Point/Counterpoint – The Firestorm Over Drug Prices

by Ryan Jerico
Senior Consultant, TFG Partners
We all need to sit down together and talk this one out.

When it comes to the current media storm surrounding the EpiPen and other drugs with rising prices, their are two points of view when it comes to laying blame. In the media, we see fault being assigned to either the drug companies or the insurers. Here are two articles illustrating the opposing viewpoints.  

Point – The Drug Companies

From The Montana Standard: Andrew Schneider’s article Insulin price spike leaves diabetes patients in crisis advocates the stance that like many drugs with steadily increasing prices, a massive spike in insulin prices is causing a health crisis for millions of diabetes patients, who depend on the lifesaving drug,

  • From 2011 to 2013 the wholesale price of insulin went up by as much as 62 percent.
  • From 2013 to 2015 the price jumped again, from a low of 33 percent to as much as 107 percent.
  • People who paid $200 or less are now getting bills of $400, $500 or more for the same amount of insulin. 

Counterpoint – The Insurance Companies

From The Sacramento Bee: Peter J. Pitts’ piece, Rising drug prices the fault of insurers, not drug companies argues the point that the very real financial pain many Americans feel at the pharmacy counter is the fault of insurers. In short, the obsessive focus on cost obscures the vastly higher value that new drugs deliver.

  • The insurance industry has managed to convince Americans that drug prices aren’t tied to the pharmaceutical industry’s investments in research and development.
  • Since 2000, drug firms have spent more than $500 billion developing new medicines.
  • Drug companies don’t have “infinite pricing power,” as critics claim.

TFG Partners’ Insights: There is likely middle ground between both sides of the argument. In our audits and analyses, we see the way drug prices are routinely inflated. One example we often see is the markup applied to injectable drugs administered in hospital and billed through the medical benefit. These charges can be many points over the drugs average wholesale price and/or average sales price. Those margins usually end up in the provider’s and insurer’s pockets.

Forget Point/Counterpoint – everyone is missing the point all together.

The above points and our insights really reflect the fact that drug prices are complex and there are a variety of factors that contribute to the increased cost to the patient. Perhaps the folks over at STAT are onto something in their article How EpiPen drug pricing went viral — and what may be next. Near the end of the piece, they assert that the media fuels the fire. By focusing on finding the next big headline, the media could really be complicit in masking the broader issue. By tweeting, reporting and sensationalizing  situations regarding specific drug companies rather than looking the industry and healthcare system as a whole, they are missing an opportunity. It is time create a meaningful dialogue and provide education and insights about a very complex system.

Patients are only now beginning to realize the costs associated with even routine care. The government continues to hold hearings, draft legislation to cap costs, and regulate a healthcare industry about which it knows very little. Drug companies are struggling to strike a balance with profits, innovation, and their place in Medicine – the art of, not the product -while bracing for the impacts of being the next daraprim/EpiPen story in the news cycle. Doctors and Hospitals are focused on patient care and generating revenue, not always in that order. The media is trying to sell ad space and newspapers, while they still exist. Meanwhile. the insurers are working to continue to be the face of and gatekeeper to the business and profits of healthcare.

Our healthcare system is more complex and expensive than anywhere in the world. Dollars and cents are concealed as part of an elaborate shell game traditionally played by drug manufacturers, PBMs, insurers, and hospitals/providers. We, the consumers, and the media need to stop playing the blame game, the industry needs to end the shell games, and the government needs to exercise restraint (and realize nothing can be fixed by regulation alone). We all need seat at the table and see eye-to-eye. Only then can our healthcare system be transformed to one that not only cuts costs, but also produces quality patient care, innovation and a healthy population.