Five stories on high drug prices

I’ll read through the Center for American Progress Medicare Extra proposal tonight but I actually have things I need to do today.  Instead, I want to highlight a brief by Ari Friedman and Janet Weiner, both at Penn when it was written, that tells five different stories on high drug prices.  I come back to this brief as an anchor to clarify my thinking and reactions to news stories.

Story 1: High cost-high value.  This is the Hep-C cure story.  The drug costs an arm and a leg but it really provides a lot of value despite being a cash flow problem.  The payer side response is warehouse as many eligible patients until “me-too” drugs emerge and competition drives down the post-rebate prices.  There may be cash flow policy problems for Medicare and Medicaid but not a formulary problem per se that requires a policy response.

Story 2: High cost -low value.  A new drug may be released that clinically does very little better than other therapies on the market.  Here the payer side response is lots of utilization management, tiered formularies and pre-authorization.  If it is a drug that is effective for a small population it will be used but off-label uses will be strongly controlled.

Story 3: Cheap generics get expensive fast — the Martin Shkreli story and the Epi-Pen story.  Here the exploit is a lack  generic manufacturers that can quickly shift to produce near substitutes.  The time and cost of other manufacturers to set up a production line to make a cheap competitor won’t ever return a profit as the original manufacturer/distributor will drop prices to or below marginal cost as soon as they see a threat.

The recent agreement by a number of large hospitals to set up a non-profit generic manufacturer is a response to this story.  The new entity would be willing to lose money to set up a production line for a generic drug that just saw its charged price increase by 1,000%.  I think the entity’s leadership would be totally happy to certify the capability to get a few simple drugs and one complex generic approved as a demonstration of capability and then just use their capability as a looming threat to tamp down on these pump and dump schemes.  That would be a stunning success even if the entity never ships a single pill for anything other than demonstration purposes.

Story 4: Short term price spikes for some generic drugs during shortages — this is a distinct story from number 3.  There may be other manufacturers that are in the process of responding to a price signal to enter or expand production for a drug but it will take a while.  The new entity could serve as a policy response here as a source of production reserves.  Larger stockpiles and diversifying supply chains so that most of a particular drug is not made on a single hurricane prone island is another possible response.

Story 5:  Lag between patent expiration and generic introduction — Here some brand manufacturers will pay generic manufacturers to not introduce a generic version as soon as possible.  The solution is lots of billable hours for lots of lawyers or Congressional action.


I am paraphrasing a great brief so that I can grok it.

What do you think about these stories that they are telling?

33 replies
  1. 1
    Sab says:

    Number 3 sounds really hopeful and useful.

  2. 2
    Starfish says:

    Story 4 could be about all the plastic saline bags being made in Puerto Rico and how other drugs that used those plastic bags (like chemo) were moved to glass bottles during the shortage that still exists. I know the bags themselves are not a drug, but it could be about issues like that. Perhaps letting the facilities that make drugs get too large is against the interest of the country as a whole? There were drug shortages during the last administration because if one drug line was shut down due to FDA issues, all the other drug lines in the same building were also shut down.

  3. 3
    cervantes says:

    “A new drug may be released that clinically does very little better than other therapies on the market. ” Well this is really the tricky one. What is “very little benefit”? Cancer drugs that increase median survival by a few weeks are the prototypical example. There are two interlocking issues here. One is the instinctual response that “life is infinitely precious” and you can’t put a monetary price on it. The second is that “median” metric. Maybe, just maybe, a particular individual might get a much greater benefit, and even hang in there until something even better comes along. For people and families facing the end of life, it’s hard to tell them we aren’t going to spend the big bucks. We do have to put a price on life, but in the U.S. we just can’t talk about this.

  4. 4
    Gin & Tonic says:

    I’m not sure where it fits in this taxonomy, but what about the case of certain drugs that go from prescription-only to OTC, and the actual out-of-pocket cost to most patients increases dramatically? I may have the name wrong, but things like Zantac come to mind. If it’s a prescription drug, I just have a small insurance co-pay, but if it’s OTC, I’m paying a (much?) higher retail price.

  5. 5
    Villago Delenda Est says:

    Story 3 can be solved toot sweet with some tumbrel rides for CEOs.

  6. 6
    cervantes says:

    @Gin & Tonic: Well, it’s not literally the price of the drug that has increased in that case, it’s the OPC for the consumer. Before the cost was spread around among all ratepayers. That’s a different issue.

  7. 7
    laura says:

    @cervantes: That’s were I’m at right now. My dad’s riddled with malignant melanoma -pelvis, lungs, 20 tumors in his brain. Stage 4, 4 to 8 months to live, halfway through radiation, and keytruda is the next planned chemo/immunotherapy. He can’t receive it while in hospital and can’t get transport from skilled nursing.
    He’s not in pain, but he’s pissed. And there’s no expected change in the trajectory of the disease. We, as a family, are feeling like his end of life is being extended in order to increase the bottom line of big pharma. Are we wrong?

  8. 8

    @laura: Do you think you are wrong? That is the critical question.

    What are his wishes? What are your wishes? What are the wishes of the rest of the family? Have you all talked this through and far more importantly, have it documented and attested to by an attorney? Have you had a conversation with a palliative care team or a hospice to identify what is out there and what is possible and how those things could align with your father’s wishes?

    If he has not had a conversation about what he wants the next four to eight months to look like, have that conversation as soon as feasible.

  9. 9
    Mnemosyne says:


    Ugh. I’m so sorry. David has all of the right conversations your family needs to have above, so I’ll just give you {{{{hugs}}}}.

  10. 10
    Sab says:

    @David Anderson: Thank you for this advice that every family should have and follow.

  11. 11
    Mnemosyne says:

    I’m still wondering WTF happened to the price of Noritate, my rosacea cream that went from a retail price of $100 to over $1,000. I’m assuming it was a combination of #3 and #5 since the patent was getting close to expiring, but no one seems to know.

  12. 12
    patroclus says:

    I think we should all be worrying about the health and well-being of our neighbors to the North this morning because the USA women’s team won gold in hockey and the men’s curling team just advanced to the finals by walloping them. Perhaps the Canadians should become more familiar with curling and hockey and embed them in their culture a little more so they can understand the nuances of these games when they try to compete at high levels in the sports.

  13. 13
    laura says:

    @David Anderson: we HAVE had the convo. He’s 81 and his interests are drinking coffee, smoking and reading. The brothers and I are tight, we talk daily-and are able to divide the labor in caring for him as they are off tour. Our decision making is simple – will x maximize joy or minimize suffering?
    The problem is, and has been the diagnostics. He fell twice at home and couldn’t get up. The second fall led to transport to the ER. He seized during a CT scan that revealed the brain tumors and evidence of prior seizures. He’s still getting biopsied, MRI’d and there is still no definite understanding of the totality of illness. And so it goes. There’s been no determination of the options of treatment vs. Care.
    The three of us are discussing palliative care with lots of coffee, e-cig and cannabis.
    Also, he believes that Judge Judy has appointed him Deputy District Attorney, and he hopes his hospitalization won’t interfere with his new legal obligations.

  14. 14
    Another Scott says:

    I was on a 10 mg generic statin from Apotex in Canada. The cost to me was around $2 for 90 days (list price was ~$500). Recently my local drugstore got bought out and my doc doubled the daily dose, and the cost to me went up to about $30 for 90 days (list price was ~ $900). Funny how that works. :-/

    I saw a few months ago that the founder of Apotex and his wife were murdered in their home. It said they were billionaires.

    There’s a vast amount of money in the drug system, even in generic drugs. Just as we set up public utilities, we should have public companies for things like generic drugs. Hospitals getting together to make generics is a good interim step, but they still don’t have the interests of the public as a whole at heart…


  15. 15
    MobiusKlein says:

    For group 1, it feels to me like the pharmaceutical companies are hostage takers.
    Is there a way to nationalize them, and make the treatment world wide at a price more in line with the cost of production?

  16. 16
    Emma Anne says:


    I love your palliative care plan. I hope you can get there.

  17. 17
    Another Scott says:

    @laura: That’s rough.

    Best of luck with the coming months. Hang in there.


  18. 18
    laura says:

    @Mnemosyne: I gladly accept that hug and thank you for your offer.

  19. 19
    Nicole says:

    @Mnemosyne: Can I ask for specifics on your state of rosacea and how the Noritate does for you? I have it mild (mostly flushing on my nose and cheeks, no pustules) that I manage with LED lights and for awhile, Finacea, although the most recent time I went back to the Finacea, it seemed to make it worse.

    Also, FWIW, Paula’s Choice makes a toner (yes, a toner) for sensitive skin that is like magic on the rosacea. I couldn’t believe it (I have no connection to the company, honest). Highly recommend. Doesn’t dry the skin at all.

  20. 20
    opiejeanne says:

    @MobiusKlein: I don’t know about that. I was treated for Hep C in 2005 and the protocol at the time was relatively new, Rebavirin and Pegylated Interferon. That combination provided the first real success in treating the disease and now neither is used because something new and better has arrived. The cost in 2005 was somewhat similar to the current cost of treatment, and thank God we had such good insurance (Kaiser), but we watched the wholesale price of these drugs come down over the 48 weeks I was in treatment. I only paid about $30 for the most expensive one and the pharmacist was very apologetic because the usual cost for meds was $5. The wholesale cost was about $3400/mo for one drug at the beginning, about $1200 by the time I bought the last month’s dosage.

  21. 21
    Nicole says:

    @laura: It sounds like your dad is in good family hands, anyway. I’m glad you and your brothers are looking to make sure the time he has left is as comfortable as possible.

  22. 22
    opiejeanne says:

    @laura: More hugs from me (((Laura))).

    Mom had dementia that would rear its head sometimes, and one evening she locked herself in the bathroom and wouldn’t come out, yelling that she was going to call the health department on Dad and accused him of being that snotty floorwalker who just wanted to be snotty at her. They’d been watching “Are You Being Served”. She thought he was Captain Peacock. Sometimes you have to laugh or you’d cry all the time.

  23. 23
    AnonPhenom says:

    What do you think about these stories that they are telling?

    The coming great wealth transfer of $30 trillion in assets from baby boomers to their heirs…

    …’jack dat shit‘ ???

  24. 24
    Gravenstone says:

    @laura: I’m terribly sorry for what your father and your family as a whole is being subjected to. But if your father honestly believes there is no benefit to the ongoing radiation or the proposed chemo follow up, then his best alternative may be to discontinue treatment and enter hospice. I realize no one really welcomes such a decision, but if the belief that the treatment is merely prolonging his existence (not really a life) to no good end other than enriching drug makers… Perhaps my view is hardened by personal experience. At least with my mother, the disease and her underlying physical condition dictated our decision. She simply couldn’t tolerate an attempt at chemo. Whatever journey lies ahead for your family, I wish you all the best.

  25. 25
    AnonPhenom says:

    …everybody sees it, and wants their own piece

    Laura Cameron, three months pregnant, tripped and fell in a parking lot and landed in the emergency room in May. She was flat on her back — scared, in pain and attached to a saline drip — when a hospital representative came by to discuss how she would pay her bill.

    Though both Cameron and her husband, Keith, have insurance, her time in the ER would likely cost about $830, the rep said. If that sounded unmanageable, she added, the couple could take out a loan through a bank that had a partnership with Mercy Hospital.

    She was “fairly forceful,” recalled the 28-year-old Cameron, who lives in Fayetteville, Ark. “She certainly made it clear she preferred we pay then, or we take this deal with the bank.”

    it’s why government run healthcare insurance is their enemy. A referee might blow a whistle on ’em.

  26. 26
    Sab says:

    @laura: Isn’t it fun having the convo when he is mentally beyond having it.? I am there now.

    Hugs to you. This is not a great phase of life, but it is necessary. Sounds like you kids are doing your filial duty now.

  27. 27
    Gravenstone says:

    @Gravenstone: I see further that your family has their plan in place, simply hoping to be able to implement it. I wish you all strength and love.

  28. 28
    Brachiator says:


    Well this is really the tricky one. What is “very little benefit”? Cancer drugs that increase median survival by a few weeks are the prototypical example. There are two interlocking issues here. One is the instinctual response that “life is infinitely precious” and you can’t put a monetary price on it.

    But we can put a monetary price on it, and we do, even if people ignore it or don’t want to think about it. And it also becomes a matter of public policy.

    The second is that “median” metric. Maybe, just maybe, a particular individual might get a much greater benefit, and even hang in there until something even better comes along.

    True. Summaries may talk about the median, but the details should include a more precise discussion of the nature of the benefit provided. Are there fewer or more manageable side effects than other drugs. What is the greatest extent of additional survival at the tail end and how many people might be expected to benefit?

    For people and families facing the end of life, it’s hard to tell them we aren’t going to spend the big bucks. We do have to put a price on life, but in the U.S. we just can’t talk about this.

    This gets really fascinating. We have more people living longer and there is more variation to what we think of as “end of life.” A friend’s father recently passed at the age of 98 and he was in relatively good health and was kept in comfort through the final period of his life. We still have doctors and health “experts” reluctant to provide potentially addictive drugs to terminally ill patients. Rethinking this area might see the development of ways to lower the costs of providing care and extending lives.

  29. 29
    Brachiator says:

    @laura: I hope some of the points that Dave raised are helpful.

    Lots of good wishes from me as you deal with these matters.

  30. 30
    laura says:

    Everyone of you jackals-your kind words, your familiar travails and offers of support and wisdom have made may day.
    Funny old life, we can get right to the heart of the matter in sickness, in suffering and in finding common ground.
    I’m grateful to have all of you all.

  31. 31
    StringOnAStick says:

    @laura: My best wishes for you and your family at such a difficult time. Its good that you and your siblings are on the same page.

  32. 32
    StringOnAStick says:

    So our pharmacy benefit manager apparently flushes the autorefills every new year, and I suddenly realized I was getting dangerously low on a med I need. After much fussing about, where they couldn’t distinguish an old prescription from the new one the doctor ordered, they finally shipped the drugs. I could tell they weren’t going to arrive in time so I asked my doc to call in a 30 days supply at the local pharmacy to make sure I had them while the 90 day supply was in transit. Insurance wouldn’t cover the 30 day supply because they’d just paid for a 90 day through the PBM, so I ended up buying 10 pills of a generic medication for $50. The 90 day supply of the exact same generic medication through the PBM costs $10. This raises so many questions, like how are people who don’t have insurance supposed to deal with such prices (answer: they don’t, they just suffer without). The price variation tells me that things are seriously messed up in the drug pricing arena.

  33. 33
    mere mortal says:

    Story 3 is the only one that looks like a solvable market failure.

    I hate Story 1, but it will shake out likely through competitors.

    Which is to say, the rest read like short-term problems that don’t rate a regulator or political effort, relative to the massive cluster-fuck that is U.S. healthcare.

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