, and the first drug to treat it, Henry Waxman, a California Democrat Seeking Alternatives zidovudine (AZT), was approved by who had sponsored the Orphan Drug the FDA in 1987; for years it remained Act, teamed in 1984 with Republican Sen. nder the Hatch-Waxman Act gener- the only drug for HIV. 101 Yet, the death Orrin Hatch of Utah to pass the 1984 U ics dominated the prescription drug rate from AIDS remained stubbornly Drug Price Competition and Patent Term market for decades. At the same time, high, as did the price of AZT. Restoration Act, known as the Hatch- major advances in biotechnology and In 1991, prodded by AIDS activists’ Waxman Act. It streamlined the FDA ap- molecular biology, coupled with abun- years-long outrage over drug costs, the proval process for generic drugs after dant public and private funding, allowed National Institutes of Health (NIH),

470 CQ Researcher volumes. For example, he says, Merck used to offer 50-milligram dose options or buyback programs for medical providers. 13 In vials of its skin and lung cancer drug Keytruda. But after introducing buyback programs, hospitals and doctors could bill manufacturers 100-milligram vials in February 2015, the company stopped pro- for unused medicine, and the drug makers could give the viding the smaller vials in the United States. 10 providers credit or reimburse them. “We don’t think this is an accident,” Saltz says. “We think “The buyback would not be . . . unfairly onerous to companies” this is, in most cases, a calculated way of increasing revenue and would give them an incentive to create vial sizes “that that is not in patients’ or society’s best interest.” allow for minimization of waste,” Saltz says. If companies created Merck still offers Keytruda in 50-milligram vials in Europe, where just “one additional vial size,” he says, it could “make a billion regulators wield more influence in setting health care prices than dollars of waste go away per year.” 14 U.S. regulators, Saltz says. — Ethan McLeod Merck changed its U.S. vial size to make it easier for care providers to administer the medication to patients, the company 1 Gardiner Harris, “Waste in Cancer Drugs Costs $3 Billion a Year, a Study said in a statement. The 50-milligram dose came in powdered Says,” The New York Times, March 1, 2016, http://tinyurl.com/j4exqn7. form that needed to be mixed into a solution; the 100-milligram 2 Ibid. dose did not require mixing. 3 “Questions about Single-dose/Single-use Vials,” Centers for Disease Control “Changing the vial size requires manufacturing changes, and Prevention, updated Feb. 9, 2011, http://tinyurl.com/gnm6gxa. 4 Claudia C. Okeke, “USP Chapter <797> Update on Recent Revisions,” stability testing and regulatory approval even if patient dosing United States Pharmacopoeia, May 20, 2008, http://tinyurl.com/jng86k7; Peter does not change,” the company said in a statement. B. Bach et al., “Overspending driven by oversized single dose vials of cancer A typical patient needs 140 milligrams of Keytruda, according drugs,” British Medical Journal, March 1, 2016, http://tinyurl.com/zwduj4p. 5 to the March study. So the new, larger vial size effectively guarantees Harris, op. cit. 6 that care providers will waste, on average, 60 milligrams of the Bach et al., op. cit. 7 “Following Release of New Report, Klobuchar and Shaheen Urge the Food drug by needing to use two 100-milligram vials, based on cal- and Drug Administration to Examine the Dosage Size of Cancer Fighting culations from the study. 11 Merck says it is conducting clinical Drugs,” press release, Sen. Amy Klobuchar, U.S. Senate, March 2, 2016, trials for a 200-milligram dose. http://tinyurl.com/j4a74zv. 8 “Allowable Excess Volume and Labeled Vial Fill Size in Injectable Drug Some manufacturers of high-cost medications offer a variety and Biological Products,” Food and Drug Administration, June 2015, p. 4, of vial selections that help reduce waste, Saltz says. For example, http://tinyurl.com/j2g5yyh. Teva Pharmaceutical Industries offers four sizes of its drug 9 Bach et al., op. cit. Treanda, a treatment for non-Hodgkins lymphoma and a type 10 Ibid. of leukemia, and Genentech offers two sizes of its breast cancer 11 Ibid. 12 medication Kadcyla. 12 Ibid. 13 For information on multi-use vials, see “Questions about Multi-dose vials,” Saltz says drug companies could help reduce waste by Centers for Disease Control and Prevention, updated Feb. 9, 2011, offering more multiple-dose vials that preserve medication over http://tinyurl.com/l6e39yq. time and are designed to treat multiple patients, more single- 14 See table 3 in Bach et al., op. cit. whose scientists had played important drugs. In 1994, FDA Commissioner David to treat each ailment.” 105 roles in the drug’s discovery, took the Kessler and a group of agency drug Either way, the early 1990s saw drug unprecedented step of licensing AZT reviewers wrote that of 127 new drugs prices, along with overall health care to a generic manufacturer, which approved between 1989 and 1993, the costs, rise by double-digit rates annually, brought down the price. 102 majority were “virtually indistinguishable” despite efforts to slow the rise. 106 Other important new drugs were from their competitors. Most were in President Bill Clinton’s proposed coming onto the market with astonishing widespread use, by millions of people, Health Security Act of 1993 called for price tags. To focus on the issue, the for common conditions such as mild a federal advisory body to evaluate Democratic-controlled Congress held pain and high blood pressure. “Victory new drug prices; it also suggested hearings in 1991 on the high price of in these therapeutic-class wars can mean giving the secretary of Health and Taxol, a cancer drug made from the millions of dollars for a drug company,” Human Services the authority to exclude Pacific Yew tree that had been developed the authors wrote. 104 overpriced drugs from Medicare coverage. with public funding. 103 “Each patient is unique,” PhRMA The measure was defeated after steep Me-too drugs in the same therapeutic countered. “Physicians and patients ben- opposition from the pharmaceutical in- classes often quickly joined the new efit from a variety of medicines available dustry and health insurance companies

www.cqresearcher.com May 20, 2016 471 PRESCRIPTION DRUG COSTS opposed to universal coverage and say the ACA, which required drugmakers factors into account, the commission government oversight. 107 to disclose how much they pay doctors could then set a “maximum allowable Taking matters into their own hands, and hospitals for meals and other services, price” for certain prescription drugs. 117 Americans looked abroad for cheaper established a precedent for requiring Using similar language, Democratic brand-name drugs. By the mid-1990s drug companies to disclose proprietary New York Gov. Andrew Cuomo in Jan- busloads of senior citizens from border information about pricing decisions. 112 uary called for the state health depart- states made highly publicized buying Some research links the size of such ment to develop “a list of critical pre- trips to Canada and Mexico, where prices payments to providers’ prescribing pat- scription drugs for which there is a were much lower than in the United terns for a company’s drugs. 113 significant public interest in ensuring States. PhRMA said the trips would ul- President Obama favors increased rational pricing.” The health department timately “force U.S. consumers to pay drug pricing transparency: His proposed could then set a “ceiling price” for the more for research and development.” 108 2017 federal budget would make drug drugs after evaluating their value. 118 Discontent with the status quo around companies reveal their research, de- A spokesman for Cuomo said setting the country finally led Congress to nar- velopment and marketing costs. The ceiling prices for certain critical drugs rowly pass the 2003 Medicare Prescription administration wants to eventually use could save the state at least $6 million Drug, Improvement, and Modernization the data to negotiate lower drug prices in the next fiscal year. 119 Act, which created the Medicare Part D for Medicare recipients. 114 Health insurers, hospitals and their prescription program. But at the same Around the country, lawmakers are trade groups support efforts to increase time, it barred Medicare from negotiating pushing for more transparency on drug transparency in drug pricing. “With phar- drug prices, and large gaps in cost cov- pricing. At least 11 states are considering macy costs as one of the biggest drivers erage remained for senior citizens. 109 bills that would require drugmakers to of health care costs overall, consumers The law also banned the importation disclose their actual costs and data on need and deserve basic pricing infor- of drugs from Canada and Europe. pricing decisions. In California, a trans- mation,” Paul Macielak, head of the New The controversial 2010 Patient Pro- parency bill was withdrawn, under York Health Plan Association, which rep- tection and Affordable Care Act (ACA), pressure from drug companies and resents insurers, said in a statement. 120 commonly known as Obamacare be- other opponents, in the state Legislature But drugmakers and their trade groups cause of the law’s strong advocacy by in January. 115 — especially PhRMA — vigorously oppose President Obama, included prescription Although the bills differ, many feature such bills. “Not only will implementing drug coverage as one of the 10 “essential provisions that would kick in only above price controls have a very negative impact benefits” health plans must offer. Under certain pricing levels. Companion bills on innovation and send a signal that risk the ACA, state Medicaid programs for in Virginia’s House and Senate, for ex- taking will not be rewarded, but also the low-income people also must provide ample, would require drugmakers to so-called ‘transparency’ information called drug benefits. 110 disclose cost data for every drug whose for in the proposals would be virtually wholesale price is $10,000 per treatment impossible to achieve because it does course or above. The data — including not include the cost of failures inherent R&D, marketing, price increases, financial in the search for new treatments and assistance programs and other informa- cures,” said Priscilla VanderVeer, a PhRMA CURRENT 116 121 tion — would be available online. spokeswoman. Under a Massachusetts bill — one After California’s drug pricing trans- SITUATION of the toughest in the country — the parency bill failed for the second time state Health Policy Commission every in January, the state approved a ballot year would formulate a list of widely initiative that would require state-run Price Controls prescribed critical drugs. Pharmaceutical health programs to pay no more for companies would be required to disclose drugs than the discounted rate paid n recent polling, 72 percent of Amer- development and marketing costs as by the U.S. Department of Veterans I icans say prescription drug prices well as data on public funding for each Affairs (VA), which receives a 24 percent are unreasonable, and 86 percent say drug; how much it costs in other coun- discount on drugs. Although Califor- pharmaceutical companies should be tries; and other detailed information. nians won’t vote on the initiative until forced to release information on how The commission would identify drugs November, PhRMA and many drug they set their drug prices. 111 whose pricing would imperil the state’s companies already have spent more The industry maintains that this in- public health program budgets and than $49 million to fight it. 122 formation is proprietary. But some experts overall medical spending. Taking such Continued on p. 474

472 CQ Researcher At Issue:

Shoyes uld Medicare be allowed to negotiate drug prices?

PETER S. ARNO DOUGLAS HOLTZ-EAKIN SENIOR FELLOW AND DIRECTOR PRESIDENT, AMERICAN ACTION FORUM; OF HEALTH POLICY RESEARCH, FORMER DIRECTOR, CONGRESSIONAL POLITICAL ECONOMY RESEARCH BUDGET OFFICE INSTITUTE, UNIVERSITY OF MASSACHUSETTS, AMHERST, WRITTEN FOR CQ RESEARCHER, MAY 2016 AND MICHAEL H. DAVIS residential candidates and members of Congress often PROFESSOR OF LAW, CLEVELAND STATE UNIVERSITY recommend having the government negotiate for drug discounts on behalf of the Medicare program. p Most recently, presumptive GOP presidential nominee WRITTEN FOR CQ RESEARCHER, MAY 2016 Donald Trump joined Vermont Sen. Bernie Sanders and Democ- ending the health care cost curve in the right direction ratic front-runner Hillary Clinton in supporting negotiations. will require new mechanisms to control drug prices. The typical proposal is to allow the secretary of Health and Drug spending in the United States increased 12 per- Human Services (HHS) to negotiate with prescription drug bcent in 2014, faster than nearly every other health care spending manufacturers on behalf of the Medicare Part D program — component and the highest rate in more than a decade. Overall, something banned by the so-called “noninterference” clause in Medicare spending grew 5.5 percent, but drug spending grew the 2003 Medicare Modernization Act. This idea is hardly new. 16.9 percent, hardly a sustainable rate. It arose during discussions over passage of the law, and the Medicare is the largest purchaser of drugs, with 39 million indi- Congressional Budget Office, Congress’ nonpartisan budget viduals enrolled in Part D plans that help pay for prescriptions. Yet analysis agency, noted at the time that getting rid of the non- a recent study by Marc-André Gagnon and Sidney Wolfe reported interference provision would have a negligible impact. that the program pays 73 percent more than Medicaid and 80 per- This is hardly surprising. Drug companies negotiate annually cent more than the Veterans Administration for brand-name drugs. with prescription drug insurance plans. Those plans go into the Both agencies negotiate with drug companies for price discounts. negotiations with some strong leverage: a formulary, or list of The Medicare Drug, Improvement, and Modernization Act of drugs offering the greatest overall value, that can be used to 2003 created prescription drug coverage through the Medicare favor a drug company’s products and millions of customers who Part D program but specifically prohibited Medicare from negoti- could be delivered to the drug company or, faced with too high ating lower prices for drugs. Calls to change this have gone un- a price, its competitors. Adding HHS to the mix does not heeded. Somey opponents toe negotiating sMedicare drug prices fall change that levenrage. Here’s how souch a negotiation would go: back on hackneyed arguments that the pharmaceutical industry HHS Secretary: I’d like a discount on your prescription drugs. has used for years whenever the issue has come up: that nego- Drug Manufacturer: What do you have to offer? tiation would stymie innovation and limit access to medications. HHS Secretary: I can guarantee millions of senior citizens Others question whether the government could successfully ne- as customers; shouldn’t I get a discount? gotiate lower prices. But these arguments assume the govern- Drug Manufacturer: What is your formulary like? ment cannot change and enforce laws to ensure the necessary HHS Secretary: I don’t have one. We can’t discriminate. leverage for negotiating reasonable prices. The arguments also Drug Manufacturer: Sorry, the prescription drug plans violate the principle that prices should — and, in fact, must — have already guaranteed us the customer base, promised to be subject to the free market when a patent expires. treat our drugs favorably in the formulary, and we’ve given To pretend that negotiation will discourage progress violates them the discounts. What else have you got? every economic rule we know. Negotiation is how two parties HHS Secretary: Uh, a used copy of healthcare.gov? reach a mutually advantageous compromise. Plus, we know that Drug Manufacturer: We are done here. excess monopoly profits, from which Big Pharma [the Pharma- The private-sector prescription drug plans already have all ceutical Research and Manufacturers of America] has “suffered” available market-based leverage. Of course, the government for decades, do not lead to greater research but rather to higher can do one thing that the private sector can’t: impose price dividends and greater market concentration through acquisition controls. Thus, many suspect that a call to repeal the nonin- of competitors, a guarantee of even more inflated prices. terference clause is really just a stalking horse for price con- Monopoly drug pricing, particularly in the Medicare program, trols. Price-fixing never works, will hurt innovation and restrict can only be called corporate welfare. The American public has the availability of valuable therapies. had enough. A national survey conducted by the Kaiser Family Medicare Part D is not broken. It is the best-functioning Foundation in August 2015 reported that 83 percent believe entitlement program, and adding secretarial negotiation would the government should directly negotiate drug prices for be far from fixing it.

Medicano re beneficiaries. This is a step long overdue. www.cqresearcher.com May 20, 2016 473 PRESCRIPTION DRUG COSTS

Continued from p. 472 The manufacturers say that through received public funding during the de- In Ohio, consumer activists got a rebates, discounting and generous as- velopment stage. 129 similar initiative on the November ballot, sistance programs for low-income pa- But in early April, NIH Director Fran- but PhRMA filed suit in March to block tients, the actual price of these drugs cis Collins told the Senate Appropria- it, alleging that false addresses and illegal is much lower. 126 Further, they point tions Labor and Health Subcommittee alterations invalidated many of the sig- out, most patients have insurance that that under the law, march-in rights natures. 123 covers most of the cost. don’t “really appear to be designed to Regardless, high demand and high be utilized in a fashion where the price prices are taxing health insurance plans is the obstacle. If we begin to march Sticker Shock and straining the budgets of state Med- in in a very broad way about drug icaid programs and prison systems. pricing,” drug companies may lose in- he controversy over the high price In January, Massachusetts Attorney terest in working with the NIH to de- T of new hepatitis C drugs is helping General Maura Healey urged Gilead velop new treatments. 130 to galvanize the push for state- and to adjust its pricing strategy for the Despite the public outcry over sky- national-level action to rein in drug drugs and threatened legal action over rocketing prices, Congress has been prices. Sovaldi came onto the market potentially unlawful trade practices if reluctant to legislate solutions in recent in late 2013, and its manufacturer, it didn’t. She pointed out that the com- years. “Between 2005 and 2014 alone, Gilead Sciences, introduced Harvoni pany sells the medicines for $4 a pill bill titles mentioning prescription drugs in 2014. By year’s end, the two drugs in India and $10 in Egypt, and noted decreased by 76 percent, more steadily had nearly become the world’s best- that Massachusetts is facing a class-action than bills with titles referencing health selling drugs, earning $12.4 billion for suit seeking more access to treatment insurance,” said academic researchers. Gilead, more than it paid for the small in state prisons, where the hepatitis C That downward trend continues in the company that developed the drugs. 124 infection rate is 17 times higher than current congressional session. 131 A number of factors are keeping these in the general population. 127 Democratic presidential candidates, drugs in the public eye. For one, they State-run Medicaid programs for low- whose party has long been critical of are remarkably effective against hepatitis income and disabled persons are se- the drug industry, hope to reverse this C, a virus that over time destroys the verely restricting access to the drugs, trend if elected. Hillary Clinton and liver and can lead to cancer. “The previous according to a study of 2,000 patients. 128 Bernie Sanders say they would legalize treatment worked less than half the time the importation of prescription drugs and was toxic and absolutely fraught with from Canada; limit out-of-pocket costs; medical complications,” says James Hamil- Congress Debates encourage more competition and ban ton, a physician and liver specialist at “pay-for-delay” agreements that block Johns Hopkins University. By comparison, fter the 18-month investigation into or slow the introduction of generic drugs. “this treatment is shockingly easy — with A Gilead’s pricing strategy for its he- Both also support allowing Medicare to a 95 percent or higher cure rate, including patitis C drugs, U.S. senators excoriated negotiate drug prices with drugmakers those with advanced disease — and no the company, saying it had placed prof- — which even presumptive GOP nom- problems. Most patients are ecstatic.” its ahead of patients. And several drug inee Donald Trump has endorsed, break- Hepatitis C is also a common in- company executives faced withering ing with Republican policy. 132 fection, afflicting more than 3 million questioning before other recent Senate Americans. Finally, and critically, the and House committee hearings. new drugs are extremely costly, with In January, 51 Democratic members a list price of $84,000 to $94,500 for of the House recommended that guide- OUTLOOK a 12-week treatment course. lines be developed to enable federal “There has never been this expensive agencies to “bring relief from out-of- a drug for this common a condition,” control drug pricing” by using the Good News, Bad News says Steve Miller, the chief medical of- “march-in” provisions of the 1980 Bayh- ficer at the nation’s largest pharmacy Dole Act — which allow the govern- any drug price watchers foresee benefit manager, Express Scripts, which ment to withdraw the exclusive mar- M a good news-bad news scenario administers prescription drug benefits keting rights awarded to drug companies over the next several years. for insurance companies and employers. if they have unreasonably priced their “We’re going to get a lot of great A newer drug, Viekira Pak from a com- products. The lawmakers said up to a new drugs,” says Pearson of the Institute petitor, is priced at $83,000. 125 quarter of important new drugs have for Clinical and Economic Review.

474 CQ Researcher Miller, of Express Scripts, says, “I’m and others decide which drugs to offer tinyurl.com/lau2yws. incredibly excited about where the science their patients. In addition, drugs known 11 Andrew Pollack, “Drug Prices Soar, Prompt- is going.” He is optimistic, among other as biosimilars, which are like generic ver- ing Calls for Justification,” The New York Times, things, about the possibility of more ef- sions of high-priced biologics, will become July 23, 2015,http://tinyurl.com/nr8uhcc. 12 fective Alzheimer’s disease treatments. common alternatives to higher-priced pre- Carolyn Y. Johnson, “This drug is defying a rare form of leukemia — and it keeps getting “There are already 70 million people scription biologics, Miller predicts. pricier,” The Washington Post, March 9, 2016, over the age of 55 who’d love to prevent Almost everyone involved in this policy http://tinyurl.com/z392jqm. Alzheimer’s in themselves,” he says. debate agrees, though, that difficult con- 13 “The Price of Sovaldi and its Impact on the The bad news, Miller says, is that versations lie ahead on ethical and eco- U.S. Health Care System, Executive Summary,” any groundbreaking drug for this dev- nomic issues. “It’s very complicated,” says Senate Committee on Finance, December 2015, astating disease or other common con- Tricia Neuman, a senior vice president http://tinyurl.com/hh6hof3. ditions such as diabetes will almost of the Kaiser Family Foundation, which 14 Priyanka Dayal McCluskey, “As competition certainly carry a high price tag. researches health care issues. “Value is wanes, prices for generics skyrocket,” The Boston When that happens, the budget strains a relative thing. If you are sick you want Globe, Nov. 6, 2015, http://tinyurl.com/pb9ueam. 15 created now by new hepatitis C drugs the best possible drug that may or may Government Accountability Office, Decem- will seem modest in comparison, experts not work. Who decides value?” ber 2009, op. cit. 16 Andrew Pollack, “Senators Condemn Big predict. And as the prices of other drugs An even bigger question, Pearson Price Increases for Drugs,” The New York Times, — new and old, branded and generic says, is, “How much do we as a society Dec. 9, 2015, http://tinyurl.com/p45kvmq. — continue their steady rise, experts want to spend on health care?” 17 Surowiecki, op. cit., Dec. 9, 2015. ask whether policy changes will occur 18 Pollack, op. cit., Dec. 9, 2015. to help make prescription drugs more 19 Ben Hirschler, “Exclusive: Transatlantic divide: affordable in the United States. Notes how U.S. pays three times more for drugs,” Peter Arno, director of Health Policy Reuters, Oct. 12, 2015, http://tinyurl.com/h2a8kdt. 1 James Surowiecki, “Taking on the Drug Research at the Political Economy Research 20 Surowiecki, op. cit., Oct. 10, 2015. Profiteers,” The New Yorker, Oct. 10, 2015, Institute at the University of Massachusetts, 21 Karthick Arvinth, “Daraprim: Generic version http://tinyurl.com/qy7s4at. of drug costs less than £0.07 in India,” In- says he is hopeful. “Change is in the wind,” 2 Leah Dickstein, Rachel Kruzan and Annie he says. “The path we are on is untenable. ternational Business Times, Sept. 25, 2015, Antar, “What happens when a company hikes http://tinyurl.com/hrcscr8. But the public has to get behind it.” the cost of crucial medicine by 5,000%,” USA 22 Ibid. Several experts agree the issue of Today, Dec. 27, 2015, http://tinyurl.com/z6mc7hh. 23 Bianca DiJulio, Jamie Firth and Mollyann 3 high drug prices has more staying power Andrew Pollack, “Drug goes from $13.50 a Brodie, “Kaiser Health Tracking Poll: October with the public now than at other times tablet to $750, overnight,” The New York Times, 2015,” The Henry J. Kaiser Family Foundation, in recent years. Others are pessimistic. Sept. 20, 2015, http://tinyurl.com/p2lhfvq. Oct. 28, 2015, http://tinyurl.com/h6zlze5. 4 “Even though 75 percent of Americans Matthew Belvedere, “Biotech CEO blasts Turing 24 “Biopharmaceutical Research & Develop- believe drug costs are a major health over 5000% price hike,” CNBC, Sept. 23, 2015, ment: The Process Behind New Medicines,” http://tinyurl.com/npdofv6. PhRMA, 2015, http://tinyurl.com/nm7d727. care issue, I don’t foresee any major 5 “Hedge Funds Attack American Health Care,” 25 “Briefing: Cost of Developing a New Drug,” overhauls,” says Harvard’s Kesselheim. HedgePapers No. 22, Sept. 30, 2015, http://tiny “The political power of the industry is Tufts Center for the Study of Drug Development, url.com/gw9xhur. http://tinyurl.com/q5kn8wn. too strong and the system is not 6 “Brand Name Prescription Drug Pricing: Lack 26 Jorge Mestre-Ferrandiz, “The R&D Cost of amenable. Every time there has been of Therapeutically Equivalent Drugs and Lim- a New Medicine,” Office of Health Economics, an attempt, it has been undercut.” ited Competition May Contribute to Extraor- University College London, Jan. 29, 2013, He and others suggest that smaller- dinary Price Increases,” U.S. Government Ac- http://tinyurl.com/jr7a58n. scale reforms, especially those that do countability Office, December 2009, http://tiny 27 Aaron E. Carroll, “$2.6 Billion to Develop not depend on government action, url.com/ydyv23j. a Drug? New Estimate Makes Questionable 7 could go forward. Nonprofit organiza- “Express Scripts Drug Trend Report 2015,” Assumptions,” The New York Times, Nov. 18, tions that evaluate drugs’ effectiveness Express Scripts, http://tinyurl.com/jsh9v9z. 2014, http://tinyurl.com/z2wmj6w. 8 Stephanie Armour, “U.S. Prescription drug or cost compared with others in their 28 Jerry Avorn, “The $2.6 Billion Pill — Method- spending is on the rise,” The Wall Street Journal, therapeutic class will continue to grow ologic and Policy Considerations,” The New March 8, 2016, http://tinyurl.com/h4phtlz. England Journal of Medicine, May 14, 2015, in importance, most experts believe. 9 “ASPE Issue Brief: Observations on Trends Such value-based assessments likely will http://tinyurl.com/jlsfhal. in Prescription Drug Pricing,” U.S. Department 29 Carroll, op. cit. play an increasingly important role in con- of Health and Human Services, March 8, 2016. 30 Ibid. 10 trolling costs, as insurance companies, hos- John Fauber, “Kalydeco: A Price Too High 31 Joseph A. DiMasi, Henry G. Grabowski and pital systems, pharmacy benefit managers to Pay?” MedPage Today, Oct. 2, 2013, http:// Ronald W. Hansen, “The cost of drug devel-

www.cqresearcher.com May 20, 2016 475 PRESCRIPTION DRUG COSTS

opment,” The New England Journal of Medicine, 44 “FTC Staff Issues FY 2013 Report on Branded Industry Literature Review,” Information Tech- May 14, 2015, http://tinyurl.com/z6rv467. Drug Firms’ Patent Settlements with Generic nology & Innovation Foundation, June 2010, 32 James Love, “KEI comment on the new Tufts Competitors,” U.S. Federal Trade Commission, http://tinyurl.com/oo5qsf2. Study on Drug Development Costs,” Knowledge Dec. 22, 2014, http://tinyurl.com/llns59r. 56 Ibid. Also see Frakt, op. cit. Ecology International, Nov. 14, 2014, http://tiny 45 Edward Wyatt, “Supreme Court Lets Reg- 57 “Pharmaceutical Pricing: Lessons from Abroad,” url.com/z3a9npb. ulators Sue Over Generic Drug Deals,” The op. cit. 33 Office of Budget, National Institutes of New York Times, June 17, 2013, http://tinyurl. 58 Douglas Holtz-Eakin and Christopher Holt, Health, http://tinyurl.com/z5m3d6x. com/z7s5dsw. “How CMS Is Trying to Wreck the Virtues of 34 Aaron Kesselheim et al., “The roles of acad- 46 Kevin Outterson, “Death from the Public Medicare Part D,” National Review, Feb. 2, emia, rare diseases, and repurposing in the Domain?” Texas Law Review, 2010, pp. 45-55, 2014, http://tinyurl.com/j73glan. development of the most transformative drugs,” http://tinyurl.com/zbq4k6e. 59 DiJulio, Firth and Brodie, op. cit. Health Affairs, 2015, pp. 286-293, http://tinyurl. 47 Peter Arno and Michael Davis, “Paying Twice 60 “Drug Pricing: Public Health Implications,” com/jgwz374. for the Same Drugs,” The Washington Post, The Forum at Harvard T.H. Chan School of 35 Ashley J. Stevens et al., “The Role of Public- March 27, 2002, http://tinyurl.com/jrxmalw. Public Health, Oct. 23, 2015, http://tinyurl.com/ Sector Research in the Discovery of Drugs and 48 Marc-André Gagnon and Sidney Wolfe, gssejga. Vaccines,” The New England Journal of Medicine, “Mirror, Mirror on the Wall: Medicare Part D 61 Robert Weisman, “Boston watchdog takes Feb. 10, 2011, http://tinyurl.com/6q6ytj7. pays needlessly high brand-name drug prices aim at rising drug prices,” The Boston Globe, 36 “Castellani Statement on Prescription Drug compared with other OECD countries and Sept. 13, 2015, http://tinyurl.com/h2fpwdr. Costs,” PhRMA, May 29, 2014, http://tinyurl. with U.S. government programs,” Carleton 62 Steven D. Pearson, “A U.S. approach to value- com/zn6bugr. University and Public Citizen, July 23, 2015, based drug assessment,” MedNous, November/ 37 Topher Spiro, Maura Calsyn and Thomas http://tinyurl.com/jbs3t6d. December 2015, http://tinyurl.com/j77ybrr. Huelskoetter, “Enough Is Enough: The Time 49 Hirschler, op. cit. See also Tim Smedley, 63 Peter B. Bach, Leonard B. Saltz and Robert Has Come to Address Sky-High Drug Prices,” “Patent wars: has India taken on Big Pharma E. Wittes, “In Cancer Care, Cost Matters,” The Center for American Progress, September 2015, and won?” The Guardian, May 14, 2013, New York Times, Oct. 14, 2012, http://tinyurl. http://tinyurl.com/z89oscw. http://tinyurl.com/hu8uydx; and David Squires com/9x342el. 38 Ibid. and Chloe Anderson, “U.S. health care from 64 Jeanne Whalen, “Doctors Object to High 39 Alexander Gaffney, “FDA Sets Policy for Grant- a global perspective: Spending, Use of Services, Cancer-Drug Prices,” The Wall Street Journal, ing New Biologic Medicines Extensive Market Prices, and Health in 13 Countries,” The Com- July 23, 2015, http://tinyurl.com/nfg2cfe. Exclusivity,” Regulatory Affairs Professionals So- monwealth Fund, October 2015. 65 Peter Loftus and Anna Wilde Mathews, ciety, Aug. 4, 2014, http://tinyurl.com/gnoo7ra. 50 “Health Insurance Coverage of the Total “Health Insurers Push to Tie Prices to Out- 40 Alfred Engelberg, “How Government Policy Population 2014,” The Henry J. Kaiser Family comes,” The Wall Street Journal, May 11, 2016, Promotes High Drug Prices,” Health Affairs Foundation, 2014, http://tinyurl.com/j928v8m. http://tinyurl.com/hwwsudb. Blog, Oct. 29, 2015, http://tinyurl.com/j57rffb. 51 Gagnon and Wolfe, op. cit. 66 Quoted in Stan Finkelstein and Peter Temin, 41 J. DiMasi J and C. Paquette, “The Economics 52 Austin Frakt, “To Reduce the Cost of Drugs, Reasonable Rx: Solving the Drug Price Crisis of Follow-on Drug Research and Development Look to Europe,” The New York Times, Oct. 19, (2008), pp. 21-22. Trends in Entry Rates and the Timing of De- 2015, http://tinyurl.com/npgho7p. 67 Paul Starr, The Social Transformation of velopment,” Pharmacoeconomics 22 (Suppl. 2), 53 Ibid. American Medicine (1982), p. 127. 2004, pp. 1-14, http://tinyurl.com/gsh3vdn. 54 Joy Li-Yueh Lee et al., “A Systematic Review 68 Starr, op. cit. 42 Aidan Hollis, “Me-too drugs: is there a of Reference Pricing: Implications for US Pre- 69 Ibid. problem?” World Health Organization, 2004, scription Drug Spending,” The American Jour- 70 Loker, op. cit. http://tinyurl.com/zx7wnb8. nal of Managed Care, Nov. 16, 2012, http://tiny 71 Joseph M. Gabriel, Medical Monopoly: In- 43 “Patents and Exclusivity,” FDA/CDER SBIA url.com/zc5h3gs. tellectual Property Rights and the Origins of Chronicles, U.S. Food and Drug Administration, 55 Luke Steward, “The Impact of Regulation the Modern Pharmaceutical Industry (2014), May 9, 2015, http://tinyurl.com/j5fllfl. on Innovation in the United States: A Cross- pp. 2-3. 72 Ibid. 73 Starr, op. cit. About the Author 74 Finkelstein and Temin, op. cit., p. 42. 75 Leslie Allen is a Washington, D.C.-based writer who specializes Starr, op. cit. 76 Ibid. in science, the environment and natural resources. Her articles 77 Ibid., p. 133. have appeared in The New York Times, National Geographic, 78 Finkelstein and Temin, op. cit., p. 21. The Washington Post Magazine, Smithsonian and other pub- 79 Ibid., pp. 40-41. lications. As a longtime staff writer for National Geographic, 80 Ibid., p. 41. she reported from five continents. She is also the author of 81 Merrill Goozner, The $800 Million Pill: The two books and co-author of two dozen others. Raised in South Truth Behind the Cost of New Drugs (2004), America, she is a graduate of Bryn Mawr College. p. 211. 82 Ibid., p. 212.

476 CQ Researcher 83 Ibid. 84 Finkelstein and Temin, op. cit., p. 42. 85 Goozner, op. cit., p. 212 FOR MORE INFORMATION 86 Gabriel, op. cit., p. 247. 87 AARP Public Policy Institute, 601 E St., N.W., Washington, DC 20049; 202-434- Goozner, op. cit., p. 214. 3840; www.aarp.org/ppi. Conducts research on price trends for prescription drugs. 88 Ibid.; Michelle Meadows, “Promoting Safe and Effective Drugs for 100 Years,” FDA Con- FiercePharma, 275 Grove St., Suite 2-130, Newton, MA 02466; 617-219-8300; sumer, The Centennial Edition, January-February www.fiercepharma.com. Online news service focusing on the drug industry. 2006, http://tinyurl.com/zw34c9l. Kaiser Family Foundation, 2400 Sand Hill Rd., Menlo Park, CA 94025; 650-854- 89 Goozner, op. cit., p. 214. 9400; www.kff.org. Nonprofit focusing on health issues with a news service offer- 90 For background, see Melinda Wenner, “20 ing nonpartisan research, data, journalism and other information. New Biotech Breakthroughs that Will Change Knowledge Ecology International, 1621 Connecticut Ave., N.W., Suite 500, Medicine,” Popular Mechanics, Dec. 17, 2009, Washington, DC 20009; 202-332-2670; http://keionline.org/a2m. A nonprofit whose http://tinyurl.com/jq28h2b. Access to Medical Technologies program examines prescription drug issues. 91 Goozner, op. cit., p. 215. National Coalition on Health Care, 1825 K St., N.W., Suite 411, Washington, 92 Finkelstein and Temin, op. cit., p. 29. 93 DC 20006; 202-638-7151; www.nchc.org. Nonprofit, nonpartisan coalition of about Goozner, op. cit. 80 organizations working for more transparency in drug pricing. 94 Michael Henry Davis and Peter Arno, “Why Don’t We Enforce Existing Drug Price Controls? Pharmaceutical Research and Manufacturers of America, 950 F St., N.W., The Unrecognized and Unenforced Reasonable Suite 300, Washington, DC 20004; 202-835-3400; www.phrma.org. Pharmaceutical Pricing Requirements Imposed upon Patents De- industry’s main trade group. riving in Whole or in Part from Federally-Funded Research,” 75 Tulane Law Review 631, 2001, 113 Charles Ornstein, Ryann Grochowski Jones 123 Ned Pagliarulo, “PhRMA Sues to Challenge http://tinyurl.com/je938dy. and Mike Tigas, “Now There’s Proof: Docs Who Ohio Ballot Initiative Limiting Drug Prices,” 95 Goozner, op. cit., p. 127. Get Company Cash Tend to Prescribe More BioPharmaDive, March 1, 2016, http://tinyurl. 96 Ibid. Brand-Name Meds,” ProPublica, March 17, 2016, com/zt9xzxp. 97 Ibid. http://tinyurl.com/zevmunp. 124 Andrew Pollack, “Sales of Sovaldi, New 98 Aaron Kesselheim, “Using Market-Exclusivity 114 Ibid. Gilead Hepatitis C Drug, Soar to $10.3 Billion,” Incentives to Promote Pharmaceutical Inno- 115 Michael Ollove, “High Drug Prices Prompt The New York Times, Feb. 3, 2015, http://tinyurl. vation,” The New England Journal of Medicine, Demands for Transparency,” Stateline, March 7, com/kckn7w4. Nov. 4, 2010, http://tinyurl.com/j28xqln. 2016, http://tinyurl.com/jxrarzu. 125 Ibid. 99 “History of Federal Regulation: 1902 — Pre- 116 Ed Silverman, “Virginia the Latest State to 126 Ibid. sent,” FDA Review, http://tinyurl.com/hmhjrtx. Push Drug Pricing Transparency Bill,” STAT, 127 Maura Healey, letter to John C. Martin, Chair- 100 Finkelstein and Temin, op. cit., pp. 108-109. Feb. 2, 2016, http://tinyurl.com/z7ww2hn. man and Chief Executive Officer, Gilead Sciences, 101 Goozner, op. cit., p. 88. 117 “Bill S.1048: An Act to promote transparency Inc., Jan. 22, 2016, http://tinyurl.com/hj8tj34. 102 Ibid., pp. 216-217, pp. 123-124. and cost control of pharmaceutical drug prices,” 128 Zachary Tracer and Caroline Chen, “New 103 Ibid. 189th General Court of the Commonwealth York said to probe insurers over hepatitis C 104 Ibid. of Massachusetts, http://tinyurl.com/zbl7a5r. drugs,” Bloomberg.com, March 2, 2016, http:// 105 Ibid., p. 217. 118 “2016-2017 New York State Executive Bud- tinyurl.com/gth49ea. 106 Ibid. get: Health and Mental Hygiene: Article VII 129 James Love, “51 members of Congress 107 “Pharmaceutical Pricing: Lessons from Abroad,” Legislation,” http://tinyurl.com/zvvebwq. have asked the NIH to use March-In rights op. cit.; W. K. Mariner, “Patients’ rights to care 119 Ed Silverman, “New York Governor Andrew to rein in high drug prices,” Knowledge Ecology under Clinton’s Health Security Act: the struc- Cuomo Seeks to Cap Some Drug Prices,” International, Jan. 11, 2016, http://tinyurl.com/ ture of reform,” American Journal of Public STAT, Jan. 22, 2016, http://tinyurl.com/zbjevdp. h4esxr9; Ed Silverman, “NIH Asked to Fight Health, August 1994, pp. 1330-1335, http://tiny 120 Statement by Paul Macielak, President & Price Gouging by Overriding Drug Patents,” url.com/h25ke9w. CEO, “New York Health Plan Association Re- STAT, Jan. 11, 2016, http://tinyurl.com/heeogom. 108 Finkelstein and Temin, op. cit., pp. 78-79. sponse to State of the State/Budget Proposal,” 130 Jeannie Baumann, “NIH Pulls Back on Using 109 Ibid. Health Plan Association, Jan. 13, 2016, http:// Bayh-Dole for Drug Pricing,” Bloomberg BNA, 110 “Closing the Coverage Gap — Medicare tinyurl.com/zlb9h3k. April 8, 2016, http://tinyurl.com/zlvktsg. Prescription Drugs Are Becoming More Af- 121 Quoted in Dan Goldberg, “Cuomo Enters 131 Philip Rocco, Walid Gellad and Julie Dono- fordable,” Centers for Medicare and Medicaid National Debate With Proposal to Cap Drug hue, “How Much Does Congress Care About Services, http://tinyurl.com/j7zw8no. Prices,” Politico, Jan. 20, 2016, http://tinyurl. Drug Prices? Less Than It Should,” Health Affairs 111 DiJulio, Firth and Brodie, op. cit. com/zqyu5f4. Blog, Jan. 13, 2016, http://tinyurl.com/jl3lngs. 112 Ed Silverman, “With Drug Costs Rising, 122 Ed Silverman, “Pharma Goes to Court in 132 Ibid. Also see Glenn Kessler, “Trump’s truly It’s Time for Pharma Companies to Open Ohio to Stop Drug Pricing Ballot Initiative,” absurd claim he would save $300 billion a year Their Books,” STAT, Feb. 16, 2016, http://tiny STAT, March 1, 2016, http://tinyurl.com/hzw on prescription drugs,” The Washington Post, url.com/jz2j3zk. 5kdq. Feb. 18, 2016, http://tinyurl.com/zbrdzby.

www.cqresearcher.com May 20, 2016 477 Bibliography Selected Sources

Books Pollack, Andrew, “Drug Makers Sidestep Barriers on Pricing,” The New York Times, Oct. 19, 2015, http://tiny Avorn, Jerry, Powerful Medicines: The Benefits, Risks, url.com/of2678b. and Costs of Prescription Drugs, Alfred A. Knopf, 2004. A reporter documents the rise of specialty pharmacies that A professor of medicine at Harvard Medical School examines help drug makers avoid insurers’ and pharmacists’ efforts to issues surrounding drug costs in this 10th printing of his book. switch patients to lower-priced generic drugs or to over-the- counter versions of expensive branded drugs. Danzon, Patricia M., and Sean Nicholson, eds., The Oxford Handbook of the Economics of the Biopharmaceutical Rockoff, Jonathan D., “How Pfizer Set the Cost of Its Industry, Oxford University Press, 2012. New Drug at $9,850 a Month,” The Wall Street Journal, A reference book examines the economics of the pharma- Dec. 9, 2015, http://tinyurl.com/p9tj397. ceutical industry, with 18 articles by leading academic health A reporter investigates what he describes as a secretive and economists. arcane world of drug pricing as he follows a company’s lead-up to unveiling a new breast cancer drug. Gabriel, Joseph A., Medical Monopoly: Intellectual Prop- erty Rights and the Origins of the Modern Pharmaceu- Reports and Studies tical Industry, The University of Chicago Press, 2014. An associate professor of behavioral sciences and social “2015 Biopharmaceutical Research Industry Profile,” medicine at Florida State University chronicles the pharma- Pharmaceutical Research and Manufacturers of America, ceutical industry through the lens of intellectual property April 2015, http://tinyurl.com/zvys3d7. policies that help determine drug costs. The pharmaceutical companies’ main trade group provides an annual overview of innovation in the industry. Goozner, Merrill, The $800 Million Pill: The Truth Behind the Cost of New Drugs, University of California Press, 2005. “The Price of Sovaldi and its Impact on the U.S. Health A journalist and editorial director of Modern Healthcare Care System,”Committee on Finance, United States Senate, argues that Americans pay twice for most important prescription December 2015, http://tinyurl.com/jzw86d3. drugs: first by funding research that leads to their creation After an 18-month investigation, a Senate committee disputes with taxpayer dollars, and second, by paying skyrocketing a drug company’s contention that it developed its ground- prices for those drugs to pharmaceutical companies. breaking $1,000-a-pill hepatitis C drug to treat the largest possible number of patients. Instead, the panel concluded, Greene, Jeremy A., Generic: The Unbranding of Modern the company focused primarily on maximizing profits. Medicine, Johns Hopkins University Press, 2014. An associate professor of medicine and the history of “What the U.S. Can Learn about Drug Pricing from Australia, medicine at Johns Hopkins University discusses the growth the U.K. and Germany,” Kaiser Permanente Institute for of generic drugs (which have risen from 10 percent of drug Health Policy, May 20, 2015, http://tinyurl.com/z4wcmcv. prescriptions in 1960 to almost 80 percent in 2010) and A hospital network’s research arm compares what it calls considers the cost implications of such growth. “unsustainable” drug pricing in the United States with other nations’ policies that keep prices down. Articles Spiro, Topher, Maura Calsyn, and Thomas Huelskoetter, Anderson, Richard, “Pharmaceutical industry gets high “Enough Is Enough: The Time Has Come to Address on fat profits,” BBC News, Nov. 6, 2014, http://tinyurl. Sky-High Drug Prices,” Center for American Progress, com/q4v9qus. September 2015, http://tinyurl.com/oh6mhjw. A reporter shows that average profit margins for drug com- Researchers at a liberal think tank explore the life cycle of panies in 2013 approached 20 percent, with one company, a prescription drug and discuss pricing issues. Pfizer, achieving a 42 percent profit margin. Video Bach, Peter B., Leonard B. Saltz and Robert E. Wittesoct, “In Cancer Care, Cost Matters,” The New York Times, “Drug Pricing: Public Health Implications,” Harvard T.H. Oct. 14, 2012, http://tinyurl.com/8cfhekv. Chan School of Public Health, Oct. 23, 2015, http://tiny Three specialists at New York’s renowned Memorial Sloan- url.com/gssejga. Kettering Cancer Center explain why they decided not to offer A panel of physicians and policy experts discusses why patients an expensive new drug, saying that it was no better drug costs are so high and what policy changes could ensure than a similar drug used to treat advanced colon cancer. that patients can afford high-value drugs.

478 CQ Researcher The Next Step: Additional Articles from Current Periodicals

International Price Controls McGinley, Laurie, “Hospitals, insurers, seniors demand action to lower prescription-drug costs,”The Washington Sridharan, Vasudevan, “India puts price cap on drugs treating Post, April 25, 2016, http://tinyurl.com/gl6syky. cancer, diabetes and heart diseases,”International Business A nonprofit coalition of health care providers, insurers and Times UK, May 12, 2016, http://tinyurl.com/jkkx5le. senior citizens is drafting proposed legislation aiming to India’s drug pricing regulator, which sets price limits for reduce drug costs and accelerate processing times for generic bulk sales of prescription drugs, reduced price limits for 54 drug applications. commonly used drugs to make them more widely available. Thomas, Katie, “Drug Prices Keep Rising Despite Intense Thomas, Andrea, “Germany Mulls Limiting Prices Drug Criticism,”The New York Times, April 26, 2016, http://tiny Firms Can Charge to Health System,” The Wall Street url.com/zxb975h. Journal, April 22, 2016, http://tinyurl.com/gtgyk98. Major pharmaceutical companies are raising list prices of pre- German state health insurers currently pay full price for scription drug more frequently than in past years despite increased new prescription drugs, but the country’s health ministry is scrutiny from lawmakers over their business practices. expected to propose rule changes this summer requiring drug makers to negotiate prices for drugs with revenue Research and Development greater than $250 million. Johnson, Carolyn, “The contradictory reasons cancer-drug Patents prices are going up,” The Washington Post, May 2, 2016, http://tinyurl.com/z7de36w. Gorenstein, Dan, “Turns out hedge funds have an in- Drug companies that make cancer treatments often say centive to control drug prices,” Marketplace, April 25, those medications require high prices because they incur 2016, http://tinyurl.com/zj9y7rc. high development costs and serve small patient populations, More hedge fund managers are challenging drug manufac- but two studies show prices for those drugs have risen with turers’ rights to drug patents in hopes that those companies’ patient demand over time. share values will drop when they lose those rights. Sherman, Erik, “The real reason U.S. drug prices are so Sullivan, Peter, “HHS considering action on drug patents high,”CBS News, Oct. 7, 2015, http://tinyurl.com/ooprwkh. over high prices,” The Hill, Feb. 10, 2016, http://tinyurl. A CBS Moneywatch analysis of data from 16 public drug com/jq8p4tk. companies found that most of their research and development The U.S. Department of Health and Human Services is considering costs for prescription medicines were lower than their marketing issuing guidelines on so-called march-in rights, which, under a costs and eventual profit margins. law passed in 1980, allow the agency to break a company’s drug patent when it sets a medication’s price too high.

Whitman, Elizabeth, “Drug Price Debate: Can An Obscure CITING CQ RESEARCHER Supreme Court Patent Case Lead To Lower Prescription Sample formats for citing these reports in a bibliography Prices?” International Business Times, April 28, 2016, http://tinyurl.com/z6rkpy2. include the ones listed below. Preferred styles and formats The outcome of a U.S. Supreme Court case regarding patent vary, so please check with your instructor or professor. review boards’ standards for rulings on the validity of patents could make it easier for generic drug manufacturers to challenge MLA STYLE drugmakers’ brand-name drug patents, some legal experts say. Jost, Kenneth. “Remembering 9/11.” CQ Researcher 2 Sept. Pricing 2011: 701-732. APA STYLE Johnson, Alan, “Backers push lawmakers on ballot issue Jost, K. (2011, September 2). Remembering 9/11. CQ Researcher, regarding drug prices,” The Columbus Dispatch, May 9, 2016, http://tinyurl.com/h5gsl84. 9, 701-732. Ohio legislators have not voted on a proposed statute that would require state agencies to pay no more than the U.S. CHICAGO STYLE Department of Veterans Affairs for prescription drugs. The Jost, Kenneth. “Remembering 9/11.” CQ Researcher, September proposal could become a November ballot measure if law- 2, 2011, 701-32. makers do not vote on it by June 4.

www.cqresearcher.com May 20, 2016 479 In-depth Reports on Issues in the News

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