Why the U.S. Pays More Than Other Countries for Drugs

[kscarbel2]

The Wall Street Journal / November 30. 2015

Norway and other state-run health systems drive hard bargains, and are willing to say no to costly therapy

Norway, an oil producer with one of the world’s richest economies, is an expensive place to live. A Big Mac costs $5.65. A gallon of gasoline costs $6.

But one thing is far cheaper than in the U.S.: prescription drugs.

A vial of the cancer drug Rituxan cost Norway’s taxpayer-funded health system $1,527 in the third quarter of 2015, while the U.S. Medicare program paid $3,678. An injection of the asthma drug Xolair cost Norway $463, which was 46% less than Medicare paid for it.

Drug prices in the U.S. are shrouded in mystery, obscured by confidential rebates, multiple middlemen and the strict guarding of trade secrets. But for certain drugs—those paid for by Medicare Part B—prices are public. By stacking these against pricing in three foreign health systems, as discovered in nonpublic and public data, The Wall Street Journal was able to pinpoint international drug-cost differences and what lies behind them.

What it found, in the case of Norway, was that U.S. prices were higher for 93% of 40 top branded drugs available in both countries in the third quarter. Similar patterns appeared when U.S. prices were compared with those in England and Canada’s Ontario province. Throughout the developed world, branded prescription drugs are generally cheaper than in the U.S.

The upshot is Americans fund much of the global drug industry’s earnings, and its efforts to find new medicines. “The U.S. is responsible for the majority of profits for most large pharmaceutical companies,” said Richard Evans, a health-care analyst at SSR LLC and a former pricing official at drug maker Roche Holding AG .

The reasons the U.S. pays more are rooted in philosophical and practical differences in the way its health system provides benefits, in the drug industry’s political clout and in many Americans’ deep aversion to the notion of rationing.

The state-run health systems in Norway and many other developed countries drive hard bargains with drug companies: setting price caps, demanding proof of new drugs’ value in comparison to existing ones and sometimes refusing to cover medicines they doubt are worth the cost.

The government systems also are the only large drug buyers in most of these countries, giving them substantial negotiating power. The U.S. market, by contrast, is highly fragmented, with bill payers ranging from employers to insurance companies to federal and state governments.

Medicare, the largest single U.S. payer for prescription drugs, is by law unable to negotiate pricing. For Medicare Part B, companies report the average price at which they sell medicines to doctors’ offices or to distributors that sell to doctors. By law, Medicare adds 6% to these prices before reimbursing the doctors. Beneficiaries are responsible for 20% of the cost.

The arrangement means Medicare is essentially forfeiting its buying power, leaving bargaining to doctors’ offices that have little negotiating heft, said Sean Sullivan, dean of the School of Pharmacy at the University of Washington.

Asked to comment on the higher prices Medicare pays compared with foreign countries, the Centers for Medicare & Medicaid Services said: “The payment rate for Medicare Part B drugs is specified in statute.”

In the U.S., few payers, public or private, cite cost as a reason to deny drug coverage, partly owing to a traditional emphasis in the U.S. on doctor and patient autonomy. “They don’t want to impinge on individual choices,” said Neeraj Sood, a health policy and economics expert at the University of Southern California.

Medicare Part B, for example, typically covers drugs and services deemed “reasonable and necessary.”

“If it’s a [Food and Drug Administration]-approved drug and prescribed by a duly licensed physician, Medicare will cover it,” said Gail Wilensky, who ran Medicare and Medicaid in the 1990s.

U.S. drug prices—showing regular increases, sometimes steep—are increasingly a focus of congressional probes and vocal criticism by insurers, doctors, politicians and consumers, who bear part of the cost.

Renee Andrews, an Oxford, Mich., resident whose son has juvenile arthritis and other conditions, said she can’t believe how low medication costs are for families overseas who post messages in her online support group. “Their out-of-pocket costs are considerably less than what we’re paying,” she said.

Research spending

The pharmaceutical industry says controls such as those seen in Europe discourage investment in research and deny patients access to some drugs. “The U.S. has a competitive biopharmaceutical marketplace that works to control costs while encouraging the development of new treatments and cures,” said Lori Reilly, an executive at the Pharmaceutical Research and Manufacturers of America, a trade association.

If U.S. pricing fell to European levels, the industry would almost certainly cut its R&D spending, said Mr. Evans, the health-care analyst. “Does the U.S. subsidize global research? Absolutely, yes,” he said.

The higher U.S. prices also help drug makers afford hefty marketing budgets that in the U.S. include consumer advertising—something Europe doesn’t allow. Pharmaceutical and biotechnology companies in the S&P 1500 earn an average net profit margin of 16%, compared with an average of about 7% for all companies in the index, according to S&P Capital IQ.

For its analysis, the Journal started with Medicare Part B’s top drugs by payments to medical practices in 2013, the latest such data available. These are mostly drugs administered in a doctor’s office. Costs of drugs sold by U.S. pharmacies are harder to compare because of discounts and rebates.

After excluding drugs that faced generic competition in 2015 and those for which prices elsewhere weren’t available, the Journal compared 2015 third-quarter prices paid in the various jurisdictions. The analysis didn’t examine Medicare’s coverage of pharmacy-dispensed drugs, known as Part D, which is run by insurance companies that don’t reveal their pricing.

Some drugs, such as for HIV and hepatitis, cost less in certain overseas markets because companies cut prices for poor countries.

Norway is a wealthy nation, with gross domestic product per capita of $97,000 last year, versus $55,000 in the U.S., according to the World Bank.

In Norway the state pays for most prescription drugs, though patients pay for some used for short periods. The government controls costs in part by setting maximum prices. To do that, it reviews prices in nine neighboring countries and takes the average of the three lowest.

Cost-effectiveness

This system automatically holds prices low because the countries consulted also have government-controlled prices.

The Norwegian Medicines Agency, or NMA, then reviews patient data to decide whether a new drug is cost-effective. Its maker must request a reimbursement price at or under the maximum Norway has set and submit a detailed comparison of the drug’s cost and benefits versus existing treatments. Companies have teams of number crunchers to produce these comparisons, which can also prove useful in pitching products in the U.S.

Norway recommends that companies describe a drug’s cost per quality-adjusted life year, or QALY, a gauge used by many government health systems. Medicare is barred from using this gauge as a threshold to determining coverage.

Companies know Norway will sometimes deny coverage, and this threat is often “enough to get them to offer a discount,” said Kristin Svanqvist, head of reimbursement at the NMA. If rejected, they can offer a lower price.

When Amgen Inc. and GlaxoSmithKline PLC sought coverage of the osteoporosis injection Prolia for certain women, the NMA concluded it wasn’t cost-effective compared with an existing infusion called Aclasta.

Aclasta is a different type of drug, a bisphosphonate. These have an advantage in binding to the bone, the NMA said in a 2011 report on Prolia, and protect against fractures for a longer time after treatment stops.

After Norway’s rejection, Amgen and Glaxo lowered Prolia’s price, according to Ms. Svanqvist. The NMA then ruled the health system would provide it for women 75 or older, for whom it appeared to work somewhat better, she said.

A syringe of Prolia cost Norway $260 in the third quarter. By the Journal analysis, that was 71% less than the $893 paid by Medicare, which doesn’t set an age test.

Amgen said, “We partner with local payers in Europe to help ensure that all appropriate patients who could benefit will have access to an important new therapy.” Glaxo referred questions to Amgen, to whom it sold Prolia’s Norwegian marketing rights in 2014.

If a manufacturer won’t budge on price, Norway might refuse to cover a drug altogether. It did that with a brand of insulin called Tresiba.

Producer Novo Nordisk A/S said Tresiba reduced nighttime dips in blood sugar better than other insulins and therefore was a good value. Ms. Svanqvist of the NMA called the documentation of this “quite lousy.”

“We think the reduction is actually quite low,” she said, and not “worth paying 70% more for.”

A spokesman for Novo Nordisk said it believes the drug provides better outcomes and is therefore cost-effective. He also said Norway didn’t ask the company to cut the price.

The way things often work, said Ms. Svanqvist, is that when drug companies are told a product isn’t cost-effective, they can provide more proof, and “if they don’t have better documentation they can only do something about the price. Very often they do something about the price.”

Denying patients access to drugs can be contentious. When Norway last year declined to cover Roche’s injected breast-cancer drug Perjeta because of its cost, “patients and physicians were on television and demonstrating a lot,” Ms. Svanqvist said. Roche agreed to a discount provided the NMA kept the terms confidential, which it grudgingly agreed to do, according to Ms. Svanqvist.

The agreement means Perjeta costs Norway less than the drug’s maximum allowed price in the country, which was $3,579 for a vial in the third quarter. Medicare paid $4,222.

Roche said Perjeta has shown strong efficacy, and the firm and Norway reached an agreement to make it available.

While U.S. payers sound dire warnings of unsustainable drug pricing, the tone in Oslo is much calmer. “We have a system that has been working quite well,” said Helga Festoy, an economist at the NMA.

Norway’s cost-effectiveness reviews sometimes cite the work of England’s health-care cost watchdog, known as one of Europe’s toughest. England’s National Institute for Health and Care Excellence, or NICE, conducts extensive analyses and recommends that the taxpayer-funded health system not cover drugs providing low value. Sometimes after one is rejected, its maker offers a discount.

England also controls prices by capping the level of National Health Service spending on drugs each year and requiring the pharmaceutical industry to reimburse the NHS for any spending over those limits.

Of 40 branded drugs covered by Medicare Part B and also available in England in the third quarter, 98% were more expensive in the U.S., according to the Journal’s analysis of data from Medicare and the NHS’s Business Services Authority.

For instance, two syringes of Cimzia, an anti-inflammatory for rheumatoid arthritis and other diseases, cost England’s health-care system $1,117—less than half the $2,357 Medicare paid, the Journal found. An NHS spokeswoman said prices it publishes are “indicative,” and vary in some situations.

Cimzia is sold by Belgian company UCB SA. It didn’t respond to requests for comment.

Canada doesn’t have a single large pharmaceutical payer, but drug prices are substantially lower nonetheless, held in check by regulation.

A federal agency called the Patented Medicine Prices Review Board sets a maximum price for new drugs, based on factors including their therapeutic benefits and the prices in seven other countries—the U.S. and six European ones. Once a drug’s maximum price is set, the maker can’t raise it faster than the national inflation rate or above the highest price in the seven other countries.

A separate body, the Canadian Agency for Drugs and Technologies in Health, recommends whether provincial and other government health programs should cover new drugs for the elderly or for low-income residents. Government agencies in Canada don’t cover most drug costs for most other people.

One such program is run by Ontario’s Ministry of Health and Long-Term Care. Of 30 drugs that both it and Medicare Part B covered in the third quarter, 93% were more expensive in the U.S., according to the Journal’s analysis.

Countries with national health systems tend to feel “we are all in this together” and “we can’t afford everything for everybody at any price,” said Steven Pearson, a physician who founded the Institute for Clinical and Economic Review, a Boston nonprofit that evaluates the cost-effectiveness of health care. “In America it’s more, ‘Well, I’ve paid my insurance premium and I don’t want anyone to tell me no. I don’t want anyone to get in the way of me and my doctor.’ ”

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[TeamsterGrrrl]

This is one case where big government using it's bargaining power to get lower prices is a good thing for all of us.

[kscarbel2]

I buy (what in the U.S.. would be) prescription drugs over-the-counter in overseas countries for 20% to 50% of the U.S. price. I haven't bought medicine in the US for years.

When I'm sick and know exactly what I need, the U.S. policy of having to pay to see a doctor so as to get that prescription called in is absurd.

[Dirtymilkman]

Is Viagra otc in other countries?

[kscarbel2]

Is Viagra otc in other countries?

Absolutely is, that and the competing brands.

[Dirtymilkman]

I just want quinine pills for leg cramps.

[kscarbel2]

How an $84,000 drug got its price: ‘Let’s hold our position … whatever the headlines’

The Washington Post / December 1, 2015

Gilead Sciences executives were acutely aware in 2013 that their plan to charge an exorbitantly high price for a powerful new hepatitis C drug would spark public outrage, but they pursued the profit-driven strategy anyway, according to a Senate Finance Committee investigation report released Tuesday.

"Let's not fold to advocacy pressure in 2014," Kevin Young, Gilead's executive vice president for commercial operations, wrote in an internal email. ‘‘Let’s hold our position whatever competitors do or whatever the headlines."

Gilead gained federal approval for its drug Sovaldi in late 2013 and ultimately settled on the price of $84,000 for a 12-week course of treatment. To the company, that price seemed to deliver the right balance: value to shareholders while also not so high that insurers would "hinder patient access to uncomfortable levels," according to internal documents. But they also got more than they bargained for: an outpouring of outrage from the public, a backlash from government and private payers, and political scrutiny.

The 18-month Senate committee investigation reviewed more than 20,000 pages of company documents.

“The documents show it was always Gilead’s plan to max out revenue, and that accessibility and affordability were pretty much an afterthought," said Sen. Ron Wyden (D-Ore.), who co-led the investigation with Sen. Charles Grassley (R-Iowa), in a news conference.

In a statement released Tuesday, Gilead disagreed with the conclusions of the report, saying that the price was "in line with previous standards of care.” The company noted that it has programs in place to help uninsured patients and those who need financial assistance access the treatments. More than 600,000 patients around the world have been treated with Gilead’s hepatitis C drugs since 2013, according to the company.

Here are four key takeaways from the investigation:

1. It could have been priced at $115,000 for a course of treatment.

Gilead considered a range of prices for Sovaldi and weighed the value to its shareholders against the "reputational risks," meaning the potential outrage from patients, physicians and payers. The potential prices ranged from $50,000 to $115,000.

Executives believed a $50,000 price would build good will and ensure easy access to the drug because it would be covered by most plans. But it would cause "significant foregone revenue," and activists would still critique the price, even at this relatively low level.

At $115,000, executives were concerned about "external considerations" and predicted: "High levels of advocacy group criticism and negative PR/competitive messaging could be expected at $115K and it would be increasingly difficult to manage at these levels."

2. Gilead priced Sovaldi partly based on the expectation it would set a benchmark for the next drugs in the pipeline.

A company presentation noted that Gilead has "considerable pricing potential" for Sovaldi, but that future pricing for next-generation drug launches would be limited by competition -- what it referred to as a second wave of treatments.

"Wave 1 will set a price benchmark against which Wave 2 will ultimately be evaluated," the presentation stated.

"By elevating the price for the new standard of care set by Sovaldi, Gilead intended to raise the price floor for all future hepatitis C treatments, including its follow-on drugs and those of its competitors," the report states.

Its next hepatitis C drug, Harvoni, was priced at $94,500.

3. Patients were warehoused to limit access to Sovaldi.

Facing pent-up demand for a hepatitis C treatment, insurers quickly began to implement restrictions -- essentially, warehousing patients by putting sick people aside until they were even more sick. Medicaid programs in 27 states limited which patients could get access to Sovaldi. Private insurers did, too.

In a letter, the Oregon Health Authority reported that while more than 10,000 Medicaid patients were deemed good candidates for Sovaldi and its competitors in fall 2014, the estimated cost of treating half of them would more than double the entire $600 million spent on all drugs in the previous year. Instead, because treating more advanced patients would be more cost effective, the state implemented a plan to treat at the rate of 500 patients a year for the first six years.

Kentucky's Medicaid program noted that the state's heroin epidemic exacerbated its hepatitis C problem -- people who had injected drugs were being tested for the disease, raising the tricky question of when to start treatment.

"Given the current cost of the newer treatment options and to remain fiscally responsible we will be forced to make difficult decisions regarding who does and does not get access to treatment medications upon diagnosis," Samantha McKinley, pharmacy director of the Kentucky Department for Medicaid Services, wrote in a letter to Grassley and Wyden.

4. Cost-per-cure, not cost of development.

The report suggests that the factors Gilead used to set its price were not based on the research and development needed to bring the drug to market, or on the $11.2 billion it paid for Pharmasset, the company that developed Sovaldi. Instead, Gilead executives looked at what previous treatments had cost and the effect of future waves of competition on the revenue it could bring in.

"Company officials surmised that its drug had a ‘value premium' because of increased efficacy and tolerability, shorter treatment duration, and its potential to ultimately be part of an all-oral regimen," the report states.

In its statement Tuesday, the company said, “We stand behind the pricing of our therapies because of the benefit they bring to patients and the significant value they represent to payers, providers, and our entire healthcare system by reducing the long-term costs associated with managing chronic [hepatitis C virus].”

With another Senate committee now probing price increases at four other pharmaceutical companies, the final conclusion of the report may be one we see repeated.

"This might be an example that received the most attention in some time, but it won't be the last," Grassley said in a statement.

[other dog]

I know - I mean "I heard"- that we some people used to get a "prescription only" in the U.S. diet pill called Ionamin over the counter in Mexico. One of the side affects was that you would stay awake for a long time, and feel good going it...or so I heard. You could get it around here without a prescription at certain truckstops for $1.50 a pill...or so I heard. And go to El Paso and cross the border and buy all you wanted cheap as aspirin...or so I heard- all hearsay, I know nothing.

Hey, I was in my 20's then, cut me some slack- kind of what I was talking about when I said I wished now how I should have taken care of myself more in my 20's and thirty's, when I thought I was invincible, and getting that load there was the most important thing...come to find out it's not.