Drugs, Money, and Secret Handshakes : The Unstoppable Growth of Prescription Drug Prices

In The Warped World Of Prescription Drug Pricing, Generic Drugs Can Cost More Than Branded Ones, Old Drugs Can Be Relaunched At Astronomical Prices, And Low-cost Options Are Shut Out Of The Market. In Drugs, Money And Secret Handshakes, Robin Feldman Shines A Light Into The Dark Corners Of The Pharmaceutical Industry To Expose A Web Of Shadowy Deals In Which Higher-priced Drugs Receive Favorable Treatment And Patients Are Channeled Toward The Most Expensive Medicines. At The Center Of This Web Are The Highly Secretive Middle Players Who Establish Coverage Levels For Patients And Negotiate With Drug Companies. By Offering Lucrative Payments To These Middle Players (as Well As To Doctors And Hospitals), Drug Companies Ensure That Inexpensive Drugs Never Gain Traction. This System Of Perverse Incentives Has Delivered The Kind Of Exorbitant Drug Prices - And Profits - That Everyone Loves Except For Those Who Pay The Bills-- Everyone Has A Limit. Every Budget Has An End Point. Although Sellers Would Love To Raise Prices Continually, It Does Not Take Fancy Economics To Know That At Some Point, The Money Runs Out. Why Isn't That Basic Principle Working As Expected In The Pharmaceutical Industry? Instead, Drug Prices Are Rising Continually And Reaching Astronomical Levels, With No End In Sight. In May Of 2018, Analysts Reported That A Company Is Contemplating A $1.5 Million Price Tag For Its New Hemophilia Cure. (the Current Hemophilia Therapies Already Cost An Astounding $580,000 To $800,000 Per Year. ) Along The Same Lines, Spark Therapeutics' Cure For A Rare Form Of Blindness Will Cost $850,000, Rivaling Novartis' Planned $475,000 Price Tag For Its Car-t Drug Kymriah. Even Outside The Eye-popping Headlines, Prescription Drug Prices Across The Board Have Risen To An Alarming And Puzzling Level. A Government Inspector General's Report Found That The High Cost Of Brand Medications For Common Conditions (diabetes, High Cholesterol, And Asthma) Were The True Problem For Patients On Medicare. In Fact, Pharmaceutical Companies Have Raised The Prices Most Sharply For Commonly Used Medications Such As These. Similarly, An Analyst Report Concluded That In 2016, The Average Price For A Set Of Specialty Drugs Known As Orphan Drugs Was $140,000 A Year And The Average Price Of Ordinary Drugs Was Almost $28,000 A Year. The List Price Of Drugs Tells Only Part Of The Story, Given The Many Rebate And Discount Processes That Exist Within The Industry. Nevertheless, Real Spending For Drugs Is Rising As Well-- Machine Generated Contents Note: 1. Introduction; 2. The Landscape -- Where Do The Dollars Flow; 3. Pbms And Insurers; 4. Pharmacies, Doctors, And Patient Groups; 5. May Your Drug Price Be Ever Green; 6. Solutions. Robin Feldman, University Of California Hastings College Of The Law. Includes Bibliographical References And Index. Cover Half-title Title page Copyright information Dedication Table of Contents Figures Tables Acknowledgments 1 Introduction 2 The Landscape 2.1 Branded Prescription Drugs 2.2 The Byzantine World of Drug Sales 2.2.1 What Is a Pharmacy Benefit Manager? 2.2.2 What Insurers Don't Know 2.2.3 Concentration in the PBM Industry 2.2.4 How the Money Flows 2.2.5 All in the Public's Best Interest 3 Pharmacy Benefit Managers and Insurers 3.1 Why PBMs May Prefer Higher Prices 3.1.1 The Power of Volume 3.1.2 Bundling Drugs - A Tried and True Idea 3.1.3 Odd Results of Formulary Games 3.2 Where Are the Insurers? 3.2.1 Disincentives for Insurers - The Big Players 3.2.2 Disincentives for Insurers - The Smaller Players 3.2.3 Stampedes at Dusk 3.2.4 Burden Shifting 3.3 The PBM Incentive Structure - Who Pays the Bills? 4 Pharmacies, Doctors, and Patient Groups 4.1 Why Pharmacies May Prefer Higher Prices 4.1.1 Silencing the Pharmacist 4.1.2 Financial Incentives for Pharmacies 4.1.3 When PBMs and Pharmacies Merge 4.1.4 The Power of Information When PBMs Combine with Pharmacies 4.1.5 Clawbacks - How PBMs Squeeze Independent Pharmacies 4.2 Doctors, Hospitals, and Other Medical Practitioners 4.2.1 Section 340B and the Problem of Nonprofit Hospitals 4.3 Patients and Patient Advocacy Groups 4.3.1 The Problem with Patient Coupons 4.3.2 Meals, Gifts, and Other Inducements 4.3.3 Patient Advocacy Groups 4.3.4 Ah, the Joys of Tax Benefits! 4.4 The Full Landscape of the Perverse Incentives 4.5 But Don't We Want to Incentivize Innovation? 5 May Your Drug Price Be Ever Green 5.1 A Brief Tour of the Modern Drug Approval Process 5.2 Methodology 5.3 Results 5.3.1 Overview 5.3.2 Recycling and Repurposing Old Drugs 5.3.3 Extending the Protection of Blockbuster Drugs 5.3.4 Number of All Drugs (Not Only Blockbusters) That Had Market Barriers Added 5.3.5 Serial Offenders 5.3.6 The Problem Is Growing across Time 5.3.7 What's in Vogue? Particular Exclusivities That Are Increasing across Time 5.3.7.1 Increase in Orphan Drug Exclusivity 5.3.7.2 Increase in New Use Codes 5.4 Final Thoughts on Extending the Protection Cliff 6 Solutions 6.1 Proposals with Potential (But Problems) 6.1.1 Value-Based Pricing 6.1.2 Direct Negotiations by Medicare 6.1.3 Slay the Dragon 6.2 What Will Work? 6.2.1 Market Information 6.2.1.1 Changes at the Federal Level 6.2.1.2 Changes at the State Level 6.2.1.3 The Al Capone Approach 6.2.2 Reduce Concentration and Rethink Markets 6.2.2.1 The Shape of Markets 6.2.2.2 Market Power and Multiplicity Effects 6.2.2.3 Hub-and-Spokes Structures and Artificial Intelligence 6.3 One and Done 6.4 Ruthless Simplification 6.5 Paving a Better Road Notes Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Index "Everyone has a limit. Every budget has an end point. Although sellers would love to raise prices continually, it does not take fancy economics to know that at some point, the money runs out. Why isn't that basic principle working as expected in the pharmaceutical industry? Instead, drug prices are rising continually and reaching astronomical levels, with no end in sight. In May of 2018, analysts reported that a company is contemplating a $1.5 million price tag for its new hemophilia cure. (The current hemophilia therapies already cost an astounding $580,000 to $800,000 per year.) Along the same lines, Spark therapeutics' cure for a rare form of blindness will cost $850,000, rivaling Novartis' planned $475,000 price tag for its Car-T drug Kymriah. Even outside the eye-popping headlines, prescription drug prices across the board have risen to an alarming and puzzling level. A government inspector general's report found that the high cost of brand medications for common conditions (diabetes, high cholesterol, and asthma) were the true problem for patients on Medicare. In fact, pharmaceutical companies have raised the prices most sharply for commonly used medications such as these. Similarly, an analyst report concluded that in 2016, the average price for a set of specialty drugs known as 'orphan drugs' was $140,000 a year and the average price of ordinary drugs was almost $28,000 a year. The list price of drugs tells only part of the story, given the many rebate and discount processes that exist within the industry. Nevertheless, real spending for drugs is rising as well"-- Provided by publisher Feldman explains the secretive world of drug pricing deals that push patients into more expensive drugs. This book is intended for an audience of policymakers, scholars, jurists, higher education students, journalists, and general interest readers and aims to provide an accessible, easy-to-read tour of issues faced by the pharmaceutical industry.