TAKE ACTION FOR LOWER DRUG COSTS! STOP PHARMA’S BACKROOM DEALS!

Working with consumer advocates across the country, Consumer Catalyst has launched a campaign to stop  ‘Pay-for-Delay’ deals that hurt consumer health!

What you can do:

1. Sign the consumer petition on Change.org
2. Join the discussion on twitter and share your story, using the hashtag: Stop the #RxRacket! And ask others to share their stories too. Also follow us at @postscriptrx.
3. Join our community on Facebook to keep up with the campaign and join our email list of impacted consumers by sharing your story.

You can also tell us your story, if you are interested in joining us as a consumer advocate and speaking out on these issues to local media.

Pharmaceutical companies are colluding to keep drug prices high – and taking that money right out of your pocket.

Did you know drug companies have made more than 160 secret, back-room deals that

• Have kept 100 generic drugs or more off the market for years
• Drive up the cost of each drug by an average of $3,000 a year
• Keep all of our prescription costs high, while divvying up the spoils!

Right now, the Supreme Court is currently deliberating over whether these back-room deals are legal – but we know they’re wrong. Since 2005, as many as 142 different generic drugs have been unfairly kept from consumers, according to government reports. Delaying the launch of a generic drug lets the drug companies make bigger and bigger profits, while patients are stuck footing the bill, or going without the medicines they need.

The Supreme Court heard arguments by the drug companies, and fortunately Justices Kagan and Sotomayor raised consumer concerns – but the Court did not hear the perspective of the thousands of Americans unable to afford their medications. That’s because most people don’t even know that these deals are costing consumers thousands, and our health system billions of extra dollars, each year!

Help us raise awareness of this #RxRacket. The public deserves to know how this decision will affect us all – how thousands of Americans are being forced to choose between skipping their medications or going into credit card debt, just so that drug companies can make even more profit. Not to mention, how health care costs for everyone have gone up, because insurers pay most of these higher costs!

Whatever the Supreme Court decides, help spread the word, so we can help make sure that these deals come to an end, once and for all.

Target drugs: 
If you have taken Cipro, Provigil, or Androgel, you have definitely paid more because of a pay-for-delay settlement. And according to legal experts, it is very probable that many drugs including blockbuster drugs like Lipitor, Plavix and Nexium — have been delayed by pay-for-delay deals.*

We need you to tell everyone you know that this is happening, and help gather and share the stories of people you know that have been negatively impacted. Read the stories shared by two women, Tanna and Karen, who were unable to afford their medications due to pay-for-delay deals that kept generic Provigil off the market for six years. Also, read how the companies’ legal arguments make no sense.

You can find all the information you would ever need about this issue on our Pay-for-Delay info page. Please also feel free to add your thoughts on this #RxRacket in the comments, below.

Thank you for helping us protect your right to affordable medicine!

*The Full List – Drugs Likely to Have High Prices from ‘Pay-for-Delay’ Deals:
Adderall XR, Aggrenox, Altace, Arthrotec, Caduet, Carbatrol, Clarinex, Comtan, Duac, Effexor XR, Eloxatin, Ethyol, Femcon Fe, Fentora, Flomax, Lipitor, Lamictal, Levaquin, Lexapro, Loestrin-24 Fe, Loprox, Lotrel, Lybrel, Namenda, Naprelan, Nexium, Niaspan, Niravam, Olux, Opana ER, Ortho Tri Cyclen Lo, Oxytrol, Plavix, Propecia, Razadyne, Razadyne ER, Rythmol SR, Sinemet CR, Skelaxin, Solodyn, Stalevo, Tricor 145mg, Vanos, Vfend, Wellbutrin XL (150 mg), Xopenex, and Zantac!

As patients and consumers, we face more and more choices about our health care each year.

We all support consumer empowerment in decisions about their care, but consumers don’t always have all the information they need to choose between different prescription drugs.

And the billions of dollars that the drug industry spends on advertising to patients and doctors is designed to make things worse. Industry advertises expensive new drugs, but not equally effective and lower-cost alternatives.

But trends are changing. State laws promoting the use of generic medications have saved consumers hundreds of billions of dollars. Employers are educating their employees to emphasize value — getting an equally effective drug that costs one-tenth as much as a brand-name option. For example, skipping the $200-a-month Nexium, and choosing Prilosec — made by the same manufacturer with the same active ingredient — for just $27.

Whether you or your organization’s members are uninsured, have high copays, or just want to be sure to get the best value for their health care dollar, these resources can help advocates, doctors, and patients make better choices for their health – and their wallets.

The Truth About Generics – safe and affordable

Generics are as safe and effective as their brand-name counterparts, but can cost 90 percent less. Go here to see why generic drugs are an affordable option used by nearly all patients.

New Generic Drugs Coming this year, and next!

Is your drug going generic soon? Dozens of expensive brand-name drugs like Cipro and Provigil have become generic, and their prices are dropping… Generic Plavix costs less than $15 even without insurance. See this year and next year’s newest generic drugs.

Uninsured? Here are some ultra-low cost options

Go here to see why, and see how you can find hundreds of drugs for $4 or $5 — many of the same drugs that you may be taking now, available at a lower cost. And learn why drug costs can vary so much from pharmacy to pharmacy.

If an expensive brand name drug is your only option, and you meet other insurance and income qualifications, a local hospital or community health center may be able to help you find low cost medicines. Find out more here.

Is that drug coupon a good thing? Maybe not!

Did you find a coupon by a drug manufacturer online? You should think twice about using it to make Nexium or some other drug more affordable. Read this to see how these coupons can actually turn over your personal private health information to the drug company, and cost you more in the long run. If you have drug coverage through Medicare or Medicaid, using a manufacturer coupon is prohibited by federal law.

Please help us share these resources!

These consumer resources were created through the generous support of the California HealthCare Foundation, and are intended to be shared freely with the public, including on other organization’s websites.

Please contact us at wwilkinson(at)communitycatalyst.org if we can help you share these resources with your members, assist you posting them on your website, or if you want to host a guest blog on ways to find affordable medications.

– Wells Wilkinson,  Project Director
Prescription Access Litigation

Reposted from the Community Catalyst blog Health Policy Hub ….

As we discussed here last week, the U.S. Supreme Court is currently deliberating over whether pharmaceutical companies can collude to reap $3.5 billion a year in excess profits from American patients. Named FTC v. Actavis (and informally referred to as “The Androgel Case”), this case addresses whether it was legal for a brand name company to pay its generic competitor to delay generic Androgel from coming to the market. Why does this matter to you? Because the generic is up to 10 times cheaper than the brand name drug and Androgel is not the only brand name drug where a generic has been delayed. As Columbia University professor Scott Hemphill puts it, “[A] pay-for-delay settlement transfers wealth from consumers to drug makers, in the form of continued high pharmaceutical prices, with brand name firms sharing a portion of that transfer with the generic firm.”

The decision in this case would have far-reaching impact on the price of at least 140 different drugs whose costs have remained high because of such back-room deals. Since the Court heard oral arguments in the case last Monday, the Washington Post, Boston Globe, and smaller newspapers such as Sonoma County’s Press Democrat have all come out in agreement with us: these payments have to stop. Why?

The financial burden of monthly out-of-pocket drug costs has forced millions of Americans without drug coverage to cut back on taking their drugs or delay other health care. Even if you have insurance, co-pays for a brand name drug whose generics have been blocked can be a significant hardship—and your insurance company pays more, too. For example, the price of the drug Provigil skyrocketed from $300 a month in 2007 to over $1,000 per month in 2010 because in 2005 and 2006, Provigil’s manufacturer, Cephalon Corp. paid $136 million to four different generic drug companies to delay generic Provigil for 6 years—while Cephalon made more than $3 billion on U.S. sales of Provigil. In response, many insurers stopped covering the drug, forcing consumers onto Cephalon’s new drug “Nuvigil,”which many consumers reported to be less effective.

Meet two patients whose lives were turned upside down by the pay-for-delay deals that kept generic Provigil off the market:

Tanna

A state librarian in Fayetteville, MI, Tanna has been taking Provigil for more than ten years to treat idiopathic hypersomnia, a disease causing excessive sleep. Her son has narcolepsy, a related disease. When Tanna’s son first received his diagnosis, he was on Provigil as well, but Tanna’s insurance company forced them both to switch to Nuvigil. Neither of them could tolerate the drug and her son successfully switched to an ADHD drug for his symptoms, but Tanna has tried everything and Provigil is the only drug that works for her.

Much of Tanna’s suffering ended after she was diagnosed and prescribed Provigil. She has obtained her Master’s in Library Science and is able to work – as long as she takes her medicine.

While Tanna says Provigil has given her life back, its high price exacted a toll in return. Instead of decreasing with time, Tanna’s copay more than doubled from $35 a month in 2005 to $75 a month in 2009.

“If ten years ago, someone told me the percentage of my salary I’d be paying a month in health-related costs now, I’d say they were crazy,” Tanna said.” We’ve managed to pay our bills, but I have no savings, no safety net. We’ve done what families do – we’ve used credit cards. There’s no way I can ever think of retiring, but I always wanted to work, so I guess I’m getting my wish.”

While her doctor promised there would be a generic version of Provigil in2008, she has only seen the price reduced in the past three months (her copay is now down to $12 a month).

Tanna knows the Supreme Court decision will greatly affect everyone who relies on prescription drugs.

“If they [the drug companies] win this case then they can do whatever they want. Forever,” she said. “We’re screwed.”

Karen

Prior to Karen’s diagnosis with multiple sclerosis (MS), she barely took an aspirin. In the eight years since her diagnosis, Karen, a busy mother of three, has relied on Provigil. Unfortunately, while Provigil gives Karen the energy she needs to function, it is prohibitively expensive. A resident of Clarkston, MI, she served as a worker’s compensation administrator at a major automobile company until her MS forced her to stop working in 2005. When Karen stopped working, she had two mortgages and three young children. As she discussed with Ed Silverman on Pharmalot, between 2007 and 2010 the price Karen paid for Provigil more than doubled, from $7.26 a pill to $16.87 a pill (with her insurance company paying half). During this time, she was unable to afford her prescription in addition to her normal household expenses, either skipping doses or splitting pills to reduce costs.

In 2011, Karen had a major MS relapse. While crippled by fatigue, she was overwhelmed by the price of Provigil – she could not afford to continue paying for her medicine out-of-pocket, so she had to stop taking it, despite her doctor’s recommendation.

Since a generic version of the drug was released in October of last year, Karen has been able to take her full dose and pays only $16 every three months. The release of generic Provigil and its lower cost has enabled Karen to lead an active life, spending more time with her family, volunteering at church and even hosting a Japanese exchange student.

The Rest of Us

Tanna and Karen are not alone – if you’ve paid for Androgel, Augmentin, BuSpar, Cardizem, Cipro, K-Dur, Nolvadex (tamoxifen), or Provigil, it is almost certain you’ve paid too much because of pay-for-delay deals based on records from the FTC and other lawsuits. Legal scholars and experts also suspect (the documents are secret) that pay-for-delay agreements have delayed generic versions of nearly fifty more drugs, including Lipitor, Plavix, Nexium, Zantac, Effexor XR, Lamictal Cipro, Adderall XR*, Wellbutrin XL (150 mg), Provigil*, Altace, Niaspan, Nolvadex (tamoxifen), Caduet, Zantac and many others (see full list in box).

If you have paid for one of these drugs in the last few years, you too might have been fleeced by a pay-for-delay agreement that kept a generic off the market. Please share your story with us, like Tanna and Karen did, and join them in the fight to stop these unfair deals, once and for all.

Khadijah M. Britton, JD, Program and Policy Associate

Today, the U.S. Supreme Court heard oral arguments in a lawsuit about a drug company’s ability to pay a competitor to keep a generic drug off the market—so-called “pay-for-delay” settlements. Unfortunately, most of the arguments dealt with how corporations do business, and not how these deals affect consumers. Nevertheless, Justices Elena Kagan and Sonia Sotomayor both acknowledged the potential for consumer harm. We at Community Catalyst think this decision will affect the affordability of prescription drugs for millions of Americans.

What is the lawsuit about?

The lawsuit, Federal Trade Commission (FTC) v. Actavis (informally referred to as “The Androgel Case”), is the government’s challenge to what former FTC Chairman Jon Leibowitz has called “an epidemic” of brand name drug companies paying competitors to delay launching a new generic version of a brand name drug. According to annual reports by the FTC, 165 of these secret deals have blocked generic versions of 140 different brand name drugs.

Delaying competition from generics is the highest priority for brand name drug makers trying to hold on to their profits. A decade ago, brand name drug makers would file one patent infringement lawsuit after another, to delay a generic as long as possible. But Congress put a stop to this in late 2003, requiring all patent challenges be brought at the same time.

So the brand name drug industry shifted to a new tactic – paying their competitors to delay generics. Under anti-trust law, paying off your competitors is clearly prohibited. But the drug companies have muddied the waters by dragging patent litigation into their dealings.

Unfortunately, the incentive for drug companies to collude is enormous because these pay-for-delay agreements are a win-win for brand name and generic manufacturers. Brand name companies continue to charge high prices and make billions or hundreds of millions on their blockbuster drugs, while the generic company is paid from these high profits to put their generic drug aside and do nothing.

The all too clear losers are consumers, who miss out on the chance for lower-priced generics, or who are forced to pay higher premiums to cover all the health plan members who do take an affected drug.

Delaying generic versions of a drug has serious financial and health impacts on individual patients.

A 2010 FTC report estimates when a pay-for-delay agreement affects just one drug, it can cost each consumer, and his or her health insurer, an extra $4,500 over a year and a half. If the consumer takes more than one drug, the costs could be inflated by $9,000 during the same time period.

For instance, Provigil’s manufacturer, Cephalon Corporation, paid $136 million to four different generic drug companies, who then agreed not to sell a generic version of Provigil for six years. During that time, Cephalon made more than $3.1 billion on Provigil sales. While the drug companies profited, consumers were devastated as the price of Provigil skyrocketed from $300 a month in 2007 to more than $1,000 per month in 2010. As a result, Cephalon was sued by the FTC and class-action attorneys on behalf of consumers.

Indirectly, all our health care premiums and other health care costs have also gone up because pay-for-delay deals have forced our health plans to pay up to ten times as much for a brand-name drug that has no generic. For example, brand-name drugs like Lipitor and Plavix cost more than $200 a month, but their generics versions cost less than $20. Many suspect pay-for-delay deals blocked generic Lipitor and Plavix for several years, while consumers and health plans wasted billions on these two best-selling blockbuster drugs.

The FTC, the U.S. Department of Justice, Attorneys-General in 36 states and consumer advocates have all asked the court to end this practice and allow the nation’s antitrust laws to do their job to restore competition and help lower prices.

The Prescription Access Litigation project at Community Catalyst has helped consumers and insurers file class action lawsuits to challenge pay-for-delay deals that have blocked consumer’s access to affordable generic versions of the drugs Provigil, Cipro, Oxycontin, K-Dur, and Tamoxifen. We have also helped dozens of consumer advocacy, senior, labor and patient groups join legal briefs or support reforms in Congress.

For more information on Pay-for-delay agreements, go here. To tell us ‘Your Story’ about one of these drugs, or any other drug you cannot afford, go here.

[Also posted on Postscript]

When drugmakers lie to doctors about a drug’s safety or effectiveness, health plans pay more for substandard care, and patients suffer.

Case in point — the recent guilty plea and $1.5 billion settlement for illegal promotion of the drug Depakote revealed how Abbott Labs misled doctors for nearly a decade. They went to great lengths, profiling doctors, training their salespeople, and inappropriately funding and influencing Continuing Medical Education to get doctors to prescribe Depakote for unapproved treatment of seniors with dementia. Why? Because such off-label promotion instantly expands a drug’s market, and thus the drugmaker’s potential profits.

Unfortunately, class action lawsuits on behalf of consumers and health plans challenging such illegal marketing have met significant legal hurdles, and have been dismissed. This leaves consumers and private market health plans paying billions because of this fraud, while millions of patients receive inappropriate treatment, and are unnecessarily put at risk of side effects, which are often serious.

But progress is being made by State Attorneys-General and the Department of Justice bringing legal challenges under false claim laws. As a result, six of the biggest drugmakers have admitted or pled guilty to illegal promotion of unapproved uses of drugs since 2004. These investigations, most often initiated by whistleblowers, have led to the largest fines in U.S. history, and billions will be recovered this year alone.

But while all these enforcement actions are a welcome development, a recent jury verdict in a trial by the State of Arkansas may become a game-changer in the fight to stop the illegal marketing or promotion of drug products.

This past April, Arkansas Attorney-General Dustin McDaniel won a staggering verdict against Johnson & Johnson for their illegal promotion of the off-label uses of the antipsychotic drug Risperdal. In a trial before a jury, the state won $1.19 billion (yes, that’s ‘b’ ) in fines for violations of the state Medicaid anti-fraud law.

A hefty billion-dollar fine like this from one state sends a very big message — drug companies can no longer pursue profits by scoffing at the laws designed to protect safety-net health plans and the patients they serve.

Even more encouraging is the fact that most of the $1.19 billion in fines will go to the State Medicaid fund, which is looking at a $400 million budget shortfall next year.

What could be better than a deterrent that also helps stabilize funding for a state’s Medicaid plan during these tough economic times? Well, the only thing that could make this victory even better would be for Arkansas’ Medicaid program to earmark some of these recovered funds to correct the misinformation spread by Johnson & Johnson. Setting aside even a small amount of funds to allow trained independent medical professionals to go out into the field and teach doctors about the appropriate and effective alternatives to the unapproved uses of Risperdal will help prevent any ongoing inappropriate use of Risperdal, improving the quality of patient care and protect patients from being harmed by the significant side effects of the drug, like weight gain and diabetes. (See more about such education programs here.)

As we have seen in drug pricing (here and here) and universal coverage, the States often take the lead in on innovative ways to protect consumers. Based on this successful prosecution by the Arkansas Attorney-General, it wouldn’t be a bad idea for the remaining States to beef up their anti-fraud laws and enforcement staff, and go after the drug industry.

– Wells Wilkinson
Director, Prescription Access Litigation
Staff Attorney, Community Catalyst

[Also posted on Postscript]

The guilty plea and $1.5 billion settlement by Abbott to resolve their illegal off-label promotion of Depakote revealed a saga of extensive industry abuses and influence peddling that put millions of vulnerable seniors at risk. Abbott’s extensive promotion of the unapproved uses of the anti-convulsant drug Depakote to treat both seniors with dementia and to treat children is shocking. But it is even more alarming that this not the first major drugmaker to plead guilty to illegal marketing tactics that have targeted this exceptionally vulnerable population of seniors.

Many may recall that Eli Lilly was caught illegally promoting the unapproved, or “off-label” use of the antipsychotic drug Zyprexa to treat seniors with dementia, despite their internal studies showing that the risk of death from this drug increased in elderly patients.

Marketing these drugs to nursing homes for use on patients who ‘act up’ or are unruly has been a lucrative strategy for drugmakers. In response, we applaud the Department of Justice and the State Attorneys-General for their increasingly aggressive litigation to penalize these dangerous and unconscionable marketing practices.

But unfortunately for the millions of seniors who may be given Depakote or Zyprexa today or in the near future, the record-breaking $1.4 and $1.5 billion settlements respectively may not translate into improved care, unless further action is taken.

We urge Medicare and Medicaid officials at the federal and state level to move quickly to develop and implement safeguards, such as prior approvals or mandatory second opinions, that could be put in place to protect these vulnerable seniors from any unwarranted or inappropriate use of the drug Depakote to treat their dementia.

Looking forward, it’s time that all off-label settlements by the DOJ or the states include a requirement that the drugmaker pay to correct the misinformation that off-label marketing creates – i.e. that a drug is safer or more effective than it really is. Using lawsuits to fund corrective educational campaigns has a long history, both in public and private sector litigation. (See description here.)

To help stop the inappropriate and potentially harmful overuse of Depakote, Zyprexa, or Risperdal from continuing, doctors should be retrained to undo the misinformation campaigns by Abbott, Eli Lilly, and Johnson and Johnson. Several states, including Pennsylvania and New York have implemented “academic detailing” programs that send independent medical experts, usually nurse practitioners and pharmacists, to provide doctors with the truth about how effective drugs are from an objective, evidence-based perspective. Many state programs specifically address mental health drugs such as Zyprexa and Depakote. Indeed, one of the first of these education programs designed by Dr. Jerry Avorn, who spearheaded the concept in the 1990’s, recommended that a little tender loving care by nursing home staff could reduce the inappropriate use of sedatives, common at that time. A similar conclusion was reached by some nursing homes profiled in an  inspiring Boston Globe article addressing the overuse of Depakote.

– Wells Wilkinson,
Director, Prescription Access Litigation
Staff Attorney, Community Catalyst

Posted May 29th, 2012

The Affordable Care Act created some desperately needed means to start controlling ever-rising health care costs. Many — like preventive care or delivery reforms — will take some time to realize savings. In contrast, new anti-fraud efforts look to be paying off right away, in amounts much bigger than expected.

The health reform law provided $350 million over ten years to increase anti-fraud investigation and enforcement resources for the Department of Justice (DOJ) and State Attorneys-General. The goal? Saving $6.4 billion over the next decade. Given that some estimate that fraud and waste cost as much as $60 billion a year, or $600 billion over a decade, saving one percent of that amount seems a pretty modest impact.

But wait! New estimates project that current or pending settlements of drug fraud litigation by the DOJ and the Attorneys-General will top $8 billion in FY2012 alone, according to the group Taxpayers Against Fraud. (See list below.) This is not the culmination of hundreds of lawsuits; it’s just the eight biggest. So it looks like this anti-fraud effort under the ACA will meet and then surpass its ten-year goal in less than two years!

To be fair, most of these eight drug fraud investigations were undoubtedly underway before the increased funding for anti-fraud efforts reached the DOJ and State Attorneys-General offices. But there is little doubt that providing these over-worked regulators with increased resources was a big help in increasing enforcement. DOJ probably has fewer lawyers working on all their pending drug fraud cases than some of the biggest drugmakers hire to defend a single lawsuit. But despite these disparities, these results show that very modest government investment in fighting fraud, coupled with hard work by government lawyers and whistleblowers, can pay off big.

For example, earlier this week drugmaker Abbott Labs in Chicago settled a civil and criminal investigation of their illegal promotion of the anti-convulsant drug Depakote as an unapproved treatment of dementia in seniors, and of various conditions in children. Abbott pleaded guilty to promoting these unapproved, or ‘off-label’ uses of Depakote, and agreed to pay $1.6 billion – one of the biggest settlements for the illegal promotion of a single drug.

There could be as many as a couple hundred pending whistle-blower lawsuits that are filed under seal and being investigated now by the federal or state regulators. These pending lawsuits may add up to billions of dollars of additional fines and settlements.

Some critics have warned that even billion-dollar fines are an inadequate deterrent when a drug company can make far in profits on illegally promoted sales of a drug.

For instance, the $1.4 billion record-breaking settlement with Eli Lilly in 2009 for illegal promotion of their antipsychotic drug Zeprexa was less than 5 percent of Lilly’s gross sales. Eight months later, DOJ shattered this record with an even bigger $2.3 billion settlement, which amounted to 14 percent of Pfizer’s gross sales of eight illegally marketed drugs (see here).

Similarly, this month’s $1.6 billion Depakote settlement is nearly 12 percent of the drug’s $13.8 billion in gross sales revenue from 1998 to 2008. Furthermore, DOJ is pioneering two mechanisms to deter future illegal conduct by Abbott, along with this hefty fine.

First, the Depakote settlement places Abbott on probation and imposes a corporate compliance and monitoring program, for five years. If Abbott violates the compliance agreement or significantly violates the law, the government can exclude Abbott, and all their drug products, from federal health care programs. That would cost Abbott billions in lost sales on numerous drugs.

The settlement also aims to hold Abbott’s corporate leadership personally accountable. Abbott’s CEO must personally certify compliance and the board of directors must review and report on compliance each year. If the CEO or the board is lax in these duties, they could be excluded from their positions at Abbott. And if CEO or board intentionally lie to the government to cover up any misconduct, they could face personal criminal liability under the federal False Statements Statute. (Find the plea agreement and related documents here.)

Sadly, Abbott’s illegal promotion of ineffective and dangerous uses of Depakote has both harmed and put at risk what is arguably the most vulnerable patient population – seniors suffering from dementia, who live away from their families in nursing homes. Undoubtedly millions of seniors were, and likely continue to be given Depakote inappropriately as a result of Abbott’s illegal promotional campaign.

Check back soon for more on (1) actions that Medicare and Medicaid can take to address the continuing effects on patients of illegal promotions of off-label use of drugs and (2) how the Arkansas AG fought prescription drug fraud, winning huge fines to plug the state’s Medicaid budget deficit.

Wells Wilkinson

Director, Prescription Access Litigation

Staff Attorney, Community Catalyst

Projected Drug Fraud Settlements in FY 2012, excerpted from the Taxpayers Against Fraud website.

A version of this blog was posted earlier on Health Policy Hub and Postscript. 

During the last few years of recession, the brand-name drug industry has continued to charge higher and higher prices. In 2009, brand-name drug prices rose an average of 9%, while the recession kept prices in  nearly every other sector from rising, according to an AARP study. On the other hand, generic drugs, which cost between one-third and one tenth as much as brand-name drugs, have been dropping in price, including an 8% drop, on average, for the most widely used generics in 2009, according to AARP. Generics have been a life-saver for many patients, while saving the US health system an estimated $824 billion since 2001.  

But recently, some shortages of certain generic drugs have started to develop. A op-ed in this Sunday’s NY Times warns that over a third of  “the 34 generic cancer drugs on the market” were “in short supply . . . as of this month . . . .” The author, oncologist Ezekiel Emanuel, attributes a tenth of these shortages “to a lack of raw materials and essential ingredients” but then notes that  

“[most of the shortages] appear … to  be the  consequence of corporate decisions to cease production, or interruptions in production caused by money or quality problems, which manufacturers do not appear to be in a rush to fix.”

Dr. Emanuel speculates that a 2003 law regulating physician reimbursement for drug costs is the key obstacle a new generic drugmaker responding to a shortage by launching their own competing drug. But what’s missing is any explanation of how this a US drug pricing law, which affects primarily US seniors covered Medicare Part-B, has such a broad, market-wide, or even global effect upon the global manufacturing and supply of these essential cancer drugs. Don’t patients covered by health systems in Europe, Japan, and other countries, need, and pay for these drugs too?

We should also not overlook the benefits of the 2003 law that Dr. Emanuel cites. This law, the Medicare Prescription Drug, Improvement and Modernization Act of 2003, was passed to move Medicare Part-B reimbursement from the fictitious industry-created list price, called the “average wholesale price” to a realistic, evidence-based price benchmark based on average sales prices, plus 6%.  Dr.  Emanuel asserts that linking reimbursement to an average-plus-6% in effect limits the  growth of a generic drug’s price to only 6% every 6 months, because that’s how frequently the average sales prices are currently calculated.

While there may be some merit to this  critique, let’s not forget that Congress enacted this law in response to the multi-billion dollar AWP drug-pricing fraud by dozens of drug makers upon Medicare Part-B and private insurers. From the early 1990s until at least 2001, drug makers promoted hundreds of  their doctor-administered drugs by inflating the drug’s list price, called the ‘average wholesale price’ which was used by Medicare and private insurers to reimburse the doctor. Drug companies pitched to  doctors that their practices would reap far higher profits using a drug with an inflated price. This was called ‘marketing the spread.’ For years, doctors bought the drugs at a much lower price, and then kept the profits, costing our health system billions. At the same time, many cancer patients, struggling with their serious illness, were forced to pay higher and co-payments if they had insurance, and high out-of-pocket costs if they were uninsured. And patients’ medical care was subverted by the inappropriate financial incentives which amounted to hundreds of thousands of dollars a year for some doctors.

The 2001 PAL Average Wholesale Price lawsuit, following on federal government investigative reports, helped to highlight this problem, and led Congress to enact  the Medicare Prescription Drug, Improvement and Modernization Act of 2003. This law changed Medicare Part-B reimbursement from the fictitious industry-created “average wholesale price” to a more evidence-based price benchmark based on average sales prices.

Over 28 drug makers agreed to settle the litigation by the private sector for $125 million. Other lawsuits with other defendants for the same type of AWP-related pricing fraud upon consumers and the private sector have also been settled. But even the combined $860 million in total settlements of AWP fraud cases cannot protect consumers from the costs of increased premiums, and reduced quality of care as this 2003 law continues to do.

While the system for Medicare’s reimbursement of generic cancer drugs may need some corrections, such as a more rapid monthly or quarterly reporting of price data to incentivize new generics to fill any supply gaps, we should not remove the 2003 law’s common-sense protection that prevents drugmakers from gaming the system of government reimbursement.

Along these lines, some state Medicaid programs have started to move to similar evidence-based “average sales price” systems for pharmacy reimbursement as well.  Our health system should pay doctors and pharmacies prices that are closer to their actual costs, and not fictitious amounts cooked up by drugmakers for their own duplicitous ends.