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The Rising Cost of Prescription Medications Matthew Eberts, Pharmd, MBA, FASHP Director of Pharmacy & IV Services, Lancaster General Health

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The Rising Cost of Prescription Medications Matthew Eberts, Pharmd, MBA, FASHP Director of Pharmacy & IV Services, Lancaster General Health The Rising CosT of PResCRiPTion MediCaTions Matthew Eberts, PharmD, MBA, FASHP Director of Pharmacy & IV Services, Lancaster General Health INTRODUCTION that underwent price increases will illustrate the fac- The rising cost of medications in the United States tors that are driving these increases. is receiving considerable attention, not only in the I. The Unapproved Drug Initiative - Colchicine news, but also in the medical literature, at board meet- and Neostigmine ings of companies big and small, and at kitchen tables The rigorous FDA drug approval process in around the country (including the tables of pharmacy effect since 1962 is based on the Federal Food, directors). The surge in the price of Epipen® to $600 Drug, and Cosmetic act of 1938, which requires evi- is one dramatic and distinctive example, but in fact dence of safety and efficacy as the two key elements the costs of medications in general are increasing, and for approval of a medication.4 Some medications the trend will continue. As health care providers, it is in current use did not go through the formal FDA important that we understand not only what is driving approval process, in most cases because they came those increases, but also their impact on patients and to market prior to 1962. In 2006 the FDA embarked health care organizations. on a concerted effort to address that gap by requir- Total spending on drugs in the United States ing that unapproved medications go through a reached $310 billion in 2015.1 In the year between June formal approval process that involves clinical trials 1, 2015 and May 30, 2016, drug costs rose nearly 10% of safety and efficacy. Though the motivation for while the overall inflation rate for the United States this program is certainly laudable, and is rooted in was only 1%.2 This trend of price increases is expected the FDA’s charge to make sure medications are safe, to continue through 2020, as both the cost of medica- the net effect has been to create some dramatic price tions and the utilization of medications continue to increases.5 rise.2 The impact on hospital inpatients has been even Due to this FDA initiative, several old, estab- greater; from 2013 to 2015 average drug spending per lished, and previously unapproved medications admission increased by 39%.3 that traditionally had stable prices – both because The accelerating inflation in drug prices is driven there were no R&D or marketing costs built into by a multitude of complex variables, including recent their prices, and because as generics they were usu- advances by the pharmaceutical industry. Diseases that ally manufactured by several companies – are now could only be managed a few years ago are now being abruptly being priced like new, branded products. cured, and patients with advanced cancer diagnoses are After a company completes the newly required having their lives extended, but these advances come studies and receives approval for a medication, the with an expensive price tag. Also, enhanced efforts by company has 3-7 years of brand exclusivity during the FDA to ensure the safety of medications are driv- which it is the only one approved to market the drug ing some of the most dramatic cost increases, even for at any price it chooses, even though the medication drugs that have been used for centuries. is well understood, has an established place in care, In addition, some companies seem to prioritize and requires little if any marketing. an unapologetic pursuit of profits. They have abruptly While the FDA acknowledges that this initiative raised the prices of long-established drugs with the may lead to increased prices in the market place, justification that their first responsibility is to their they reply that their charter from Congress is about stockholders. safety, efficacy, and labeling of products, not medi- cation pricing.6 THE COST OF MEDICATIONS IN THE UNITED STATES One example is colchicine, a drug that has been A detailed review of some of the specific drugs used since the ancient Greeks, and cost no more 100 The Journal of Lancaster General Hospital • Winter 2016 • Vol. 11 – No. 4 Rising CosT of PRescription MediCaTions than 25 cents a day before 2010.7 By using the FDA’s strategy. They acquire the company and its portfolio program for review of unapproved medications, the of pharmaceutical products, reduce expenses (mainly small pharmaceutical company URL Pharma carried by not doing as much, or any, research and develop- out relatively small scale studies that were sufficient ment), and focus on “pricing optimization,” which to obtain FDA approval and exclusive rights to means raising prices significantly. An ideal target the product, and then sold those rights to Takeda for this strategy is a small (and therefore affordable) Pharmaceuticals, a much larger company, for $800 pharmaceutical company that makes a product that million. Takeda raised the price dramatically to over has no competition. This form of value-based invest- $6/pill from the historical price of 10-25 cents. Since ing is a common general business practice, but when this is a drug that is widely used, the impact on state it is applied to a critical life-saving medication with Medicaid programs was an increase in spending for no good alternative, the price can be raised dramati- this medication alone from $1 million per year to cally with severe consequences. As pointed out in $50 million per year.8 a New Yorker article by James Surowiecki, it is a Colchicine is primarily used for outpatients, so “Moneyball” approach to pharmaceuticals. (By that the burden of increased cost falls mainly on patients he means that this business model depends on iden- and insurers, but there are many examples that tifying undervalued assets that can be purchased more directly impact health-systems and hospitals. cheaply, just as Oakland A’s manager Billy Beane Obviously, because of the Diagnosis Related Group identified undervalued baseball players who could (DRG) system of fixed payments for treating a diag- be paid low salaries.) nosis regardless of the resources used, any increase Examples of this business model are provided in the cost of inpatient medications raises the hospi- by nitroprusside and isoproterenol. These two life-sav- tal’s overall cost of care and lowers its margin. ing heart medications were purchased on the same Neostigmine was first patented in 1931 to reverse day by Valeant Pharmaceuticals. These were prod- neuromuscular blockade. Though it is a staple in ucts made by only one company, and even though operating rooms, and is classified by the World they were no longer protected by patent, there were Health Organization as an essential medication,9 it no alternatives. (When the market for a drug is was never approved in the U.S. because it predated very small there is little incentive for anyone else the Food, Drug, and Cosmetic Act.10 In 2013 the to create a generic alternative at the existing price FDA approved Bloxiverz™, the first neostigmine point. Indeed, the price would probably fall further product to be formally evaluated, and all other neo- if there were competition.) Though the medications stigmine products were pulled from the market. were still manufactured in the same plant with no Flamel Technologies, the European manufacturer, changes to their formulation, the prices were raised promptly raised the price of Bloxiverz™ from $3/ 525% for isoproterenol and 212% for nitroprusside vial to an initial price of $160/vial. After the FDA on the day of acquisition.12 approved another manufacturer’s neostigmine prod- Another example of this business model uct the price of Bloxiverz™ fell, and is currently is intravenous acetaminophen. In May 2014, $56/vial for the hospital. Since neostigmine is used Mallinckrodt Pharmaceuticals purchased Cadence extensively in the operating room, the implica- Pharmaceuticals, the manufacturer of injectable tions of this price increase have been considerable. acetaminophen (Ofirmev®). At the time of pur- During the time when there was only one approved chase, Mallinckrodt increased the cost of injectable manufacturer, there were also some periods of drug acetaminophen from $14.60 to $35.05 for each 1-g shortage. There has been much discussion about vial. This was a 140% increase over and above the more frugal use of the drug, as well as alternative 37% price increase implemented by Cadence during approaches to neuromuscular blockade. the three years before the company’s acquisition.13 One of the most notorious examples of this MERGERS AND PRICE HIKES - NITROPRUSSIDE practice, mainly driven by the media attention given Another cost driver is the pharmaceutical to the company’s CEO, is Daraprim® (pyrimeth- industry’s new business model in which a company amine). When this product was purchased by Turing identifies a pharmaceutical company that has a prod- Pharmaceuticals in August 2015, the price increased uct or products felt to have a suboptimal pricing by over 5,500%, from $13.50/tablet to $750/tablet. The Journal of Lancaster General Hospital • Winter 2016 • Vol. 11 – No. 4 101 Rising CosT of PRescription MediCaTions The medication also shifted from general distribu- the outcomes in clinical trials that preceded FDA tion through wholesalers to closed distribution approval, it has been estimated that these medications requiring pharmacies and hospitals to purchase it could reduce the cost of cardiovascular care by $29 bil- directly from the company, allowing them more con- lion over 5 years, but they would increase drug costs trol of the supply and cost. While pyrimethamine by $592 billion.21 This study estimated that the cost of is an anti-malarial medication, it is often used to the drugs would need to be reduced to about 10% of treat toxoplasmosis in AIDs patients and other their current cost to realize an overall decrease in the immunocompromised patients for whom it can be cost of care.
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