This week’s furor over the skyrocketing cost of the EpiPen — a lifesaving shot for those with severe food and bee-sting allergies — brought to mind the results of an 18-month investigation trumpeted late last year by two senior U.S. senators.
“Wyden-Grassley Sovaldi Investigation Finds Revenue-Driven Pricing Strategy Behind $84,000 Hepatitis Drug,’’ read the news release issued by Sens. Ron Wyden, D-Ore., and Chuck Grassley, R-Iowa, who are members of the Senate Finance Committee. The concept that a big pharmaceutical company — in this case, Sovaldi’s manufacturer, Gilead Sciences — was “maximizing revenue” apparently came as a shock to these two health care policymakers.
It’s remarkable it took a year and a half to reach this conclusion. The pharmaceutical industry regularly ranks among the world’s most profitable, with the largest firms reliably posting double-digit margins. In 2013, for example, Pfizer Inc. reported a staggering 42 percent profit. Access and affordability have long been low-priority items on a CEO’s agenda.
So the newly revealed price-gouging by EpiPen manufacturer Mylan Inc., and the greed from its politically connected CEO Heather Bresch, is contemptible but not surprising. For the quarter-century that this nation has debated health care reform, there’s been widespread consensus not only around “market-driven health care” but the need to protect drugmakers’ profits in the name of innovation. Bresch is the daughter of Sen. Joe Manchin, D-W.Va.
The result: a system that encourages drugmakers to set prices at whatever the American market bears. “In contrast with most other countries, the United States does not employ a form of drug price regulation to control spending on pharmaceuticals,’’ according to a 2010 American Journal of Public Health article. Instead, the government protects a brand-name drug’s market exclusivity against generic competitors. It also fails to wield its immense purchasing power, such as by negotiating lower drug prices through the Medicare program for seniors.
Predictably, Americans’ per capita spending on prescription drugs exceeds the rest of the world’s, according to an Aug. 23 article in the Journal of the American Medical Association. On average, the “list prices for the top 20 highest-revenue-grossing drugs ... are 3 times greater in the United States than the United Kingdom,’’ the authors noted.
Is it any wonder that the $500 increase in EpiPen pricing followed last year’s scandal: the price hike masterminded by “Pharma Bro” Martin Shkreli for a drug often taken by AIDS patients. Without change, another scandal will erupt next year. Consumers with high-deductible health insurance or no insurance will again feel the pinch. Taxpayer-funded health care programs also will continue to pay top dollar and continue to strain government budgets.
As with anything in health care, fixes are complex. U.S. Sen. Amy Klobuchar has smartly called for the Federal Trade Commission to investigate potential activity by Mylan to limit EpiPen competition. The Minnesota Democrat also merits praise for two long-standing pushes: legislation that would allow Americans to import lower-cost drugs from Canada and another bill that would speed generic versions of brand-name drugs to market.
Those measures have lingered in congressional limbo due in part to the pharmaceutical industry’s lobbying might. But reluctance is also tied to a valid need to protect innovation. Developing new drugs and bringing them to market does indeed require massive amounts of money. The profit incentive encourages companies to take the associated risks.
Still, some academic analyses dispute that today’s sky-high drug prices are justified by research costs. Mylan, for example, appears to have prioritized payouts for Bresch and other executives as profits rolled in from the old but reliable drug used in EpiPens. Policymakers calling for solutions after the EpiPen outrage are to be commended, but they also need to strike a very careful balance.