By Quentin Fottrell
It’s a pity there’s no miracle drug to help companies take responsibility for their actions. Despite efforts in Washington to curb drug costs, they’re on the rise again, putting further pressure on those with little or no insurance. The average price of prescription drugs rose a hefty 6.9% last year, according to Barclays Capital. U.S. underlying inflation rose 1.1% on the year in February.
Sales of prescription medicine have now hit around $300 billion a year. The reason for the price hikes vary wildly, depending on who you ask. Drug companies blame R&D costs, while others admit they need to boost profits before drug patents expire. Most quietly sidestep the costs of their marketing and advertising when they get their product to market.
Prescription Policy Choices – a non-profit, non-partisan group aimed at improving access to effective, safe and affordable drugs – has another reason. It cites the influence of the relatively small but powerful band of “pharmacy benefit managers” who it says negotiate discounts and payments or “rebates” with drug manufacturers for increased sales of their most profitable medicines.
“While pharmacy benefit managers may play a role in reducing the cost of more expensive brand name drugs, both private and public health plans should compare those drugs for which rebates are offered, to recommended evidenced-based drugs proven to be as or more effective, safer and often much less expensive,” PPC executive director Ann Woloson tells Pay Dirt.
In their defense, pharmaceutical companies say the headline price rises don’t allow for these rebates and discounts they give, but The Wall Street Journal article quotes one analyst who says the hike in drug prices (up $58.96 per prescription between 2002 and 2009) dramatically outstrip the growth in these rebates (up just $12.57 in the same period).
Of those drugs surveyed by Barclays Capital investment bank, Benicar had the biggest price spike, rising 29.3% on the year in 2010. That drug, made by Daiichi Sankyo Co., is used to treat blood pressure, an ailment more common among the elderly or, you might say, those in society who can least afford such medicines and yet need them the most.
However, compounding this problem of drug affordability is the lack of adequate insurance. A report in the latest American Journal of Medicine published last week concluded that the percentage of personal bankruptcies related to medical bills or illness in Massachusetts hasn’t improved much since a 2006 law there requiring people to buy health insurance.
“Medical bankruptcy in Massachusetts: Has health reform made a difference?” surveyed bankruptcy filers in that state in 2009 and compared them with those from 2007. The answer to that question: no. Medical bankruptcies as a percentage of personal bankruptcies eased only slightly to 52.9% from 59.3%, which doesn’t bode well for the Obama administration’s healthcare reform.
Why this is worrying: Massachusetts has traditionally had fewer medical bankruptcies than the rest of the nation – where the rate hovers at around 62%, according to the authors of that study – partly due to the state’s more robust social safety net, including public hospitals and free medical care for the poor predating the state’s most recent reform.
The research concludes that the least expensive individual coverage available to a 56-year-old Bostonian carries a premium of $5,616, a deductible of $2,000, and covers only 80% of the next $15,000 in costs for covered services. With Washington watching from the sidelines as drug prices soar, expect the situation to get worse before it gets better.