COMPTROLLER LEMBO REPORT TO
FEDERAL DELEGATION: "INVESTIGATE AND REVERSE RUNAWAY PHARMACEUTICAL DRUG PRICES"
Comptroller Kevin Lembo today, in a report to
Connecticut's federal delegation, detailed the consequences of a runaway
pharmaceutical drug marketplace that threatens to obstruct patient care and
overcome health care budgets across the public and private sectors.
The headline rightfully grabbed significant attention- but the issues raised
are not isolated or unique¨ Lembo said. "They signal a more pervasive and
intensifying trend in the pharmaceutical marketplace.
We applaud the profit motive in our free market society as a mechanism to efficiently distribute resources and drive innovation, but excessive profits can cause significant harm when applied unbridled to essential and lifesaving medicines in an uncompetitive marketplace. High costs are pushing certain treatments out of reach for some and, on a macro level, our society has fewer resources to expend on other important priorities.¨
Lembo said the issues plaguing the pharmaceutical market are twofold- and each will likely require distinct remedies. The issues are:
Generic and Brand Price Hikes
The state plan has experienced significant cost increases for non-specialty drugs- an unsustainable 16.9 percent- as a result of substantial price hikes in traditional brand and generic medications, Lembo said.
"The increased costs come at a time when we are seeing very little change in overall utilization for brand and generics- and the changes we are seeing should result in lower, not higher, costs" Lembo said.
For example, last fiscal year the state experienced a slight reduction in the
utilization of brand drugs and a slight increase in the generic dispensing rate.
Despite these encouraging utilization patterns, Lembo said the state still
incurred significant additional costs driven by price hikes of long available
traditional brand and generic medications.
As the extreme case involving the drug Daraprim demonstrated, companies have been buying up the rights to generic and brand drugs and then increasing prices.
Industry consolidation has eroded competition in the market, which in turn
allows pharmaceutical companies to demand higher prices," Lembo said. "Even
worse, a significant backlog of applications to manufacture generic medications
at the U.S. Food and Drug Administration (FDA) is contributing to the lack of
competition and high prices."
"Additionally, the promise of lower cost generics only occurs when generics come to market after patent protection for a brand name drug expires," Lembo said. "Pharmaceutical company stall tactics have delayed the introduction of generic competition for some blockbuster brand drugs."
In Fiscal Year 2015, the state employee plan incurred significant costs for the brand drug Nexium as a result of a significant delay in the release of a generic version of the drug. The delay resulted in substantial costs for the state employee plan, which expended more than $8 million that year for the brand name version when an available generic would have significantly reduced the costs to the plan.
"The combination of delayed approvals at the FDA and significant market consolidation has increased prices for generic and brand drugs as a result of reduced competition," Lembo said.
"The specialty drug market poses its own
significant challenges that are separate and distinct from those related to
traditional brand and generic drugs," Lembo said. "The added costs resulting
from specialty drugs, in large part, are for new innovative treatments that are
often more effective than those previously available. As such, specialty drug
manufacturers are adding real value to the medical system. Still, specialty
medications are launching at much higher price points than similar specialty
drugs released just three or four years ago - creating a significant cost burden
for health plans and consumers."
"All indications are that the trend will continue as the majority of new FDA approvals anticipated in the next four years are specialty drugs," Lembo said. "Many of these medications will bring much needed relief to individuals, but the runaway prices are unsustainable and must be addressed."Significant investments have been made in the development of these new treatments, and better treatments like the new class of Hepatitis C drugs are saving lives and reducing long-term medical costs, Lembo said. However, not all specialty drugs have such clear medical cost savings, and yet the high prices are not limited to the Hepatitis C drugs. They can be found across the spectrum of specialty drugs.
Lembo said at least two current proposals should be thoroughly examined: