tag:theconversation.com,2011:/africa/topics/drug-prices-18958/articlesDrug prices – The Conversation2024-03-08T13:38:33Ztag:theconversation.com,2011:article/2228582024-03-08T13:38:33Z2024-03-08T13:38:33ZAsthma meds have become shockingly unaffordable − but relief may be on the way<figure><img src="https://images.theconversation.com/files/579691/original/file-20240304-18-r33cu5.jpg?ixlib=rb-1.1.0&rect=25%2C51%2C8538%2C5469&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Its price will take your breath away.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/man-using-blue-asthma-inhaler-medication-royalty-free-image/1179346207?">Brian Jackson/Getty Images</a></span></figcaption></figure><p>The <a href="https://www.businessinsider.com/cost-asthma-medication-doubled-unjust-2023-7">price of asthma medication has soared</a> in the U.S. over the past decade and a half. </p>
<p>The jump – in some cases from around <a href="https://doi.org/10.1001/jamainternmed.2015.1665">a little over US$10</a> <a href="https://www.singlecare.com/blog/albuterol-sulfate-hfa-proventil-hfa-without-insurance/">to almost $100</a> for an inhaler – has meant that patients in need of asthma-related products <a href="https://www.businessinsider.com/cost-asthma-medication-doubled-unjust-2023-7">often struggle</a> to buy them. Others simply <a href="https://asthma.net/living/cannot-afford-inhalers">can’t afford</a> them. </p>
<p>To make matters worse, asthma <a href="https://www.fda.gov/drugs/buying-using-medicine-safely/generic-drugs">disproportionately affects</a> lower-income patients. Black, Hispanic and Indigenous communities have the <a href="https://aafa.org/asthma-allergy-research/our-research/asthma-disparities-burden-on-minorities/">highest asthma rates</a>. They also shoulder <a href="https://aafa.org/asthma-allergy-research/our-research/asthma-disparities-burden-on-minorities/">the heaviest burden</a> of asthma-related deaths and hospitalizations. Climate change will likely <a href="https://www.hsph.harvard.edu/c-change/subtopics/climate-change-and-asthma/">worsen asthma rates</a> and, consequently, these disparities.</p>
<p>I’m a health law professor at <a href="https://www1.villanova.edu/university/law/faculty-scholarship/faculty-directory/profiles/AnaSantosRutschman.html">Villanova University</a>, <a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2667484">where I study</a> whether patients can get the medicines they need. And I’ve been watching this affordability crisis closely.</p>
<p>In many ways, it shows what happens when law and policy decisions aren’t aligned with public health needs. The good news, however, is that there finally seems to be some political will to rein in the price of asthma meds.</p>
<h2>Why inhaler prices are skyrocketing</h2>
<p>In 2008, the U.S. Food and Drug Administration <a href="https://www.fda.gov/drugs/frequently-asked-questions-popular-topics/transition-cfc-propelled-albuterol-inhalers-hfa-propelled-albuterol-inhalers-questions-and-answers">banned inhalers</a> that use chlorofluorocarbons, or CFCs – which were once widely used as propellants – because they can damage the ozone layer. The FDA was following a timeline set by an environmental treaty, the <a href="https://www.unep.org/ozonaction/who-we-are/about-montreal-protocol">Montreal Protocol</a>, which the U.S. ratified in the late 1980s. </p>
<p>From 2009 onward, CFC inhalers were phased out and replaced with hydrofluoroalkane, or HFA, ones, which are more environmentally friendly. They’re also a lot pricier. For patients with insurance, the average out-of-pocket cost of an inhaler rose from $13.60 per prescription in 2004 to $25 immediately after the 2008 ban, <a href="https://doi.org/10.1001/jamainternmed.2015.1665">a 2015 study found</a>.</p>
<p>Today, the <a href="https://www.singlecare.com/blog/albuterol-sulfate-hfa-proventil-hfa-without-insurance/">average retail price</a> of an albuterol inhaler is $98. Unlike CFC inhalers, which have <a href="https://www.fda.gov/drugs/buying-using-medicine-safely/generic-drugs">generic versions</a>, HFA inhalers are <a href="https://www.scientificamerican.com/article/unlikely-victims-of-banning-cfcs/">covered by patents</a>. While <a href="http://doi.org/10.1089/jamp.2016.1297">the drug itself</a> hasn’t changed, the switch to a different device allowed companies to increase their prices.</p>
<p>In 2020, the FDA finally approved the <a href="https://www.fda.gov/news-events/press-announcements/fda-approves-first-generic-commonly-used-albuterol-inhaler-treat-and-prevent-bronchospasm">first generic version</a> of an albuterol inhaler. But generic competition still isn’t robust enough to lower prices meaningfully.</p>
<p>Patients with good insurance <a href="https://allergyasthmanetwork.org/advocacy-updates/united-healthcare-albuterol-epinephrine-cost/">may pay very little</a> or even nothing. But uninsured patients face steep market prices, and as of 2023, there were <a href="https://aspe.hhs.gov/sites/default/files/documents/e06a66dfc6f62afc8bb809038dfaebe4/Uninsured-Record-Low-Q12023.pdf">over 25 million</a> uninsured Americans. <a href="https://www.cdc.gov/asthma/asthma_stats/insurance_coverage.htm">Even insured patients may have trouble</a> affording their asthma meds, the CDC has found. </p>
<p>The same asthma medication for which U.S. patients pay top dollar is available elsewhere at much cheaper prices. Consider the following case for inhalers. The pharmaceutical company Teva sells <a href="https://dailymed.nlm.nih.gov/dailymed/drugInfo.cfm?setid=ccd3aaec-4892-40d0-ad60-3e570178fbe1">QVAR RediHaler</a>, a corticosteroid inhaler, <a href="https://doi.org/10.1016/S2213-2600(24)00012-2">for $286</a> in the U.S.</p>
<p>In Germany, Teva sells that same inhaler for $9.</p>
<h2>Seeking meds from Mexico and Canada</h2>
<p>Some U.S. patients have traveled abroad to obtain cheaper asthma medication. After the 2008 ban on CFCs, it became common for patients to <a href="https://doi.org/10.1177/8755122515595052">visit border towns in Mexico</a> to purchase albuterol inhalers. They were sold for <a href="https://doi.org/10.1177/8755122515595052">as little as $3 to $5</a>. </p>
<p>A study of inhalers available to U.S. patients in Nogales, Mexico – about an hour south of Tucson, Arizona – found that Mexican products were <a href="http://doi.org/10.1177/8755122515595052">generally comparable to U.S. inhalers</a>. But researchers found some differences in performance, suggesting that American patients who use them could be getting a slightly different dose than their usual.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Asthma medication is seen on the shelves of a Mexican pharmacy." src="https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Asthma meds are considerably more affordable south of the border.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-interior-of-farmacia-san-pablo-news-photo/1041982048">Jeffrey Greenberg/Universal Images Group via Getty Images</a></span>
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</figure>
<p>There have also been reports of Americans turning to Canadian pharmacies to purchase asthma inhalers at much cheaper prices. In one case, a U.S. pharmacy would have charged $857 for a three-month supply. A patient obtained it for <a href="https://www.seattletimes.com/life/wellness/canadian-pharmacy-provided-inhaler-at-a-fraction-of-us-cost/">$134 from a pharmacy in Canada</a>.</p>
<h2>One potential fix: Importing cheaper meds</h2>
<p>U.S. law has long <a href="https://www.fda.gov/about-fda/center-drug-evaluation-and-research-cder/frequently-asked-questions-about-drugs">prohibited</a> personal importation of pharmaceutical drugs. However, a recent development could <a href="https://www.reuters.com/business/healthcare-pharmaceuticals/us-fda-allow-florida-import-cheaper-drugs-canada-2024-01-05">pave the way for states</a> to import cheaper asthma drugs.</p>
<p>In January 2024, the <a href="https://www.reuters.com/business/healthcare-pharmaceuticals/us-fda-allow-florida-import-cheaper-drugs-canada-2024-01-05/">FDA authorized</a> the importation of certain prescription drugs from Canada for the first time. <a href="https://www.kff.org/policy-watch/what-to-know-about-the-fdas-recent-decision-to-allow-florida-to-import-prescription-drugs-from-canada/">For now</a>, this authorization is limited to Florida, and it covers only drugs for HIV/AIDS, prostate cancer and certain mental health conditions.</p>
<p>Should it prove successful, the program could serve as a blueprint for other states.</p>
<h2>Another possible solution: Price-capping</h2>
<p>Policymakers could also try borrowing a page from the insulin playbook. Insulin prices <a href="https://doi.org/10.1001/jamanetworkopen.2023.18074">climbed for almost two decades</a> before Congress acted, capping the cost of insulin for Medicare patients. The 2022 <a href="https://www.congress.gov/bill/117th-congress/house-bill/5376/text">Inflation Reduction Act</a> established an out-of-pocket ceiling of $35 per month for prescription-covered insulin products. </p>
<p>If this cap had been in effect two years earlier, it would have saved 1.5 million Medicare patients about $500 annually, <a href="https://www.hhs.gov/about/news/2023/08/16/first-anniversary-inflation-reduction-act-millions-medicare-enrollees-savings-health-care-costs.html">a recent study estimated</a>. It also would have saved Medicare <a href="https://www.hhs.gov/about/news/2023/08/16/first-anniversary-inflation-reduction-act-millions-medicare-enrollees-savings-health-care-costs.html">$761 million</a>.</p>
<p>A similar approach could be taken for asthma meds.</p>
<p>Congress could create an asthma-specific rule similar to the insulin case. Or it could place provisions for asthma-med prices into a larger piece of legislation.</p>
<p>While this approach depends on the political environment, there are signs the government is becoming more willing to act. In January 2024, the U.S. Department of Health and Human Services <a href="https://www.hhs.gov/about/news/2024/01/29/readout-hhs-officials-meeting-private-sector-patient-advocacy-leaders-improve-national-access-important-asthma-medications.html">hosted a meeting</a> to discuss the problem with manufacturers and other stakeholders.</p>
<p>It’s a start. And – together with other measures – it brings some hope that asthma meds might soon become more affordable to those in need.</p><img src="https://counter.theconversation.com/content/222858/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ana Santos Rutschman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>An inhaler that costs nearly $300 in the US goes for just $9 in Germany. What gives?Ana Santos Rutschman, Professor of Law, Villanova School of LawLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2154922023-10-11T21:39:24Z2023-10-11T21:39:24ZPoliticians come and go, but the clock is now ticking on long-promised pharmacare<figure><img src="https://images.theconversation.com/files/553352/original/file-20231011-17-yyenn6.jpg?ixlib=rb-1.1.0&rect=89%2C224%2C4949%2C2766&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canada's long-promised yet undelivered pharmacare program may be entering the most crucial phase in its history.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/politicians-come-and-go-but-the-clock-is-now-ticking-on-long-promised-pharmacare" width="100%" height="400"></iframe>
<p>The sword of Damocles hangs over the Trudeau government as it prepares a pharmacare bill that must be passed this year to uphold its <a href="https://www.pm.gc.ca/en/news/news-releases/2022/03/22/delivering-canadians-now">supply and confidence agreement</a> with the NDP. This month might be the most crucial time in the history of pharmacare, the long-promised yet undelivered program that would add necessary medicines to Canada’s national health insurance system.</p>
<p>Pharmacare is more than just a financial system. It is — <a href="https://www.longwoods.com/content/24637/healthcare-policy/a-better-prescription-advice-for-a-national-strategy-on-pharmaceutical-policy-in-canada">or should be</a> — a system of policies aimed at integrating medicines into Canadian Medicare to ensure access to a safe and secure supply of treatments at affordable prices. </p>
<p>Given the current challenges, pharmacare is once again in peril of failing to launch. A national procurement program for essential medicines, like the program used to acquire COVID-19 vaccines during the pandemic, could provide a feasible, evidence-based solution for Canadians.</p>
<h2>Rocky discussions</h2>
<p><a href="https://twitter.com/DonDavies/status/1707877877985993207">Public statements</a> from NDP health critic Don Davies signal that discussions on the bill have been rocky. </p>
<p>The NDP are trying to hold the government to the recommendations of Trudeau’s own <a href="https://www.canada.ca/en/health-canada/corporate/about-health-canada/public-engagement/external-advisory-bodies/implementation-national-pharmacare.html">Advisory Council on the Implementation of National Pharmacare</a>, chaired by former Ontario health minister, Eric Hoskins. That recommendation was a universal, public program for covering medicines on a national formulary (a list of drugs to be included), beginning with about 100 of the most commonly prescribed, “essential medicines.” That first stage is critical, whether financed by Ottawa alone or in conjunction with provinces.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1707877877985993207"}"></div></p>
<p>In contrast, the <a href="https://www.clhia.ca/web/CLHIA_LP4W_LND_Webstation.nsf/page/4BDB561E2BD420448525895F005B3327/$file/2023%20Consultation%20Finance%20Canada.pdf">private insurance</a> and <a href="https://innovativemedicines.ca/wp-content/uploads/2023/06/20230601-Addendum-to-Innovative-Medicines-Canada-Submission-on-National-Pharmacare_FINAL.pdf">pharmaceutical</a> industries have lobbied for an American-style, “fill-the-gaps” system that would rely on — possibly even legally mandate — work-related private insurance for prescription drugs. Québec implemented such a system in 1997 to the delight of industry stakeholders but at great <a href="https://doi.org/10.1503/cmaj.170726">cost to patients, businesses and even taxpayers</a>.</p>
<p><a href="https://www.healthcoalition.ca/ndp-rejects-liberals-draft-pharmacare-bill/">The NDP has signalled</a> that “fill-the-gaps” pharmacare does not fulfil the government’s obligations under the supply and confidence agreement. Unfortunately, however, Trudeau’s government appears weak in the face of industry lobbying.</p>
<h2>Delays and challenges</h2>
<p>In 2019, the federal government planned to <a href="https://www.canada.ca/en/health-canada/news/2019/08/government-of-canada-announces-changes-to-lower-drug-prices-and-lay-the-foundation-for-national-pharmacare.html">reduce drug prices as a “foundation” for national pharmacare</a>, but later <a href="https://doi.org/10.1016/S0140-6736(23)00956-X">delayed and then watered down and walked back patented drug pricing reforms</a>. </p>
<p>Those reforms would have prevented firms from price gouging on medicines to treat serious conditions, such as rheumatoid arthritis and cancer. Prominent officials involved in the reform process <a href="https://doi.org/10.1503/cmaj.1096044">resigned in protest</a> of what appeared to be meddling from the office of health minister Jean-Yves Duclos.</p>
<p>After a cabinet shuffle in July, the pharmacare file now lies heavily on the desk of <a href="https://www.cbc.ca/news/politics/mark-holland-health-minister-pharmacare-1.6938470">Health Minister Mark Holland</a>. In the coming days, perhaps weeks, the minister needs to find a path that stays true to the government’s own recommendations, its prior commitments to Canadians and its deal with the NDP. The plan must also be one that provincial governments will support.</p>
<p>At this point, it does not seem viable for the federal government to launch the complete vision of national pharmacare laid out in the <a href="https://www.canada.ca/en/health-canada/corporate/about-health-canada/public-engagement/external-advisory-bodies/implementation-national-pharmacare/final-report.html">Hoskins report</a>. That would be a $38.5 billion, comprehensive, program that would be administered by provinces but require $15 billion in new federal funding, plus $23 billion contributed by provinces. The latter is not new money but is a source of provincial anxiety and political tension to say the least.</p>
<h2>National procurement</h2>
<p>There is another way for the government to act in a principled and evidence-based manner that could not only get them out of this bind but also leave a positive legacy for generations to come. </p>
<p>The federal government could procure essential medicines nationally for distribution by provincial governments, <a href="https://www.tpsgc-pwgsc.gc.ca/trans/documentinfo-briefingmaterial/lcp-cow/2022-05-19/p2-eng.html">just as it has done for COVID-19 vaccines, tests and treatments</a> for the past three years.</p>
<p>More than 100 countries have developed <a href="https://www.who.int/publications/i/item/WHO-MHP-HPS-EML-2023.02">essential medicines lists</a> for national procurement and distribution. We have evidence that providing Canadians with coverage of approximately 125 essential medicines to treat a wide range of conditions will <a href="https://doi.org/10.1001/jamainternmed.2019.4472">improve health care for patients</a>, reduce financial burdens on families and <a href="https://doi.org/10.1001/jamahealthforum.2023.1127">lower costs elsewhere in the health-care system</a>.</p>
<p>National procurement will reduce the cost of these medicines through bulk purchasing. It can also reduce shortages of medicines on the list by including security of supply provisions into the national supply contracts. Countries that used these <a href="https://doi.org/10.1377/hlthaff.2012.1268">best practices in supply contracts</a> reduce the risks of drug shortages while still achieving prices that are as much as <a href="https://doi.org/10.1503/cmaj.180197">90 per cent lower than Canadians pay</a>.</p>
<p>Federal funding of essential medicines will, of course, cost the federal government, since it would foot the bill for all of those essential medicines instead of the provinces paying much of the costs. But the <a href="https://www.canada.ca/en/health-canada/corporate/about-health-canada/public-engagement/external-advisory-bodies/implementation-national-pharmacare/final-report.html">$7.6 billion price tag</a> is a bargain.</p>
<p>All told, a program of this kind could save provinces, employers and families $12 billion in reduced prescription drug costs. The $4 billion in direct savings for provinces alone is enough to entice even the most recalcitrant of provincial governments.</p>
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Read more:
<a href="https://theconversation.com/with-a-pharmacare-bill-on-the-horizon-big-pharmas-attack-on-single-payer-drug-coverage-for-canadians-needs-a-fact-check-213041">With a pharmacare bill on the horizon, Big Pharma’s attack on single-payer drug coverage for Canadians needs a fact check</a>
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<p>On the other hand, Trudeau’s government could do what industry lobbyists want them to do. Such a program will not save provinces, employers and families any money; it will cost them $5 billion more than they are already paying for medicines.</p>
<p>Another Trudeau faced a similar challenge in 1983 when provincial premiers, ministers of health, and ministers of finance joined health care lobbyists in opposition to a <a href="https://www.historymuseum.ca/cmc/exhibitions/hist/medicare/medic-7h01e.html">contentious bill</a>. </p>
<p>Former Prime Minister Pierre Trudeau and Health Minister Monique Bégin stood strong and, in the dying months of their government, got the cornerstone <a href="https://laws-lois.justice.gc.ca/eng/acts/c-6/page-1.html">Canada Health Act</a> passed.</p>
<p>The sword now dangles over Prime Minister Justin Trudeau and Health Minister Holland who will either buckle under the pressure from industry lobbying or rise to a long-promised signature policy that could shape this government’s legacy.</p><img src="https://counter.theconversation.com/content/215492/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nav Persaud receives funding from the CIHR and other government sources. </span></em></p><p class="fine-print"><em><span>Steven G. Morgan has received funding from Health Canada for research in support of the Advisory Council on the Implementation of National Pharmacare (2018-2019).</span></em></p>A national procurement program for essential medicines could provide a principled, evidence-based solution to the current challenges facing a national pharmacare program in Canada.Nav Persaud, Canada Research Chair in Health Justice, University of TorontoSteven G. Morgan, Professor, School of Population and Public Health, University of British ColumbiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2130412023-09-11T23:27:09Z2023-09-11T23:27:09ZWith a pharmacare bill on the horizon, Big Pharma’s attack on single-payer drug coverage for Canadians needs a fact check<figure><img src="https://images.theconversation.com/files/547294/original/file-20230908-23-s1i9fc.jpg?ixlib=rb-1.1.0&rect=201%2C23%2C4974%2C3243&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Under a pharmacare plan, a single bargaining agent negotiates for lower prices from drug companies.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/with-a-pharmacare-bill-on-the-horizon-big-pharmas-attack-on-single-payer-drug-coverage-for-canadians-needs-a-fact-check" width="100%" height="400"></iframe>
<p>Health Minister Mark Holland <a href="https://www.cbc.ca/news/politics/mark-holland-health-minister-pharmacare-1.6938470">announced in August</a> that the federal government intends to introduce pharmacare legislation in the fall. Now the battle lines are being drawn.</p>
<p>One of the many virtues of pharmacare — a universal drug coverage plan — is that there will be a single bargaining agent looking for lower prices from the drug companies. Australia has a single buyer and has brand-name prices that are on average <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/annual-reports/annual-report-2021.html">29 per cent lower than Canada’s</a>. That difference on Canadian annual sales of $17.4 billion translates into savings of about $5 billion.</p>
<p>Pharmaceutical and insurance industries that stand to lose profit through lower drug prices are not happy about pharmacare. They are speaking out and mobilizing their allies. </p>
<h2>‘Fill in the gaps’</h2>
<p>Innovative Medicines Canada, the lobby group for Big Pharma, is pushing for a “<a href="https://innovativemedicines.ca/newsroom/all-news/imc-calls-on-canadas-premiers-to-improve-patient-access-to-medicines/">fill in the gaps</a>” model. That means providing coverage for people who don’t have drug insurance, but leaving the current system otherwise untouched.</p>
<p>Québec already has “filled in the gaps.” However, it <a href="https://doi.org/10.1503/cmaj.170726">hasn’t achieved the solutions shown in countries with pharmacare</a>. Québec spends more per capita on drugs than other provinces. A greater percentage of people in Québec (8.7 per cent) report spending more than $1,000 on prescription drugs in one year, compared to comparable countries with pharmacare (three per cent) or even the rest of Canada (4.8 per cent).</p>
<p>In Québec, nine per cent of its residents report that they go without their medications because they cannot afford them. While this is an improvement on the rest of the country, with 11 per cent of Canadians in other provinces skipping medications due to costs, it is still significantly higher than the numbers in most comparable countries with pharmacare (six per cent or less).</p>
<h2>The 97 per cent myth</h2>
<p>GreenShield, a not-for-profit health benefits provider and a member of the Canadian Life and Health Insurance Association (CLHIA), appears to share the insurance industry’s stand against pharmacare. In July it <a href="https://www.theglobeandmail.com/business/article-greenshield-cares-essential-medicines-low-income/">announced a pilot program</a> that will offer up to $1,000 in drug coverage to low-income Canadians who do not have public or private prescription drug insurance.</p>
<p>In making the announcement, GreenShield’s chief executive Zahid Salman repeated the myth that 97 per cent of Canadians already have drug coverage. That 97 per cent number is theoretical. Having some form of coverage does not necessarily make drugs affordable. For example, if you live in <a href="https://www.gov.mb.ca/health/pharmacare/estimator.html">Manitoba</a> and your family income is $47,500, you’ll first have to pay $2,760 out of pocket. Anything less and there’s no public coverage. </p>
<p>According to a recent report from <a href="https://www150.statcan.gc.ca/n1/pub/75-006-x/2022001/article/00011-eng.htm">Statistics Canada</a>, 33 per cent of seniors in Manitoba don’t have drug coverage. (That figure might be lower if some seniors who are eligible for provincial insurance didn’t register or were unaware that they were covered.)</p>
<h2>Not everyone has workplace benefits</h2>
<p>CLHIA came out swinging after the federal NDP tabled a <a href="https://www.ctvnews.ca/politics/ndp-attempts-to-prod-liberals-into-action-on-pharmacare-by-tabling-its-own-bill-1.6439036">pharmacare bill</a> in June. The NDP’s bill called for a federal, universal, public and single-payer drug plan. In other words, a plan similar to what Canadians already enjoy for doctor and hospital services. </p>
<p>Denis Ricard, chair of the CLHIA’s board of directors, has claimed that “<a href="https://breachmedia.ca/greenshield-insurance-industry-fights-liberal-ndp-pharmacare/">a fully one-payer national pharmacare is going to be a disaster for this country</a>.”</p>
<p>The <a href="https://betterhealthbenefits.ca/">Better Health Benefits, Together</a> campaign being run by the CLHIA warns that Canadians “can’t afford to lose their workplace benefits because of politics…Done the wrong way, Canadians will lose access to medicines they use today.” </p>
<p>The campaign fails to mention that workplace benefits do not cover everyone, and exclude those experiencing unemployment, which affects some populations more than others. For example, <a href="https://www150.statcan.gc.ca/n1/pub/75-006-x/2022001/article/00011-eng.htm">racialized Canadians have a higher unemployment rate</a> than the rest of the population and therefore are less likely to have work-based drug coverage. </p>
<p>Nor does the campaign mention that, according to <a href="https://www150.statcan.gc.ca/n1/pub/75-006-x/2022001/article/00011-eng.htm">Statistics Canada</a>, “the majority of insurance coverage changes due to the pandemic were negative,” with immigrants faring worse than non-immigrants.</p>
<h2>High deductibles</h2>
<p>Joining the battle against pharmacare is <a href="https://www.thestar.com/opinion/contributors/canada-has-in-fact-achieved-universal-drug-insurancecoverage/%2520article_65bc7a1e-8fb2-56d5-abb8-1b5890909597.html">Brett Skinner</a>, the CEO of the free market Canadian Health Policy Institute. Skinner’s message is that a national government-run drug insurance program is not necessary and will be bad for patients and costly for taxpayers. </p>
<p>He argues that private plans cover more drugs, and cover new drugs more quickly than public plans, and that if Canadians are faced with high deductibles there are provincial programs to deal with them.</p>
<p>He neglects to mention that <a href="https://doi.org/10.1177%2F20542704231166620">only about 10 to 15 per cent of new drugs provide any substantial new benefits</a> compared to existing drugs. He fails to note that a third of the difference in the time between public and private coverage is because <a href="https://doi.org/10.9778/cmajo.20220063">drug companies don’t take advantage of the opportunity to apply for coverage as quickly as they could</a>. </p>
<p>Skinner also ignores the fact that <a href="https://doi.org/10.1503%2Fjpn.180051">people living in Manitoba</a> with an annual income of just over $55,000 who are taking three drugs a day are faced with deductibles of up to $350 every three months. British Columbia residents aren’t far behind at $300 every three months.</p>
<p>Big Pharma, the insurance industry and free market zealots are all motivated by money and ideology. In a battle over people’s health, greed shouldn’t be the winner.</p><img src="https://counter.theconversation.com/content/213041/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Between 2019-2023, Joel Lexchin received payments for writing briefs on the role of promotion in generating prescriptions for two legal firms. He is a member of the Board of Canadian Doctors for Medicare. He receives royalties from University of Toronto Press and James Lorimer & Co. Ltd. for books he has written. Between 2017 and 2023 he was a coinvestigator on four different projects funded by the Canadian Institutes of Health Research.</span></em></p>Pharmaceutical and insurance industries that could lose profit through lower drug prices are not happy that a pharmacare bill is planned for fall. They are speaking out and mobilizing their allies.Joel Lexchin, Professor Emeritus of Health Policy and Management, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2125032023-08-30T23:01:53Z2023-08-30T23:01:53ZMedicare starts a long road to cutting prices for drugs, starting with 10 costing it $50.5 billion annually – a health policy analyst explains why negotiations are promising but will take years<figure><img src="https://images.theconversation.com/files/545372/original/file-20230829-23-kg9w8p.jpg?ixlib=rb-1.1.0&rect=0%2C30%2C6720%2C4436&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Americans pay far more for prescription drugs compared with people in other high-income countries. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/sorting-weekly-medication-royalty-free-image/1190823309?adppopup=true">Willie B. Thomas/Digital Vision via Getty Images</a></span></figcaption></figure><p>The Biden administration released on Aug. 29, 2023, a <a href="https://www.cms.gov/files/document/fact-sheet-medicare-selected-drug-negotiation-list-ipay-2026.pdf">list of the first 10 drugs</a> that will be up for negotiations with pharmaceutical companies over their Medicare prices.</p>
<p>The drugs are purchased through <a href="https://www.medicare.gov/drug-coverage-part-d">Medicare Part D</a>, a prescription drug coverage program for Americans ages 65 and older. The 10 medications accounted for more than US$50.5 billion in gross costs between June 1, 2022, and May 31, 2023.</p>
<p>Provisions authorizing these negotiations were part of the <a href="https://www.irs.gov/inflation-reduction-act-of-2022">Inflation Reduction Act</a> which Congress passed in 2022, allowing Medicare to negotiate drug prices for the first time. Pending successful negotiations, these changes would amount to what researchers estimated to be net savings of about <a href="https://doi.org/10.18553/jmcp.2023.29.8.868">$1.8 billion in 2026</a>. The <a href="https://www.cbo.gov/system/files/2022-09/PL117-169_9-7-22.pdf">Congressional Budget Office projected an even bigger savings of $3.7 billion</a>.</p>
<p>The top 10 list includes such drugs as Johnson & Johnson’s <a href="https://www.xarelto-us.com/">Xarelto</a>, which treats blood clots, and Amgen’s <a href="https://www.enbrel.com/">Enbrel</a>, which treats rheumatoid arthritis and psoriasis.</p>
<p>Negotiations are expected to begin in October and continue until August 2024, with lower prices going into effect in 2026. </p>
<p>Democrats have <a href="https://www.cbsnews.com/news/inflation-reduction-act-drug-costs-medicare-seniors-cbs-news-explains/">hailed the new law’s drug pricing provisions as game-changing</a>. They’re likely to make the issue a centerpiece of their <a href="https://apnews.com/article/medicare-prescription-drug-negotiations-biden-inflation-2bf6775c3431111a2cd03fd033caefa7">2024 election campaigns</a>. Democrats are further emboldened as public opinion polls show <a href="https://www.kff.org/health-costs/poll-finding/kff-health-tracking-poll-december-2022/">overwhelming support for the policy among Americans</a>.</p>
<p>As a scholar who <a href="https://scholar.google.com/citations?user=QY68LSIAAAAJ&hl=en">researches the politics of health policy</a>, I’m skeptical that Medicare drug price negotiations will end up making as big a difference as Democrats have promised, at least in the near future. While U.S. prescription drug prices are excessive, the true potential of the policy is unclear, as it remains <a href="https://www.politico.com/news/2023/08/29/drugmakers-trade-groups-push-back-against-medicare-drug-price-negotiations-00111936">muddled in lawsuits</a> and <a href="https://www.biopharmadive.com/news/pharma-drug-pricing-negotiation-bill-ceo-response/628872/">industry opposition</a>. However, if it can withstand the ongoing attacks and become settled law, Americans ages 65 and up could see real financial relief down the line.</p>
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<h2>Cutting drug costs for Medicare enrollees</h2>
<p>The <a href="https://www.irs.gov/inflation-reduction-act-of-2022">Inflation Reduction Act</a> allows the Centers for Medicare & Medicaid Services to negotiate prices with the companies that make some of the most expensive drugs in the Medicare program, including life-saving cancer and diabetes treatments like <a href="https://www.imbruvica.com/">Imbruvica</a> and <a href="https://www.januvia.com/">Januvia</a>.</p>
<p>If the negotiations proceed as planned, the drug-price-negotiation provision is expected to <a href="https://www.cbo.gov/system/files/2022-09/PL117-169_9-7-22.pdf">save the U.S. government about $98.5 billion</a> by 2031 by allowing it to pay less on prescription drugs for Americans on Medicare – nearly <a href="https://medicareadvocacy.org/medicare-enrollment-numbers/#">66 million people</a>. The Biden administration hopes that these cost savings will be passed down to Americans 65 and older through <a href="https://www.kff.org/medicare/issue-brief/how-would-drug-price-negotiation-affect-medicare-part-d-premiums/">reduced Medicare Part D premiums</a> and lower out-of-pocket costs.</p>
<p>The Inflation Reduction Act provides <a href="https://theconversation.com/why-letting-medicare-negotiate-drug-prices-wont-be-the-game-changer-for-health-care-democrats-hope-it-will-be-188560">additional benefits for older Americans</a>, including limiting their out-of-pocket expenses for prescription drugs to no more than $2,000 annually, limiting the growth of Medicare Part D premiums, eliminating out-of-pocket costs for vaccines and providing premium subsidies to low-income people ages 65 and older.</p>
<p>The Inflation Reduction Act also includes a separate provision that requires drugmakers, under certain conditions, to <a href="https://www.cms.gov/files/document/fact-sheet-part-b-rebatable-drug-coinsurance-reduction.pdf">provide the Medicare program</a> with rebates if drug price increases outpace inflation, <a href="https://www.cms.gov/files/document/reduced-coinsurance-part-b-rebatable-drugs-apr-1-june-30.pdf">starting in January of 2023</a>. That measure is expected to <a href="https://www.cbo.gov/system/files/2022-07/senSubtitle1_Finance.pdf">yield $71 billion in savings</a> over a decade. </p>
<figure class="align-center ">
<img alt="A Black female pharmacist shows Black woman some prescription medications." src="https://images.theconversation.com/files/478839/original/file-20220811-8881-5qqn2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/478839/original/file-20220811-8881-5qqn2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/478839/original/file-20220811-8881-5qqn2f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/478839/original/file-20220811-8881-5qqn2f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/478839/original/file-20220811-8881-5qqn2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/478839/original/file-20220811-8881-5qqn2f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/478839/original/file-20220811-8881-5qqn2f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Government negotiations with pharmaceutical companies over drug pricing should lower medical costs for many people ages 65 and older.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/young-pharmacist-helping-a-senior-lady-choose-the-royalty-free-image/1352510394?adppopup=true">Marko Geber/DigitalVision via Getty Images</a></span>
</figcaption>
</figure>
<h2>Penalties for companies that won’t negotiate</h2>
<p>The 10 drugs that the Centers for Medicare & Medicaid Services <a href="https://www.cms.gov/files/document/fact-sheet-medicare-selected-drug-negotiation-list-ipay-2026.pdf">have selected</a> accounted for $3.4 billion in out-of-pocket spending in 2022 <a href="https://www.cnbc.com/2023/08/29/10-drugs-to-face-medicare-price-negotiations-see-the-list.html">for Americans ages 65 and older</a> and $50.5 billion, or about 20%, of <a href="https://www.cms.gov/files/document/fact-sheet-medicare-selected-drug-negotiation-list-ipay-2026.pdf">total Part D gross prescription drug costs</a> from June 1, 2022, to May 31, 2023. </p>
<p>Pharmaceutical companies have to sign agreements to participate in the upcoming negotiations by October 2023. Based on criteria such as public feedback and consultation, as well as the clinical value of the drug, the Centers for Medicare & Medicaid Services will make an initial price offer in early 2024, with the potential to <a href="https://www.cms.gov/files/document/fact-sheetrevised-drug-price-negotiation-program-guidance-june-2023.pdf">further negotiate the price until August 2024</a>. Going forward, additional drugs will be subject to negotiations.</p>
<p>If drugmakers don’t negotiate, they will face stiff penalties in the form of a tax, reaching as high as <a href="https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/#bullet02">95% of U.S. pharmaceutical product sales</a>. Alternatively, the companies may pull their drugs from the Medicare and Medicaid markets, meaning that seniors on Medicare would lose access to them.</p>
<h2>Why US drug prices are so high</h2>
<p><a href="https://www.healthsystemtracker.org/chart-collection/how-do-prescription-drug-costs-in-the-united-states-compare-to-other-countries/">Americans pay substantially more for prescription drugs</a> compared with people who live in countries with similar economies, like Germany, the U.K. and Australia. While Americans spent more than <a href="https://www.healthsystemtracker.org/chart-collection/how-do-prescription-drug-costs-in-the-united-states-compare-to-other-countries/">$1,100 a year</a> in 2019, Germans paid $825, the British paid $285 and Australians paid $434 per person.</p>
<p>The <a href="https://theconversation.com/why-the-us-has-higher-drug-prices-than-other-countries-111256">reasons for this disparity are multilayered</a> and include the overall <a href="https://theconversation.com/us-health-care-system-a-patchwork-that-no-one-likes-85252">complexity of the U.S. health care system</a> and the <a href="https://www.kff.org/other/report/follow-the-pill-understanding-the-u-s/">lack of transparency in the drug supply chain</a>. Of course, many other countries also directly <a href="https://theconversation.com/why-the-us-has-higher-drug-prices-than-other-countries-111256">set prices for drugs or use their monopoly on health services to drive down costs</a>.</p>
<p>For example, Dulera, an asthma drug, costs <a href="https://www.provista.com/blog/blog-listing/us-drug-prices-exceed-those-in-11-similar-countries">50 times more in the U.S.</a> than the international average. Januvia, a diabetes drug that is among the first 10 drugs up for price negotiation, and Combigan, a glaucoma drug, cost about <a href="https://www.cusd.com/Downloads/EBC_013020_US_v_Int_RX_Drug_Prices.pdf">10 times more</a>.</p>
<p>These costs impose a <a href="https://www.commonwealthfund.org/publications/journal-article/2018/nov/whats-driving-prescription-drug-prices-us">big burden on Americans</a> – <a href="https://www.commonwealthfund.org/publications/journal-article/2018/nov/whats-driving-prescription-drug-prices-us">1 in 5 of whom</a> skip at least some of their prescribed medications due to the expense. Those 65 and older are <a href="https://www.kff.org/health-costs/poll-finding/kff-health-tracking-poll-february-2019-prescription-drugs/">particularly affected</a> by these problems.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&rect=34%2C17%2C5657%2C3763&q=45&auto=format&w=1000&fit=clip"><img alt="Older adult customer standing at a pharmacy checkout stand, with pharmacist explaining something." src="https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&rect=34%2C17%2C5657%2C3763&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/545363/original/file-20230829-17-5vd6tm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The first 10 drugs selected for negotiated pricing can be picked up at a pharmacy.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/female-owner-holding-prescription-paper-with-senior-royalty-free-image/944238626?adppopup=true">Maskot/Getty Images</a></span>
</figcaption>
</figure>
<h2>Strong resistance</h2>
<p>It’s too soon to say how big the impact of the drug pricing provisions will be and whether this policy will be sustained. </p>
<p>Drugmakers have opposed any <a href="https://doi.org/10.1111%2Fj.0887-378X.2004.00311.x">governmental regulation of drug prices for decades</a>. They are fighting the <a href="https://www.politico.com/news/2023/08/29/drugmakers-trade-groups-push-back-against-medicare-drug-price-negotiations-00111936">measure in court</a> and running a public relations campaign that warns of reduced investments in life-saving cures because their financial incentives are reduced. </p>
<p>Even if the drug price negotiations survive the industry’s legal challenges, it’s possible that future Republican administrations won’t embrace or enforce this policy. This is because potential Republican wins in the 2024 presidential and congressional elections could unravel or severely curtail the new drug negotiation policy. Indeed, Republicans have been working <a href="https://www.politico.com/news/2023/08/29/biden-drug-prices-gop-00113404">feverishly on designing a strategy</a> to use the negotiations against Democrats in the upcoming elections.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/9qI-2sLtp4M?wmode=transparent&start=12" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">If successful, the price negotiations could substantially lower the cost of some of the most in-demand drugs.</span></figcaption>
</figure>
<h2>Weighing the prospects</h2>
<p>In my view, the government’s efforts to cut prices for prescription drugs that Part D enrollees obtain are a step in the right direction. For now, the <a href="https://doi.org/10.18553/jmcp.2023.29.8.868">effect will likely be small</a> because patients already receive discounts on the listed drugs, bringing the net savings down substantially. However, the potential for real savings for Americans ages 65 and older will undoubtedly grow as more drugs become subject to negotiation. </p>
<p>At the same time, drug manufacturers have indicated that they are willing to take their legal battles against the Medicare drug pricing reform <a href="https://www.nytimes.com/2023/07/23/us/politics/medicare-drug-price-negotiations-lawsuits.html">all the way to the Supreme Court</a>. If that happens, there’s a <a href="https://www.medpagetoday.com/opinion/the-health-docket/105818">good chance they will prevail</a> because the arguments made in their lawsuits are likely to appeal to the Supreme Court’s conservative majority, which <a href="https://www.medpagetoday.com/opinion/the-health-docket/105818">has been favorable</a> to many of the arguments made by drugmakers in their lawsuits. </p>
<p>Moreover, drugmakers could also simply pull their drugs from Medicare and Medicaid to force the government’s hand. The Centers for Medicare & Medicaid Services seems to have deliberately chosen drugs that <a href="https://www.statnews.com/2023/08/29/10-drugs-medicare-price-negotiation">make up a high percentage of manufacturers’ drug sales</a> to counter this possibility. The industry has a <a href="https://www.amazon.com/American-Sickness-Healthcare-Became-Business/dp/1594206759">history of skillfully exploiting loopholes</a> and <a href="https://theconversation.com/prescription-drug-costs-would-have-been-a-major-campaign-issue-so-what-will-happen-now-that-coronavirus-is-center-stage-132493">possesses a vast lobbying apparatus</a>. </p>
<p>It’s also too soon to know if this is going to be a win for American patients overall. It’s possible that Americans who aren’t covered by Medicare <a href="https://rollcall.com/2022/08/10/senates-medicare-drug-pricing-may-ripple-into-private-market">may actually see prices go up</a>. That’s because if drugmakers do make less money on drugs for people enrolled in Part D, they might make up for those lost profits by charging more for drugs that other people depend on.</p>
<p>And lastly, it’s possible that there will be <a href="https://www.nytimes.com/2023/07/23/us/politics/medicare-drug-price-negotiations-lawsuits.html">fewer new prescription drugs</a> – as an indirect result of this policy that’s supposed to improve access to health care – because it <a href="https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act">may reduce drugmakers incentives</a>. While the number of cases is likely small, it would potentially take a toll on patients who might have seen a cure to their disease – or some relief from their symptoms.</p><img src="https://counter.theconversation.com/content/212503/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon F. Haeder does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The drug pricing reform may drastically lower prices for some of the most critical life-saving drugs in the long run. But numerous obstacles stand in the way.Simon F. Haeder, Associate Professor of Public Health, Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2068482023-07-20T12:29:04Z2023-07-20T12:29:04ZBlame capitalism? Why hundreds of decades-old yet vital drugs are nearly impossible to find<figure><img src="https://images.theconversation.com/files/537557/original/file-20230714-29-wo8n77.jpg?ixlib=rb-1.1.0&rect=0%2C17%2C6000%2C3970&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There is presently no end in sight to the drug supply shortage. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/young-pharmacist-checking-the-shelves-with-a-royalty-free-image/1344251576?phrase=generic+drugs&adppopup=true">FG Trade/E+ via Getty Images</a></span></figcaption></figure><p><a href="https://www.npr.org/sections/health-shots/2019/12/31/792617538/a-decade-marked-by-outrage-over-drug-prices">Past public ire</a> over high drug prices has recently taken a back seat to a more insidious problem – <a href="https://pharmanewsintel.com/features/drug-shortages-a-growing-concern-for-the-healthcare-industry-worldwide">no drugs</a> <a href="https://www.nytimes.com/2023/05/17/health/drug-shortages-cancer.html">at any price</a>.</p>
<p>Patients and their providers increasingly face <a href="https://www.nytimes.com/2023/06/26/health/cancer-drugs-shortage.html">limited or nonexistent supplies of drugs</a>, many of which treat essential conditions such as cancer, heart disease and bacterial infections. The American Society of Health System Pharmacists now <a href="https://www.ashp.org/products-and-services/database-licensing-and-integration/ashp-drug-shortages">lists over 300 active shortages</a>, primarily of decades-old generic drugs no longer protected by patents.</p>
<p>While this is not a new problem, the number of drugs in short supply has increased in recent years, and the average shortage is lasting longer, with more than 15 critical drug products <a href="https://www.hsgac.senate.gov/wp-content/uploads/2023-03-20-HSGAC-Majority-Draft-Drug-Shortages-Report.pdf">in short supply for over a decade</a>. Current shortages <a href="https://www.ashp.org/drug-shortages/current-shortages/drug-shortages-list?">include widely known drugs</a> such as the antibiotic amoxicillin; the heart medicine digoxin; the anesthetic lidocaine; and the medicine albuterol, which is critical for treating asthma and other diseases affecting the lungs and airways.</p>
<p>What’s going on?</p>
<p>I’m a <a href="https://scholar.google.com/citations?user=3jf-nyIAAAAJ&hl=en&oi=ao">health economist</a> who has studied the pharmaceutical industry for the past 15 years. I believe the drug shortage problem illustrates a major shortcoming of capitalism. While costly brand-name drugs often yield high profits to manufacturers, there’s relatively little money to be made in supplying the market with low-cost generics, no matter how vital they may be to patients’ health. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/aXbYGfz2ATE?wmode=transparent&start=17" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The shortage includes chemotherapy drugs, antibiotics, medications to treat ADHD and other critical drugs. Some patients are able to get their drugs, while others are not, and in some cases patients are getting ‘rationed care.’</span></figcaption>
</figure>
<h2>A generic problem</h2>
<p>The problem boils down to the nature of the pharmaceutical industry and how differently the markets for brand and generic drugs operate. Perhaps the clearest indication of this is the fact that <a href="https://www.rand.org/pubs/research_reports/RR2956.html">prices of brand drugs in the U.S. are among the highest</a> in the developed world, while generic drug prices are among the lowest. </p>
<p>When a drugmaker develops a new pill, cream or solution, the government grants the company an exclusive patent for up to 20 years, although most patents are filed before clinical testing, and thus the effective patent life is closer to eight to 12 years. Nonetheless, patents allow the drugmakers to cover the cost of research and development and earn a profit without the threat of competition from a rival making an identical product.</p>
<p>But once the patent expires, the drug becomes generic and any company is allowed to manufacture it. Since generic manufacturers are essentially producing the same product, profits are determined by their ability to manufacture the drug at the lowest marginal cost. This often results in low profit margins and can lead to cost-cutting measures that can compromise quality and threaten supply. </p>
<h2>Outsourced production creates more supply risks</h2>
<p>One of the consequences of generics’ meager margins is that drug companies outsource production to lower-cost countries.</p>
<p>As of mid-2019, 72% of the manufacturing facilities making active ingredients for drugs sold in the U.S. <a href="https://www.fda.gov/news-events/congressional-testimony/safeguarding-pharmaceutical-supply-chains-global-economy-10302019">were located overseas</a>, with India and China alone making up nearly half of that. </p>
<p>While overseas manufacturers often <a href="https://openknowledge.worldbank.org/server/api/core/bitstreams/3842481d-7bc7-532b-8cd2-ab30f57c6519/content">enjoy significant cost advantages</a> over U.S. facilities, such as easy access to raw materials and lower labor costs, outsourcing production at such a scale raises a slew of issues that can hurt the supply. <a href="https://www.nytimes.com/2011/08/13/science/13drug.html?pagewanted=al">Foreign factories are more difficult</a> for the <a href="https://theconversation.com/the-fdas-lax-oversight-of-research-in-developing-countries-can-do-harm-to-vulnerable-participants-170515">Food and Drug Administration to inspect</a>, tend to have more production problems and are far more likely than domestic factories to be shut down once a problem is discovered. </p>
<p><a href="https://www.fda.gov/news-events/congressional-testimony/safeguarding-pharmaceutical-supply-chains-global-economy-10302019">In testimony to a House subcommittee</a>, Janet Woodcock, the FDA’s principal deputy commissioner, acknowledged that the agency has little information on which Chinese facilities are producing raw ingredients, how much they are producing, or where the ingredients they are producing are being distributed worldwide. </p>
<p>The COVID-19 pandemic underscored the country’s reliance on foreign suppliers – and the risks this poses to U.S. consumers.</p>
<p>India is the world’s largest producer of generic drugs but imports 70% of its raw materials from China. About <a href="https://www.cidrap.umn.edu/sites/default/files/downloads/cidrap-covid19-viewpoint-part6.pdf">one-third of factories</a> in China shut down during the pandemic. To ensure domestic supplies, the Indian government restricted the export of medications, <a href="https://www.nytimes.com/2020/03/03/business/coronavirus-india-drugs.html">disrupting the global supply chain</a>. This led to shortages of drugs to treat COVID-19, such as for respiratory failure and sedation, as well as for a wide range of other conditions, <a href="https://www.uspharmacist.com/article/drug-shortages-amid-the-covid19-pandemic">like drugs to treat chemotherapy</a>, heart disease and bacterial infections. </p>
<h2>Low profits hurt quality</h2>
<p>Manufacturing drugs to consistently high quality standards requires constant testing and evaluation. </p>
<p>A company that sells a new, expensive, branded drug has a strong profit motive to keep quality and production high. That’s often not the case for generic drug manufacturers, and <a href="https://www.statnews.com/2020/06/02/bring-manufacturing-generic-drugs-back-to-u-s/">this can result in shortages</a>. </p>
<p>In 2008, an adulterated version of the blood-thinning drug Heparin <a href="https://www.pharmaceutical-technology.com/features/generic-drug-safety-us-regulators-struggle-global-market">was recalled worldwide</a> after being linked to 350 adverse events and 150 deaths in the U.S. alone.</p>
<p>In 2013, the Department of Justice <a href="https://oig.hhs.gov/fraud/enforcement/generic-drug-manufacturer-ranbaxy-pleads-guilty-and-agrees-to-pay-500-million-to-resolve-false-claims-allegations-cgmp-violations-and-false-statements-to-the-fda/#">fined the U.S. subsidiary of Ranbaxy Laboratories</a>, India’s largest generic drug manufacturer, US$500 million after it pleaded guilty to civil and criminal charges related to drug safety and falsifying safety data. In response, the FDA banned products made at four of the company’s manufacturing facilities in India from entering the U.S., <a href="https://www.nytimes.com/2013/05/14/business/global/ranbaxy-in-500-million-settlement-of-generic-drug-case.html">including generic versions of gabapentin</a>, which treats epilepsy and nerve pain, and the antibiotic ciprofloxacin.</p>
<p>And while there may be multiple companies selling the same generic drug in the U.S., there may be only a single manufacturer supplying the basic ingredients. Thus, any hiccup in production or shutdown due to quality issues can affect the entire market.</p>
<p>A recent analysis found that approximately 40% of generic drugs sold in the U.S. <a href="https://ssrn.com/abstract=3011139">have just one manufacturer</a>, and the share of markets supplied by just one or two manufacturers has increased over time. </p>
<figure class="align-center ">
<img alt="A man in a suit points in front of a lectern that says $30 insulin, with fridges of insulin in the background." src="https://images.theconversation.com/files/537321/original/file-20230713-19-4vturh.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/537321/original/file-20230713-19-4vturh.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/537321/original/file-20230713-19-4vturh.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/537321/original/file-20230713-19-4vturh.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/537321/original/file-20230713-19-4vturh.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/537321/original/file-20230713-19-4vturh.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/537321/original/file-20230713-19-4vturh.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">California Gov. Gavin Newsom partnered with Civica Rx to manufacture insulin for the state.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/CaliforniaGovernor/fb9c46b454aa451b87d3120061aa4fd2/photo?Query=insulin%20california&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=27&currentItemNo=6">AP Photo/Damian Dovarganes</a></span>
</figcaption>
</figure>
<h2>Repatriating the drug supply</h2>
<p>It is hard to quantify the impact of drug shortages on population health. However, a recent survey of U.S. hospitals, pharmacists and other health care providers found that drug shortages <a href="https://www.usp.org/sites/default/files/usp/document/supply-chain/pediatric-oncology-drugs-and-supply-chain.pdf">led to increased medication errors</a>, delayed administration of lifesaving therapies, inferior outcomes and patient deaths. </p>
<p>What can be done?</p>
<p>One option is to simply find ways to produce more generic drugs in the U.S.</p>
<p>California <a href="https://nashp.org/california-enacts-law-to-produce-generic-prescription-drugs/#">passed a law</a> in 2020 to do just that by allowing the state to contract with domestic manufactures to produce its own generic prescription drugs. In March 2023, California <a href="https://californiahealthline.org/news/article/california-generic-insulin-contract-civica-rx-newsom/">selected a Utah company</a> to begin producing low-cost insulin for California patients.</p>
<p>Whether this approach is feasible on a broader scale is uncertain, but, in my view, it’s a good first attempt to repatriate America’s drug supply.</p><img src="https://counter.theconversation.com/content/206848/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geoffrey Joyce does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The shortages, which have been going on for years, have typically affected only low-cost generics rather than profitable brand-name drugs.Geoffrey Joyce, Director of Health Policy, USC Schaeffer Center, and Associate Professor, University of Southern CaliforniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2097662023-07-17T21:52:04Z2023-07-17T21:52:04ZHigh drug prices in Canada are just one side of a bad equation<figure><img src="https://images.theconversation.com/files/537866/original/file-20230717-241434-8l70pi.jpg?ixlib=rb-1.1.0&rect=310%2C525%2C4751%2C3302&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canadians pay high drug prices, but the pharmaceutical industry claims it is a 'key partner in economic resilience, recovery and growth.'</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/high-drug-prices-in-canada-are-just-one-side-of-a-bad-equation" width="100%" height="400"></iframe>
<p>The Canadian health-care system is under pressure as <a href="https://nationalpost.com/news/canada/the-life-boat-is-full-why-canadas-entire-health-care-system-is-failing">service levels decline</a> while <a href="https://www.cihi.ca/en/national-health-expenditure-trends-2022-snapshot">costs escalate</a>. Drugs are one of our <a href="https://www.cihi.ca/en/national-health-expenditure-trends-2022-snapshot">largest health-care expenditures</a>. A federal agency, the Patented Medicine Prices Review Board (PMPRB), is supposed to <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/legislation/about-guidelines/guidelines.html">control drug prices</a> for Canadians. </p>
<p>However, the last year has been marked by upheavals which prevented the PMPRB from enacting a <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/consultations/2022-proposed-updates-guidelines.html">proposed series of reforms</a> that would have saved Canadians billions of dollars. </p>
<p>Innovative Medicines Canada (IMC), an advocacy group for the brand name pharmaceutical industry, <a href="https://innovativemedicines.ca/resources/all-resources/suspension-reformulation-pmprb-guidelines-urgently-required-imc-response-pmprb-2022-guidelines-proposals/">lobbied extensively</a> to quash these reforms. Its lobbying campaign was one of several key events which prompted <a href="https://www.ourcommons.ca/DocumentViewer/en/44-1/HESA/meeting-65/evidence">parliamentary hearings</a> and concerns over <a href="https://www.cmaj.ca/content/195/10/E378">political interference</a> with the activities of the PMPRB. </p>
<p>The result of these upheavals is that Canadians do not currently have a fully functional body protecting their best interests around drug prices.</p>
<p>However, drug prices are just one side of the equation. We must also look at pharmaceutical investment to understand the impact of the industry on the Canadian economy. </p>
<h2>Pharma industry in Canada</h2>
<p>Not surprisingly, IMC paints the contribution of its members in a positive light, recently publishing a <a href="https://innovativemedicines.ca/newsroom/all-news/canadas-rd-pharmaceutical-sector-a-key-partner-in-economic-resilience-recovery-and-growth/">press release</a> highlighting Canada’s research and development (R&D) pharmaceutical sector as “a key partner in economic resilience, recovery and growth.” IMC used data from <a href="https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2023001-eng.pdf">Statistics Canada</a> to show how pharmaceutical investment in Canada compares to other countries.</p>
<figure class="align-center ">
<img alt="Green capsules coming off a manufacturing line" src="https://images.theconversation.com/files/537888/original/file-20230717-230628-45bhv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/537888/original/file-20230717-230628-45bhv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/537888/original/file-20230717-230628-45bhv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/537888/original/file-20230717-230628-45bhv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/537888/original/file-20230717-230628-45bhv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/537888/original/file-20230717-230628-45bhv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/537888/original/file-20230717-230628-45bhv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Drug prices are just one side of the equation. We must also look at pharmaceutical investment to understand the impact of the industry on the Canadian economy.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Reports in <a href="https://breachmedia.ca/pharma-lobby-paid-statistics-canada-reports-used-industry-pr-push/">news media</a> and <a href="https://doi.org/10.12927/hcpol.2023.27037">scientific publications</a>, including one by <a href="https://www.cmaj.ca/content/re-pharmaceutical-industry-spending-rd-canada">one of us</a>, have expressed concerns about the data used and the degree of influence that IMC had over the published Statistics Canada report. </p>
<p>Other sources such as the <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/annual-reports/annual-report-2021.html">PMPRB annual report</a>, which includes pharmaceutical market statistics from the <a href="https://www.oecd.org/health/health-systems/pharmaceuticals.htm">Organization for Economic Co-operation and Development (OECD)</a>, cite lower numbers for the economic impact of the industry. However, disputes over absolute numbers do not need to be resolved, because the relative numbers can help us understand how the economic benefits to Canada from the pharmaceutical sector compare with peer countries.</p>
<h2>High drug prices in Canada</h2>
<p>Depending on the source, patented medicine prices in Canada are either <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/annual-reports/annual-report-2021.html#a6">fourth-</a> or <a href="https://www.canada.ca/en/health-canada/services/health-care-system/pharmaceuticals/costs-prices.html">third-highest</a> in the OECD (surpassed only by Germany, Switzerland and the United States), averaging <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/annual-reports/annual-report-2021.html#a6">18 per cent above the OECD average</a>. </p>
<p>Some authors suggest our small market and fragmented administration of health care by 13 different provinces and territories <a href="https://doi.org/10.12927/hcpap.2023.27000">contribute to high drug prices</a>.</p>
<p>However, when comparing the ratio of Canadian drug prices with those of <a href="https://www.statista.com/statistics/496169/price-ratio-canadia-to-foreign-drug-prices/">smaller countries</a> like Australia (price ratio 0.71 compared to Canada), and the Netherlands (price ratio 0.77 compared to Canada), it is clear that small market size does not automatically mean high drug prices.</p>
<p>Other countries with publicly funded health-care systems also have better prices, including the <a href="https://www.statista.com/statistics/496169/price-ratio-canadia-to-foreign-drug-prices/">United Kingdom</a> (price ratio 0.87). <a href="https://stats.oecd.org/index.aspx?DataSetCode=HEALTH_PHMC">Pharmaceutical sales data from 2020</a> shows that Canada spent US$723 per person per year on drugs, which is much higher than countries like Australia (US$447) and the Netherlands (US$368).</p>
<p>It is clear that Canada has very high drug prices relative to its peers — but what about the other side of the equation?</p>
<h2>Pharmaceutical investment and the Canadian economy</h2>
<p>Pharmaceutical trade balance is one indicator of the economic impact of the industry. Data from the industry itself shows the trade balance is positive for the European Union (EU) (<a href="https://efpia.eu/media/637143/the-pharmaceutical-industry-in-figures-2022.pdf">US$429.62 per person</a>) and also positive for individual countries with higher drug prices like Germany and Switzerland. Contrast this with the negative pharmaceutical trade balance in Canada, where the deficit was estimated at <a href="https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2023001-eng.pdf">US$351.14 per person</a> and increasing.</p>
<p>Canada fares better when looking at pharmaceutical employment. <a href="https://efpia.eu/media/637143/the-pharmaceutical-industry-in-figures-2022.pdf">Its own statistics</a> suggest the pharma industry provides one job for every 628 people in the EU overall. Looking at specific countries, it is not surprising that Switzerland has the highest level of pharmaceutical employment (one job for 185 people) but Germany (one job for 720 people) and France (one job for 682 people) also benefit.</p>
<p>Although <a href="https://innovativemedicines.ca/newsroom/all-news/canadas-rd-pharmaceutical-sector-a-key-partner-in-economic-resilience-recovery-and-growth/">IMC touts a figure of 107,000 Canadian jobs</a>, a look at the source from <a href="https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2023001-eng.pdf">Statistics Canada</a> shows that this includes both direct and indirect jobs. Still, the 49,403 direct jobs provided to Canadians by the pharmaceutical sector translates into one job for 774 people which is comparable with other countries.</p>
<h2>Investment in pharma R&D in Canada</h2>
<p>Not comparable however is the level of R&D investment. <a href="https://innovativemedicines.ca/newsroom/all-news/canadas-rd-pharmaceutical-sector-a-key-partner-in-economic-resilience-recovery-and-growth/">IMC cites a figure</a> of CAD$2.4 billion. However this figure differs from the <a href="https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2023001-eng.pdf">source data</a>, which actually provides an estimated range CAD$1.8-2.4 billion, and includes spending by the entire industry, not just IMC members.</p>
<figure class="align-center ">
<img alt="Collage showing a scientist in safety glasses and face mask, a bottle of capsules and molecules" src="https://images.theconversation.com/files/537890/original/file-20230717-231587-itq97k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/537890/original/file-20230717-231587-itq97k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=335&fit=crop&dpr=1 600w, https://images.theconversation.com/files/537890/original/file-20230717-231587-itq97k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=335&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/537890/original/file-20230717-231587-itq97k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=335&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/537890/original/file-20230717-231587-itq97k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=421&fit=crop&dpr=1 754w, https://images.theconversation.com/files/537890/original/file-20230717-231587-itq97k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=421&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/537890/original/file-20230717-231587-itq97k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=421&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The ratio of pharmaceutical research and development to sales in Canada is the lowest among comparator countries.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>The ratio of R&D to sales is another way to gauge the economic impact of the industry. The <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/annual-reports/annual-report-2021.html#a6">PMPRB</a> noted that Canada had the worst ratio among comparator countries at 3.9 per cent. Countries with lower drug prices had ratios two to six times better than Canada (France 15.2 per cent, Italy 6.6 per cent, Sweden 25.6 per cent, United Kingdom 23.4 per cent), as did those with higher drug prices (Germany 20.9 per cent, United States 23.4 per cent, Switzerland 115.4 per cent).</p>
<p><a href="https://innovativemedicines.ca/newsroom/all-news/canadas-rd-pharmaceutical-sector-a-key-partner-in-economic-resilience-recovery-and-growth/">IMC disputes</a> the PMPRB estimates claiming they are based on an outdated definition of R&D. But even using figures from the <a href="https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2023001-eng.pdf">Statistics Canada publication</a> endorsed by IMC, its membership was spending <a href="https://www.cmaj.ca/content/re-pharmaceutical-industry-spending-rd-canada">5.6 per cent to 7.9 per cent of revenue on R&D</a>, putting Canada perhaps marginally ahead of Italy but well behind the other comparator countries.</p>
<p>Looking at both sides of the equation then, Canadians pay very high absolute drug prices and receive lower economic benefits relative to our peers.</p>
<h2>Realistic goals for Canadian drug prices and pharma industry</h2>
<p>Canada has traditionally been a <a href="https://natural-resources.canada.ca/science-and-data/data-and-analysis/key-facts-and-figures-on-the-natural-resources-sector/16013">resource-based economy</a>. Enhancing other economic avenues takes time and consistent government policies. It is not reasonable to expect pharmaceutical investment in Canada sufficient to match R&D to sales ratios with countries like Switzerland where pharmaceuticals are a major contributor to GDP. </p>
<p>However, Canada could try to achieve a balance of investment and prices closer to norms for similar countries. Using the median of <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/are-you-patentee/current/sources-foreign-prices-pmprb7.html">the countries PMPRB uses as comparators</a>, this would mean improving the <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/annual-reports/annual-report-2021.html#a6">ratio of R&D to sales by five-fold</a>.</p>
<p>Building on lessons learned from the pandemic, the federal government initiated a <a href="https://ised-isde.canada.ca/site/biomanufacturing/en/canadas-biomanufacturing-and-life-sciences-strategy">Biomanufacturing and Life Sciences Strategy</a> to “rebuild our biomanufacturing sector, and support our innovative and world-leading scientists.” </p>
<p>To ensure that Canadians receive similar benefits from the pharmaceutical industry as other countries, we need oversight of both sides of the equation: drug prices (which requires a renewed PMPRB fully protected from political influence), and follow-up to ensure any government programs intended to offer investment incentives for the pharmaceutical industry in the Canadian economy achieve their goals.</p><img src="https://counter.theconversation.com/content/209766/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sandra Sirrs has received funding from CADTH and Health Canada for consultative services. She is affiliated with a provincial health authority in British Columbia. No funding support was received for this article. </span></em></p><p class="fine-print"><em><span>In 2019-2023, Joel Lexchin received payments for writing briefs on the role of promotion in generating prescriptions for two legal firms. He is a member of the Foundation Board of Health Action International and the Board of Canadian Doctors for Medicare. He receives royalties from University of Toronto Press and James Lorimer & Co. Ltd. for books he has written. </span></em></p>Canadians pay very high drug costs, but Canada also does not receive the same economic benefits from pharmaceutical industry investments as other countries do.Sandra Sirrs, Clinical Professor, UBC Division of Endocrinology, University of British ColumbiaJoel Lexchin, Professor Emeritus of Health Policy and Management, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1973352023-01-09T19:57:15Z2023-01-09T19:57:15ZHow the pharmaceutical industry uses disinformation to undermine drug price reform<figure><img src="https://images.theconversation.com/files/503452/original/file-20230106-9978-995yzp.jpg?ixlib=rb-1.1.0&rect=0%2C94%2C5742%2C3721&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The pharma industry warned that if proposed new prescription price guidelines go ahead, drug launches would be delayed and 'Canadian patients will be deprived of potentially life-saving new medicines.'
</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Canada’s drug prices are the <a href="https://www.canada.ca/en/patented-medicine-prices-review/services/annual-reports/annual-report-2020.html">fourth highest in the developed world</a>. Despite this, Innovative Medicines Canada (IMC), the lobby group for Big Pharma, <a href="https://innovativemedicines.ca/newsroom/all-news/implementation-patented-medicine-prices-review-boards-proposed-guidelines-will-harm-canadian-patients/">put out a call</a> in November 2022 for the Canadian government to suspend consultations on guidelines aimed at lowering prescription drug prices. </p>
<p><a href="https://www.canada.ca/en/patented-medicine-prices-review/services/consultations/2022-proposed-updates-guidelines.html">The proposed guidelines</a> were expected to come into effect on Jan. 1, but were postponed in late December. </p>
<p>IMC warned that if the new guidelines went ahead, drug launches would be delayed and “Canadian patients will be deprived of potentially life-saving new medicines.”</p>
<p>Just a few days later, IMC took out a <a href="https://www.theglobeandmail.com/business/adv/article-shortening-the-regulatory-timeline-will-benefit-patients-and-the/">full-page ad in the <em>Globe and Mail</em></a> claiming that “Canadians wait twice as long for new medicines.” </p>
<p>The first statement is false and the second is a half-truth. Both are typical of an industry that <a href="https://www.citizen.org/article/twenty-seven-years-of-pharmaceutical-industry-criminal-and-civil-penalties-1991-through-2017/">paid US$38.6 billion in fines</a> in civil and criminal cases in the United States between 1991 and 2017.</p>
<h2>Falsehoods and half-truths</h2>
<p>IMC has been <a href="https://archive.innovativemedicines.ca/pmprb-still-time-regulations/">claiming since the end of 2020</a> that “new drugs are not being launched in Canada” because our drug prices might be lowered. However, between 2011 and 2020, there was <a href="https://doi.org/10.1016/j.healthpol.2022.08.006">no change in the timing</a> between when drugs were approved by the United States Food and Drug Administration (FDA) and then by Health Canada. </p>
<p>Drug companies did not wait longer to introduce new drugs here compared to the U.S. There was a <a href="https://doi.org/10.1016/j.healthpol.2022.08.006">decline in the per cent of drugs first approved by the FDA and then by Health Canada</a>, but the same thing happened in Australia where drug prices were not being lowered.</p>
<p>What about the claim that Canadians are losing out on new potentially life-saving drugs? </p>
<p>Only 10-15 per cent of new drugs are actually <a href="https://doi.org/10.1136/bmjopen-2018-023605">major therapeutic breakthroughs</a>. The industry claims the other 85-90 per cent <a href="https://ethics.harvard.edu/blog/new-prescription-drugs-major-health-risk-few-offsetting-advantages">give patients more choice</a>. But companies don’t test their new drugs on patients who can’t tolerate or don’t get better on older ones. So, nobody really knows if those choices mean anything positive for patients. </p>
<h2>Wait times</h2>
<figure class="align-center ">
<img alt="A piggy bank seen from above beside a prescription box" src="https://images.theconversation.com/files/503453/original/file-20230106-24-vj99yn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/503453/original/file-20230106-24-vj99yn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/503453/original/file-20230106-24-vj99yn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/503453/original/file-20230106-24-vj99yn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/503453/original/file-20230106-24-vj99yn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/503453/original/file-20230106-24-vj99yn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/503453/original/file-20230106-24-vj99yn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">For over 50 years, drug companies have been suggesting that access to medications will be at risk every time governments do something that threatens their profits.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Do Canadians wait longer for new drugs? If the comparison is to patients in the U.S. or the European Union (EU), then the answer is yes. </p>
<p>Why is the wait longer? After companies submit drugs for approval in the U.S. or the EU, <a href="https://www.cirsci.org/publications/cirs-rd-briefing-81-new-drug-approvals-in-six-major-authorities-2011-2020/">they take an extra year</a> before submitting them to Health Canada. Is that wait because of Canadian drug prices? No. Drug prices are higher in Switzerland than in Canada, but the wait to get drugs approved in Switzerland is also longer than in Canada. </p>
<p>If drug prices were the reason for the wait, then companies should be submitting applications sooner in Switzerland compared to Canada.</p>
<p>In Canada, newly approved drugs are available for people with private insurance <a href="https://doi.org/10.9778/cmajo.20220063">about a year</a> before they can be prescribed to people covered by provincial/territorial drug formularies. But a substantial proportion of that time difference is in the hands of drug companies.</p>
<p>If pharma companies want to get their drugs publicly covered, they first have to submit them to the <a href="https://www.cadth.ca/about-cadth">Canadian Agency for Drugs and Technologies in Health</a> (CADTH). CADTH then does a value-for-money audit and makes a recommendation to the provinces and territories about funding. </p>
<p>In an effort to speed up decision-making about whether the public should pay for new drugs, ever since April 2018 companies can <a href="https://doi.org/10.3389/fphar.2019.00196">submit applications to CADTH up to 180 days</a> before Health Canada approves the drugs. But instead of taking full advantage of this provision, <a href="http://doi.org/10.9778/cmajo.20220063">companies only submit a median of 13 days before approval</a>, adding 5.5 months to the time it takes to make a final decision. </p>
<h2>Protecting profits</h2>
<p>Drug companies have been making threats for over 50 years every time governments do something that threatens their profits. </p>
<p>In 1972, the NDP government of Manitoba passed a law making it mandatory for pharmacists to substitute cheaper generic drugs for those named on prescriptions, unless prohibited by the physician writing the prescription. Furthermore, the substitute could not be sold at a price higher than that of the lowest priced equivalent drug. After this legislation passed, the <a href="https://utorontopress.com/9781442619609/private-profits-versus-public-policy/">president of the industry association made a thinly veiled threat to the Manitoba government</a>:</p>
<blockquote>
<p>“It will remain to be seen how much value would be put on the Manitoba market by research-oriented companies. It is each company’s decision whether the size of their Manitoba market will merit the cost of properly servicing that market. If they can’t meet the prices they could be forced out of business.”</p>
</blockquote>
<p>After the Liberal government in Ontario passed legislation in 2017 requiring companies to report how much money they gave to doctors, hospitals and other health care personnel and institutions, <a href="https://www.theglobeandmail.com/canada/article-ford-pcs-leave-drug-company-transparency-law-in-limbo/">IMC made the same threat</a> about not launching new drugs in Canada because of the regulatory burden of having to make reports.</p>
<p>Now, they are making a similar threat based on potentially lower drug prices in Canada.</p>
<p>Drug companies make threats to maintain their ability to make <a href="https://doi.org/10.1001/jama.2020.0442">extraordinarily high profits</a>. The rest of us need to stand up for the right of patients to get drugs at affordable prices.</p><img src="https://counter.theconversation.com/content/197335/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In 2019-2022, Joel Lexchin received payments for writing a brief on the role of promotion in generating prescriptions for Goodmans LLP and from the Canadian Institutes of Health Research for presenting at a workshop on conflict-of-interest in clinical practice guidelines. He is a member of the Foundation Board of Health Action International and the Board of Canadian Doctors for Medicare. He receives royalties from University of Toronto Press and James Lorimer & Co. Ltd. for books he has written. </span></em></p>The pharma industry claims lower prescription drug prices will mean less access to new medication for Canadians. It’s an old threat that pits profits against patients’ rights to affordable drugs.Joel Lexchin, Professor Emeritus of Health Policy and Management, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1749672022-01-24T16:03:16Z2022-01-24T16:03:16ZLower drug prices are a priority for Canadians, but not for the federal government<figure><img src="https://images.theconversation.com/files/441912/original/file-20220121-8679-1cfzhwc.jpg?ixlib=rb-1.1.0&rect=58%2C100%2C5330%2C3631&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Changes to the Patented Medicine Prices Review Board regulations, which are intended to help lower drug costs in Canada, were originally scheduled to take effect in July 2020.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 175px; border: none; position: relative; z-index: 1;" allowtransparency="" src="https://narrations.ad-auris.com/widget/the-conversation-canada/lower-drug-prices-are-a-priority-for-canadians--but-not-for-the-federal-government" width="100%" height="400"></iframe>
<p>Once again, the federal minister of health has postponed <a href="https://www.canada.ca/en/health-canada/news/2021/12/statement-from-the-minister-of-health-on-the-deferral-of-coming-into-force-of-the-regulations-amending-the-patented-medicines-regulations.html">changes to the Patented Medicine Prices Review Board (PMPRB) regulations</a> for another six months until July 1, 2022. </p>
<p>The excuse is that bringing the amendments into force during the COVID-19 pandemic requires preparedness and consultation and the government needs to further engage stakeholders — the pharmaceutical industry and its allies.</p>
<p>The process of changing the regulations started in June 2016 when the PMPRB released a <a href="http://www.pmprb-cepmb.gc.ca/CMFiles/Consultations/DiscussionPaper/PMPRB_DiscussionPaper_June2016_E.pdf">public discussion paper</a>. Changes were necessary because of the high cost of drugs in Canada: The PMPRB reported in 2019 that only the <a href="https://www.canada.ca/content/dam/pmprb-cepmb/documents/reports-and-studies/annual-report/2019/pmprb-ar-2019-en.pdf">United States, Switzerland and Germany had higher drug prices</a>. On a per capita basis, <a href="https://www.oecd-ilibrary.org/docserver/ae3016b9-en.pdf?expires=1640634504&id=id&accname=guest&checksum=BB9D07F986EF2A8A219322378B5291C5">Canada spent the third-highest amount in the world</a> on drugs in 2021, according to the Organization for Economic Co-operation and Development. </p>
<p>Lowering drug prices was part of the <a href="https://www.budget.gc.ca/2019/docs/themes/pharmacare-assurance-medicaments-en.html">groundwork for a national pharmacare plan</a> — although pharmacare gets only a passing mention in the <a href="https://pm.gc.ca/en/mandate-letters/2021/12/16/minister-health-mandate-letter">latest mandate letter</a> from Prime Minister Justin Trudeau to the new Health Minister Jean-Yves Duclos.</p>
<p>Finally, the multinational drug companies were not living up to their end of the bargain: in 1987 they agreed to spend 10 per cent of sales revenue on research and development in Canada in return for Canada changing its rules about drug patents. By 2019, that figure had <a href="https://www.canada.ca/content/dam/pmprb-cepmb/documents/reports-and-studies/annual-report/2019/pmprb-ar-2019-en.pdf">shrunk to 3.9 per cent</a>.</p>
<h2>Delayed by two years</h2>
<p>The PMPRB changes were initially supposed to come into effect on July 1, 2020, but were delayed for six months. The reasons, <a href="https://www.pharmainbrief.com/2020/06/pmprb-update-amendments-delayed-new-guidelines-consultation-announced-and-judicial-review-heard/">according to the federal government</a>, were “to minimize the imposition of new administrative burden on industry” and to give stakeholders more time to provide feedback because of the impact of the pandemic. </p>
<figure class="align-center ">
<img alt="A medicine bottle tipped on its side, with white caplets arranged in the shape of a dollar sign" src="https://images.theconversation.com/files/441926/original/file-20220121-17-x9agmc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/441926/original/file-20220121-17-x9agmc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=333&fit=crop&dpr=1 600w, https://images.theconversation.com/files/441926/original/file-20220121-17-x9agmc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=333&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/441926/original/file-20220121-17-x9agmc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=333&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/441926/original/file-20220121-17-x9agmc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=419&fit=crop&dpr=1 754w, https://images.theconversation.com/files/441926/original/file-20220121-17-x9agmc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=419&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/441926/original/file-20220121-17-x9agmc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=419&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Efforts to lower drug prices were part of the groundwork for a national pharmacare plan.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Fast forward six months and there’s another six-month delay. This time, a <a href="https://www.ctvnews.ca/health/health-canada-delays-drug-pricing-reforms-citing-covid-19-challenges-for-manufacturers-1.5258523">spokesperson for Health Canada</a> said that the industry needed more time to adjust to new reporting requirements while dealing with the challenges posed by the COVID-19 pandemic. </p>
<p>On June 24, 2021, seven days before the changes were to start, the federal government decided that industry needed even more time because of the pandemic. On that occasion, Health Canada said, “<a href="https://www.theglobeandmail.com/politics/article-ottawa-delays-drug-pricing-changes-a-third-time-citing-covid-19/">It is not anticipated that further delaying these amendments will be needed</a>.” But as the <a href="https://www.reuters.com/business/healthcare-pharmaceuticals/canada-delay-drug-price-reforms-by-six-months-cites-pandemic-2021-12-23/">announcement on Dec. 23</a> showed, another delay was necessary.</p>
<h2>Lobbying efforts</h2>
<p>Are the pandemic and the need for more discussions the only reasons for these repeated delays? The multinational drug companies, as represented by their lobby group Innovative Medicines Canada (IMC), have been very vocal in their opposition to the changes. </p>
<figure class="align-right ">
<img alt="Innovation, Science and Industry Minister Francois-Philippe Champagne standing with a finger raised in the House of Commons" src="https://images.theconversation.com/files/441922/original/file-20220121-23-vilfiz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/441922/original/file-20220121-23-vilfiz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/441922/original/file-20220121-23-vilfiz.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/441922/original/file-20220121-23-vilfiz.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/441922/original/file-20220121-23-vilfiz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=528&fit=crop&dpr=1 754w, https://images.theconversation.com/files/441922/original/file-20220121-23-vilfiz.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=528&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/441922/original/file-20220121-23-vilfiz.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=528&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Innovation, Science and Industry Minister François-Philippe Champagne is reportedly rebuilding bridges with Big Pharma.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Patrick Doyle</span></span>
</figcaption>
</figure>
<p><a href="http://innovativemedicines.ca/wp-content/uploads/2018/02/20180212_IMC_CG1_Submission_Regulations_Amending_the_Patented_Medicines_Regulations_Final.pdf">IMC disputed the need for them</a>, the benefits that would result and claimed that drug companies would either not launch or delay the launch of new drugs in Canada. The only evidence for the latter threat was a <a href="https://lifesciencesontario.ca/wp-content/uploads/2020/06/EN_LSO_Global-Launch-Benchmarking_Webinar-June22-20_Final.pdf">report from Life Sciences Ontario</a>, an organization whose membership includes multiple multinational drug companies.</p>
<p>If the pandemic meant more discussions were necessary, it also meant more lobbying by the industry. According to an investigative article in <a href="https://breachmedia.ca/how-canada-became-a-vaccine-villain/"><em>The Breach</em></a>, an online media outlet, IMC lobbied elected representatives and government officials 55 times in 2021. </p>
<blockquote>
<p>“Lobbyists for U.S.-based pharmaceutical giants Pfizer and Johnson & Johnson … paid designated office holders in Canada a combined 116 visits since October 2020.” </p>
</blockquote>
<p>The bulk of the lobbying was to make sure that Canada <a href="http://innovativemedicines.ca/innovative-medicines-canada-cautions-covid-19-trips-ip-waiver/">didn’t support any relaxation of patent standards at the World Trade Organization</a>. But <a href="https://www.theglobeandmail.com/opinion/article-in-battle-between-trudeau-and-big-pharma-over-drug-prices-federal/">in light of reports</a> that then Innovation Minister François-Philippe Champagne had “made it a mission to rebuild bridges with Big Pharma,” <a href="https://lobbycanada.gc.ca/app/secure/ocl/lrs/do/clntSmmrySrch?dpohFullName=FRANCOIS+PHILIPPE+CHAMPAGNE&searchType=Search">some of that lobbying</a> was very likely also around the PMPRB changes. </p>
<p>Besides lobbying and predicting repercussions like delayed drug launches, the industry has also attempted to buy its way out of the changes. IMC offered to <a href="https://www.reuters.com/article/canada-pharmaceuticals-idUSKBN27V0LO">spend $1 billion</a> over 10 years to boost local manufacturing and commercialization, and on new programs to improve access to drugs for rare diseases on the condition that some of the pricing changes be scrapped.</p>
<h2>Vocal opposition</h2>
<p>IMC was <a href="https://www.theglobeandmail.com/business/article-health-canada-delays-drug-pricing-reforms-citing-covid-19-challenges/">backed up by various patient groups</a>. Durhan Wong-Reiger, president and CEO of the Canadian Organization for Rare Disorders (CORD), warned that “draconian” restrictions on drug prices won’t solve Canada’s budget problems. </p>
<p>Chris MacLeod, the founder of the Cystic Fibrosis Treatment Society, said burdensome drug-pricing measures could cut Canada out of the latest COVID-19 vaccines and treatments being developed around the world. </p>
<figure class="align-center ">
<img alt="Shelves of prescription medication at a pharmacy" src="https://images.theconversation.com/files/441925/original/file-20220121-23-1quc7tf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/441925/original/file-20220121-23-1quc7tf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=395&fit=crop&dpr=1 600w, https://images.theconversation.com/files/441925/original/file-20220121-23-1quc7tf.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=395&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/441925/original/file-20220121-23-1quc7tf.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=395&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/441925/original/file-20220121-23-1quc7tf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=496&fit=crop&dpr=1 754w, https://images.theconversation.com/files/441925/original/file-20220121-23-1quc7tf.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=496&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/441925/original/file-20220121-23-1quc7tf.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=496&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canadians pay some of the highest prescription drug costs in the world.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
</figcaption>
</figure>
<p>On its website, <a href="https://www.raredisorders.ca/cord-membership/partners/">CORD lists over 25 drug companies</a> among its “corporate leaders.” The <a href="https://cfadvocacynow.com/">website of the Cystic Fibrosis Treatment Society</a> doesn’t say if it has any relationships with drug companies.</p>
<p>Likewise, a group of “concerned Canadian doctors” recently wrote an opinion piece in the <a href="https://www.thespec.com/opinion/contributors/2021/12/22/press-pause-on-drug-price-policy.html"><em>Hamilton Spectator</em></a>. In it they argued that the federal government should halt implementation of new federal drug pricing regulations until a thorough consultation that includes physicians is undertaken. </p>
<p>Their reasoning is that if the regulations went ahead, Canadians will have increasing difficulty accessing effective new drugs. The article did not mention whether any of the signatories had financial conflicts of interest with drug companies.</p>
<p>Finally, there has been pressure from outside Canada. The <a href="https://phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Org/PDF/P-R/PhRMA_2021-Special-301_Review_Comment-1.pdf">Pharmaceutical Research and Manufacturers of America</a>, the lobby group that represents giant American drug companies, made it clear that in its view the changes “will significantly undermine the marketplace for innovative pharmaceutical products, delay or prevent the introduction of new medicines in Canada and reduce investments in Canada’s life sciences sector.” </p>
<p>In its annual report, the <a href="https://ustr.gov/sites/default/files/files/reports/2021/2021%20Special%20301%20Report%20(final).pdf">Office of the United States Trade Representative</a> warned that the U.S. “will continue to monitor the implementation and effects of … changes to the Patented Medicine Prices Review Board’s pricing regulations.”</p>
<h2>Rising drug costs for Canadians</h2>
<p>While the federal government has been bowing to the pharmaceutical industry, the amount that Canadians spend on medicines has continued to rise. In 2020, Canadians <a href="https://canjhealthtechnol.ca/index.php/cjht/article/view/mt0001">spent an estimated $32.7 billion</a>, 4.3 per cent more than the previous year. Meanwhile, <a href="https://angusreid.org/pharmacare-2020/">more than two-in-five Canadians are concerned about their ability to afford prescription drugs in 10 years</a>. </p>
<p>A <a href="https://nursesunions.ca/wp-content/uploads/2018/05/2018.04-Body-Count-Final-web.pdf">report from the Canadian Federation of Nurses Unions</a> estimates that the lack of affordability of prescription drugs could be causing 370 to 640 premature deaths due to heart disease every year, and 270 to 420 premature deaths annually of working-age Canadians with diabetes. </p>
<figure class="align-center ">
<img alt="Pharmacist's hands using a pill tray to count green and yellow capsules, with a pill bottle and prescriptions in the background." src="https://images.theconversation.com/files/441923/original/file-20220121-23-og491k.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/441923/original/file-20220121-23-og491k.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=481&fit=crop&dpr=1 600w, https://images.theconversation.com/files/441923/original/file-20220121-23-og491k.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=481&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/441923/original/file-20220121-23-og491k.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=481&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/441923/original/file-20220121-23-og491k.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=605&fit=crop&dpr=1 754w, https://images.theconversation.com/files/441923/original/file-20220121-23-og491k.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=605&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/441923/original/file-20220121-23-og491k.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=605&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">More than two-in-five Canadians are concerned about their ability to afford prescription drugs in 10 years.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
</figcaption>
</figure>
<p>Added to these grim numbers, job losses due to the pandemic have meant the loss of benefits including insurance for prescription drugs. An <a href="https://angusreid.org/pharmacare-2020/">Angus Reid poll</a> reports while seven per cent of Canadians gained prescription drug coverage during the year ending in October 2020, 14 per cent lost it during the same year.</p>
<p>Canadians have been waiting more than five years for lower drug prices. It’s time to stop waiting.</p><img src="https://counter.theconversation.com/content/174967/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In 2019-2021, Joel Lexchin received payments for writing a brief on the role of promotion in generating prescriptions for Goodmans LLP and from the Canadian Institutes of Health Research for presenting at a workshop on conflict-of-interest in clinical practice guidelines. He is a member of the Foundation Board of Health Action International and the Board of Canadian Doctors for Medicare. He receives royalties from University of Toronto Press and James Lorimer & Co. Ltd. for books he has written. </span></em></p>Changes to Canada’s Patented Medicine Prices Review Board regulations have been postponed for a fourth time in two years as Canadians continue to pay some of the highest drug prices in the world.Joel Lexchin, Professor Emeritus of Health Policy and Management, York University, Emergency Physician at University Health Network, Associate Professor of Family and Community Medicine, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1475502020-12-06T13:17:48Z2020-12-06T13:17:48ZWithout pharmacare, Canadians with disabilities rationing drugs due to high prescription costs<figure><img src="https://images.theconversation.com/files/372049/original/file-20201130-19-fy5oys.jpg?ixlib=rb-1.1.0&rect=790%2C49%2C7452%2C5438&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">For people with disabilities, prescription drug costs are often layered on top of other health-related costs.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Up to a third of Canadians with disabilities may skip doses of medication or neglect to get their prescriptions filled because of the cost of prescription drugs. One of the aims of pharmacare is to remove financial barriers to prescription drugs, and overcome inequities among Canadians for this important aspect of health care. </p>
<p>While the federal government reiterated its commitment to implementing pharmacare in the <a href="https://www.canada.ca/en/privy-council/campaigns/speech-throne/2020/speech-from-the-throne.html">speech from the throne</a> in September, a <a href="https://www.canada.ca/en/health-canada/corporate/about-health-canada/public-engagement/external-advisory-bodies/implementation-national-pharmacare/final-report.html">key task</a> for implementation will be to ascertain who needs it most, ensuring that tax dollars are spent where they can do the most good. </p>
<h2>Myths about medication costs</h2>
<p>Recent <a href="https://qspace.library.queensu.ca/handle/1974/27908">research</a> from investigators at Queen’s University exposes two myths that could interfere with making sure the right people get the help they need from a pharmacare or public drug benefit program.</p>
<p><strong>Myth No. 1</strong>: People with disabilities are either seniors or welfare recipients, and therefore already receive their drugs free of charge. </p>
<figure class="align-right ">
<img alt="A young black woman using a wheelchair" src="https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sixty per cent of Canadians with disabilities are under age 65.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>The <a href="https://www150.statcan.gc.ca/n1/pub/89-654-x/89-654-x2018002-eng.htm">Canadian Survey on Disability (2017)</a> shows that 60 per cent of disabled adults are under the age of 65, and therefore are not eligible for seniors’ benefits. Furthermore, between 30 and 60 per cent of working-age disabled adults are employed (depending on the severity of their disability), and thus may be ineligible for government drug programs. In our research, 27 per cent of our sample received coverage for prescription drugs from government sources exclusively. Many were covered only by private health insurance (47 per cent) or by a mixture of private and public health insurance (17 per cent).</p>
<p><strong>Myth No. 2</strong>: Drug insurance alleviates the financial burden of prescription medications.</p>
<p><a href="https://doi.org/10.1038/s41393-019-0406-x">The study</a> also showed that although 92 per cent of our sample had some type of drug insurance, they still experienced extraordinary out-of-pocket costs for prescription medications — more than five times the national average.</p>
<h2>Multiple medications</h2>
<p>Like many people with disabilities and chronic illnesses, members of our sample took a number of prescription medications. The average in our sample was five, which is <a href="https://www150.statcan.gc.ca/n1/pub/82-003-x/2014006/article/14032/tbl/tbl2-eng.htm">significantly more than most Canadians take</a>, particularly those under age 65. For each of these prescriptions, there may be co-payments, dispensing fees or other point-of-purchase costs. These costs added up to an average of $197 per month in our sample, with some people bearing costs near $3,000 per month for their medications. </p>
<p>There were also often deductibles and/or premiums that had to be paid on a monthly or annual basis to maintain coverage. Deductibles are typically calculated as a percentage of net income, and range from $100-$400 annually. Catastrophic coverage of high-risk patients is intended to prevent financial hardship for people with high drug costs. However, deductibles for these patients can be as high as 20 per cent of annual income plus a co-insurance of up to 35 per cent — a percentage of prescription costs that patients pay directly while making a purchase.</p>
<p>Prescription drug costs were often layered on top of other health-related costs, such as over-the-counter medications, expendable health supplies such as catheters, gloves and skincare supplies, dietary supplements and adaptive devices such as wheelchairs and special cushions. These additional costs added up on average to $600 per month in our sample.</p>
<figure class="align-center ">
<img alt="Pharmacist discussing a product with a man using a wheelchair" src="https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Thirty-seven per cent of people with disabilities ration medications because of prescription drug costs.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>The excess costs of prescription drugs for disabled people are particularly problematic when we take into account that disabled people are typically significantly less well off than non-disabled Canadians. <a href="https://www150.statcan.gc.ca/n1/pub/89-654-x/89-654-x2018002-eng.htm">National data</a> show the average income for someone with a disability is $20,000 lower than for those without a disability ($19,000 versus $39,000 per year). Twenty-eight per cent of people with a severe disability live below the poverty line, compared to 10 per cent of the non-disabled. Even among those who are employed, many work part-time, work for small employers or are self-employed.</p>
<h2>Rationing medication</h2>
<p>When we <a href="https://doi.org/10.3390/ijerph16173066">surveyed 160 people with disabilities for a study</a>, we found that the high cost of medications led 37 per cent of individuals to ration their medications by taking a smaller dose, taking medications less often or simply not filling prescriptions. Many resorted to cutting back on essentials such as food, shelter or other disability-related expenses in order to be able to pay for their drugs. These measures caused their symptoms to get worse, which ultimately affected their quality of life and caused them to use more health-care services.</p>
<p>Given this rising burden of prescription drug costs on patients, a national pharmacare program for Canada needs to respond to the breadth (who is covered, or population-coverage), depth (what services are covered, or cost-coverage) and scope (how much of the cost is covered, or service-coverage) of drug insurance. In particular, the extraordinary needs of people with disabilities need to be taken into account. </p>
<p>Our study demonstrated that paying for medications is a significant issue for many Canadians, but especially for those who live on a precarious margin of health. If we are to find a workable solution for pharmacare for Canadians, it needs to prioritize the needs of people who need it most.</p><img src="https://counter.theconversation.com/content/147550/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shikha Gupta receives funding from Mark S Lodge Foundation. </span></em></p><p class="fine-print"><em><span>Mary Ann McColl receives funding from Mark S Lodge Foundation; Social Sciences & Humanities Research Council</span></em></p>Any pharmacare plan that aims to remove financial barriers to treatment and eliminate inequities should prioritize those who face the highest out-of-pocket drug costs, such as people with disabilities.Shikha Gupta, Research Coordinator, Centre for Health Services and Policy Research and School of Rehabilitation Therapy, Queen's University, OntarioMary Ann McColl, Professor, School of Rehabilitation Therapy, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1417632020-07-16T12:16:00Z2020-07-16T12:16:00ZEnding the pandemic will take global access to COVID-19 treatment and vaccines – which means putting ethics before profits<figure><img src="https://images.theconversation.com/files/347794/original/file-20200715-35-13bamf4.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5692%2C3752&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Indian health workers doing health checks in Mumbai, June 17, 2020.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Virus-Outbreak/c7559479e6e14738b8817229a88fbdb3/89/0">AP Photo/Rafiq Maqbool, File</a></span></figcaption></figure><p>As COVID-19 surges in the United States and worldwide, even the richest and best insured Americans understand, possibly for the first time, what it’s like not to have the medicines <a href="https://www.nytimes.com/2020/04/14/opinion/sunday/covid-inequality-health-care.html">they need to survive</a> if they get sick. There is no coronavirus vaccine, and the best known treatment, remdesivir, only reduces <a href="https://www.technologyreview.com/2020/04/29/1000855/remdesivir-covid-hospital-save-lives/">hospital recovery time by 30%</a> and only for patients with certain forms of the disease.</p>
<p>Poorer people have always had trouble accessing essential medicines, however – even when good drugs exist to prevent and treat their conditions.</p>
<p>In the U.S., where <a href="https://indicators.ohchr.org/">there is no legal right to health</a>, insurance is usually necessary for medical treatment. Remedesivir costs about <a href="https://www.cnbc.com/2020/06/29/gileads-coronavirus-treatment-remdesivir-to-cost-3120-for-us-insured-patients.html">US$3,200 for a typical treatment course of six vials</a>, though critics argue its manufacturer, Gilead, could <a href="https://www.businesswire.com/news/home/20200512005240/en/AHF-Demands-Gilead-Price-Remdesivir-1.00-Dose">make a profit off much less</a>. Internationally, <a href="https://doi.org/10.1111/j.1748-720X.2009.00365.x">high drug prices</a> mean that critical medicines are often <a href="https://time.com/5564547/drug-prices-medicine/">available only to the richest patients</a>. </p>
<p>Access to medicines, in other words, is usually an ethical problem – not a scientific one. And that’s going to complicate the global coronavirus fight. Experts worry that any COVID-19 vaccine is likely to have a <a href="https://khn.org/news/analysis-how-a-covid-19-vaccine-could-cost-americans-dearly/">high price tag</a> and, as a result, be <a href="https://www.who.int/ethics/publications/ethics-covid-19-resource-allocation.pdf?ua=1">unequally distributed</a> according to countries’ <a href="https://www.nytimes.com/2020/06/29/health/coronavirus-remdesivir-gilead.html">purchasing power</a>, not need.</p>
<p>With a little imagination, this challenge can be overcome. My new book “<a href="https://global.oup.com/academic/product/global-health-impact-9780197514993">Global Health Impact: Extending Access to Essential Medicines</a>” documents how in past epidemics, from <a href="https://www.who.int/news-room/q-a-detail/does-polio-still-exist-is-it-curable">polio</a> and <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4337146/">Ebola</a> to HIV, the international community managed to get lifesaving drugs to patients – no matter where they lived or how much they earned.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Afghan women in burqas vaccinate young boys" src="https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/347755/original/file-20200715-27-d2xxu2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An Afghan health worker administers the polio vaccine to a child in Arghandab, Afghanistan, Aug. 17, 2018.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/an-afghan-health-worker-administers-the-polio-vaccine-to-a-news-photo/1018029676?adppopup=true">Javed Tanveer/AFP via Getty Images</a></span>
</figcaption>
</figure>
<h2>Past wins</h2>
<p>It took years for scientists to <a href="https://www.healthline.com/health/hiv-aids/history#:%7E:text=Azidothymidine%2C%20also%20known%20as%20zidovudine,percent%20decline%20in%20death%20rates">identify an effective treatment</a> for HIV. But by 1997, most people diagnosed with HIV in Europe and the U.S. were living long and productive lives thanks to antiretroviral drugs. </p>
<p>Meanwhile, the disease was still <a href="https://data.unaids.org/pub/report/2000/2000_gr_en.pdf">killing 2.2 million people each year</a> in sub-Saharan Africa because <a href="https://www.nytimes.com/2019/06/24/health/drugs-poor-countries-africa.html">pharmaceutical companies claimed</a> it was impossible to lower the <a href="https://www.npr.org/sections/health-shots/2019/05/30/727731380/old-fight-new-front-aids-activists-want-lower-drug-prices-now">US$10,000 to $15,000</a> annual cost per patient for antiretrovirals. </p>
<p>In response, human rights activists galvanized <a href="https://academic.oup.com/jhrp/article/1/1/14/2188684">a global AIDS campaign</a>, educating African patients about antiretrovirals, giving them the tools they required to demand treatment and even suing drug companies. Eventually, mass <a href="https://www.thebodypro.com/article/aids-2016-inside-the-massive-hiv-treatment-access-">protests erupted in South Africa</a> and elsewhere, shifting public opinion on access to medicines. </p>
<p>By 2000, <a href="https://www.wipo.int/wipo_magazine/en/2016/04/article_0001.html">competition from generic drug manufacturers</a> brought the price of antiretrovirals down to around $350 per patient per year, allowing <a href="https://doi.org/10.1093/jhuman/hun006">millions more worldwide</a> to <a href="https://jiasociety.biomedcentral.com/articles/10.1186/1758-2652-14-15">take them</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Protesters wearing yellow 'HIV Positive' shirts hold signs and banners" src="https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/347744/original/file-20200715-27-1apgnfx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Demonstrators in Durban, South Africa, demand lower priced HIV drugs outside the 2000 international AIDS conference.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/demonstrators-hold-banners-09-july-2000-in-the-streets-of-news-photo/51396710?adppopup=true">Yoav Lemmer/AFP via Getty Images</a></span>
</figcaption>
</figure>
<p>Around the same time, a <a href="https://doi.org/10.1164/rccm.200402-140OE">similar story was playing out with tuberculosis</a>, which had greatly diminished in the U.S. and Europe but remained deadly in many other places. The <a href="https://www.who.int/tb/areas-of-work/drug-resistant-tb/global-situation/en/">rise of drug-resistant strains</a> – especially in the former Soviet Union and parts of Africa and Asia – posed a particularly <a href="https://doi.org/10.1016/S1473-3099(18)30625-X">terrible challenge</a>.</p>
<p>Conventional wisdom held that people with drug-resistant TB <a href="http://www.npr.org/2008/12/21/98460202/health-is-a-human-right">couldn’t be saved</a>. The drugs were too expensive, treatment courses too long and disease management too complicated. </p>
<p>The organization <a href="https://www.devex.com/news/deal-slashes-preventive-tb-medicine-price-by-nearly-70-95942">Partners in Health</a> disproved that excuse by successfully treating 50 tuberculosis patients in Peru, then one of the world’s poorest countries. That project helped convince the World Health Organization to endorse multi-drug-resistant TB treatment. Global <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5070676/">funding for TB treatment</a> increased greatly and generic medicines were produced. Today more than <a href="http://globalhealth.pythonanywhere.com/index/disease/2015/tb#relocation_disease2015">70% of people diagnosed with drug-resistant TB receive treatment</a></p>
<h2>Ending COVID-19 ethically</h2>
<p>These health campaigns both demonstrate the virtue I call creative resolve, which is a fundamental commitment to overcoming apparent tragedy. </p>
<p>Other examples include the adoption of “<a href="https://www.historyofvaccines.org/content/articles/disease-eradication">ring vaccinations</a>” in the 1960s – a <a href="https://www.washingtonpost.com/news/worldviews/wp/2015/02/14/how-a-method-used-to-wipe-out-smallpox-is-making-a-comeback-in-the-fight-against-ebola/">contact tracing-based immunization strategy</a> pioneered in the 1960s after mass vaccinations failed to stop smallpox – and a 2010 campaign to give children in Afghanistan their <a href="https://www.globalcitizen.org/en/content/polio-afghanistan-eradication-circus/">polio vaccinations at the circus</a>.</p>
<p>Ending the global coronavirus pandemic will require similar creative resolve. </p>
<p>[<em>The Conversation’s science, health and technology editors pick their favorite stories.</em> <a href="https://theconversation.com/us/newsletters/science-editors-picks-71/?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=science-favorite">Weekly on Wednesdays</a>.]</p>
<p>Recently, the U.S. agreed to pay $1.2 billion for <a href="https://www.usatoday.com/story/news/2020/05/21/coronavirus-covid-19-vaccine-astrozeneca-1-billion-us-300-million-doses/5237320002/">early access</a> to a promising COVID-19 vaccine in the United Kingdom and secured first access to another by the <a href="https://www.bloomberg.com/news/articles/2020-05-13/u-s-to-get-sanofi-covid-vaccine-first-if-it-succeeds-ceo-says">French pharmaceutical company Sanofi</a>, enraging citizens of those countries. Such arrangements also harm manufacturing countries like <a href="https://www.nature.com/articles/d41586-020-01756-0">Brazil</a>, Egypt and India, whose people have little access to the medicines their factories pump out.</p>
<p>Unequal access to COVID-19 medicines isn’t just a moral problem. In a global pandemic, an outbreak anywhere threatens people everywhere.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5534%2C3678&q=45&auto=format&w=1000&fit=clip"><img alt="Masked health workers at a pharmaceutical manufacturing company" src="https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5534%2C3678&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/347751/original/file-20200715-29-iejrrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Egyptian patients will get little to none of the remdesivir produced by the Egyptian drug company Eva Pharma because the US has bought up the world’s supply.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/june-2020-egypt-giza-employees-of-egyptian-pharmaceutical-news-photo/1223461292?adppopup=true">Fadel Dawood/picture alliance via Getty Images</a></span>
</figcaption>
</figure>
<p>There is some creative resolve on display in the <a href="https://medicinespatentpool.org/the-medicines-patent-pool-stands-ready-to-offer-support-as-needed-in-access-to-treatment-for-the-coronavirus/">COVID-19 fight</a>, though. </p>
<p>For example, the <a href="https://www.who.int/emergencies/diseases/novel-coronavirus-2019/global-research-on-novel-coronavirus-2019-ncov/covid-19-technology-access-pool">Medicines Patent Pool</a> – a United Nations-backed organization that encourages companies to share their patents in order to <a href="https://medicinespatentpool.org/who-we-are/about-us/">speed up innovation</a> – is pushing this method for advancing the research and development of COVID-19 drugs. </p>
<p>Other health experts are proposing new <a href="https://healthimpactfund.org/pdf/High-level-panel-draft-016-02-22-formatted.docx.pdf">medicine distribution mechanisms</a> that would send drugs and <a href="https://www.sciencemag.org/news/2020/04/tame-testing-chaos-nih-and-firms-join-forces-streamline-coronavirus-vaccine-and-drug">vaccines</a> where they’re most needed based on the net health benefits a population would receive.</p>
<p>That plan and others require smart data use. The <a href="http://globalhealth.pythonanywhere.com/">Global Health Impact Project</a>, a research collaboration that I direct, measures the effectiveness and availability of lifesaving medicines. The idea is that if we know <a href="https://doi.org/10.1371/journal.pone.0141374">which drugs are actually addressing pressing health needs and where</a>, policymakers and health organizations can craft more targeted treatment access plans. </p>
<p>Such information could be also used creatively to reward drug companies for their global health impact. Governments could create an <a href="https://www.keionline.org/book/prizes-lots-of-them">international prize</a>, say, that <a href="https://www.mercatus.org/features/mercatus-launches-prize-fund-combat-covid-19">awards funds</a> to companies based on the lives saved by their COVID-19 drugs and other essential medicines. That could offset profit as the primary motivation for drug research, development and sales.</p>
<p>And if pharmaceutical companies don’t voluntarily <a href="https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm">help people in poor countries</a>, those governments can do <a href="https://journals.sagepub.com/doi/10.1111/j.1748-720X.2009.00369.x">what they’ve done in past health crises</a>: let other companies produce generic versions of patented medicines, to protect the common good.</p>
<p><em>Editor’s note: This story has been corrected to reflect the disease that Afghan children were vaccinated against in 2010.</em></p><img src="https://counter.theconversation.com/content/141763/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Many universities have contributed to the Global Health Impact Organization. Its supporters are listed at: <a href="http://globalhealth.pythonanywhere.com/index/thankyou">http://globalhealth.pythonanywhere.com/index/thankyou</a></span></em></p>The high cost of pharmaceuticals often means only the richest patients get lifesaving medicines. As coronavirus drugs emerge, it will require hard, creative work to ensure they’re available to all.Nicole Hassoun, Professor of Philosophy, Binghamton University, State University of New YorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1381622020-05-08T12:17:36Z2020-05-08T12:17:36ZThe flowers you buy your mom for Mother’s Day may be tied to the US war on drugs<figure><img src="https://images.theconversation.com/files/333473/original/file-20200507-49565-2e8d2v.jpg?ixlib=rb-1.1.0&rect=203%2C82%2C4817%2C3349&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Colombia is the world's second-biggest cut flower exporter. </span> <span class="attribution"><span class="source">AP Photo/Fernando Vergara</span></span></figcaption></figure><p>What does Mother’s Day flowers have to do with cocaine? </p>
<p>Very little, most people would think. But as an economist, I <a href="http://businessmacroeconomics.com">often explain</a> to my students that the world is economically connected, often in strange ways. The flower business is one of those strange economic connections.</p>
<p>Mother’s Day, which this year falls on May 10, is typically big for the American floral industry, which depends on it for <a href="https://aboutflowers.com/holidays-occasions/mothers-day/mothers-day-floral-statistics/">over a quarter of all holiday flower sales</a>. It’s especially important to flower vendors this year as the coronavirus <a href="https://qz.com/1848936/the-global-flower-industry-is-wilting-ahead-of-mothers-day/">has ravaged the industry</a>, affecting both supply and demand. </p>
<p><a href="https://ccfc.org/about-ccfc/">About a third of cut flowers</a> purchased in the U.S. come from California, while the rest are imported. <a href="https://dataweb.usitc.gov/">About 80% of those</a> come from Colombia or Ecuador. </p>
<p>The story of how both countries became such an important source of flowers for the U.S. can be traced back to the <a href="https://theconversation.com/us/topics/war-on-drugs-2718">U.S. war on drugs</a>.</p>
<p>In the late 2000s, the U.S. and Colombian government were looking for <a href="https://tradevistas.org/rose-how-trade-policy-was-used-to-fight-drugs-from-colombia/">new ways to stem the flow of cocaine</a> into the U.S. Part of the strategy involved law enforcement: <a href="https://www.state.gov/eradication-and-interdiction/">increasing interdictions</a> to stop drugs before they crossed the border and <a href="https://www.bjs.gov/content/dcf/enforce.cfm">ramping up arrests of people selling drugs</a> in the U.S.</p>
<p>Another part of this strategy, however, was to convince farmers in Colombia to stop growing coca leaves, a traditional Andean plant that provides the raw ingredient for making cocaine, by giving them preferential access to U.S. markets if they grow something else.</p>
<p>The goal of the program was to give these subsistence farmers a legal crop that would be roughly as profitable as growing coca leaves – whether flowers, <a href="https://theconversation.com/why-coca-leaf-not-coffee-may-always-be-colombias-favourite-cash-crop-74723">honey or coffee</a>. This is formally called <a href="https://www.ncjrs.gov/pdffiles1/Digitization/146794NCJRS.pdf">crop substitution</a>. </p>
<p>In theory, by cutting back the supply of coca leaves, the price of the key raw material in cocaine rises. This cost increase is passed along the supply chain, raising the price of cocaine at every point.</p>
<p>Why is raising the price of cocaine important? A basic idea in economics is the “<a href="https://www.investopedia.com/terms/l/lawofdemand.asp">law of demand</a>,” which says the higher the price of a product the less people buy, holding everything else constant. Pushing up the <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3945407/">price of cocaine should reduce the amount</a> Americans consume. </p>
<p>Not just Colombia but also Ecuador, Bolivia and Peru – all coca-producing countries – get duty-free access to U.S. markets in exchange for clamping down on illegal drugs, under the <a href="http://www.sice.oas.org/TPD/USA_ATPA/USA_ATPA_e.ASP">Andean Trade Promotion and Drug Eradication Act</a>. </p>
<p>Has crop substitution worked? </p>
<p>Well, not to eradicate the cocaine market. Only last year <a href="https://apnews.com/0aa6474b944f4ff8eb9e7e9cffffce87">Colombia had a record coca crop</a>, and the <a href="https://www.businessinsider.com/how-much-does-cocaine-cost-in-the-us-2016-10">street price of cocaine</a> hasn’t budged. There are complicated reasons for this, including the <a href="https://www.nytimes.com/2017/12/31/opinion/failed-war-on-drugs.html">persistence of U.S. demand for drugs</a>, regardless of source, the ingenuity of drug trafficking organizations, and the <a href="https://www.dukeupress.edu/coca-yes-cocaine-no">cultural significance of coca leaf in the Andean region</a>.</p>
<p>But this failed U.S. drug policy did lead to a surge in cut flower exports to the U.S. from both Colombia and Ecuador. <a href="https://dataweb.usitc.gov/">Colombia exported</a> US$800 million worth of flowers to the U.S. in 2019, up from $350 million in 2000. Ecuador’s exports tripled from $90 million in 2000 to $270 million in 2019. As a result of the increased supply, flower prices in the U.S. <a href="https://beta.bls.gov/dataViewer/view/timeseries/CUUR0000SEHL02">rose less</a> than <a href="https://www.bls.gov/data/inflation_calculator.htm">average inflation</a>. </p>
<p>So if you do manage to find flowers this Mother’s Day, both your mom and the farmers who grow them will thank you for it.</p>
<p>[<em>You’re too busy to read everything. We get it. That’s why we’ve got a weekly newsletter.</em> <a href="https://theconversation.com/us/newsletters/weekly-highlights-61?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=weeklybusy">Sign up for good Sunday reading.</a> ]</p><img src="https://counter.theconversation.com/content/138162/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A program intended to reduce coca production ended up giving two Latin American countries a big boost to their flower power.Jay L. Zagorsky, Senior Lecturer, Questrom School of Business, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1349742020-03-30T17:32:20Z2020-03-30T17:32:20ZCanada’s coronavirus aid package guards against drug shortages with compulsory licensing<figure><img src="https://images.theconversation.com/files/323716/original/file-20200327-146671-lhxwq.jpg?ixlib=rb-1.1.0&rect=74%2C91%2C1842%2C1184&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The COVID-19 Emergency Response Act enables compulsory drug licensing to help avoid medication shortages.</span> <span class="attribution"><span class="source">(Pixabay)</span></span></figcaption></figure><p>Canada’s <a href="https://www.parl.ca/DocumentViewer/en/43-1/bill/C-13/third-reading">COVID-19 Emergency Response Act</a>, which provides emergency assistance to cope with the expected dramatic economic downturn due to the COVID-19 pandemic, contains an important clause that may get overlooked. The act effectively brings back compulsory licensing for drugs if supply is interrupted because of the effects of COVID-19. </p>
<p>There have already been stories about <a href="https://edmontonjournal.com/opinion/letters/wednesdays-letters-sellers-share-blame-for-toilet-paper-shortage/">toilet paper shortages</a> in parts of Canada. Far worse would be a shortage of medicines. That has already been reported in Australia where people are being accused of <a href="https://www.theguardian.com/world/2020/mar/19/paracetamol-and-ventolin-limited-to-one-per-customer-as-australia-combats-coronavirus-hoarding">hoarding Ventolin asthma puffers and acetaminophen</a>. Here in Canada, <a href="https://www.pharmacists.ca/news-events/news/canadian-pharmacists-association-warns-against-stockpiling-medication-in-response-to-covid-19/">pharmacists are already warning people</a> not to stock up on drugs as that may trigger shortages.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/323718/original/file-20200327-146724-1dayeg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/323718/original/file-20200327-146724-1dayeg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=426&fit=crop&dpr=1 600w, https://images.theconversation.com/files/323718/original/file-20200327-146724-1dayeg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=426&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/323718/original/file-20200327-146724-1dayeg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=426&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/323718/original/file-20200327-146724-1dayeg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=535&fit=crop&dpr=1 754w, https://images.theconversation.com/files/323718/original/file-20200327-146724-1dayeg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=535&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/323718/original/file-20200327-146724-1dayeg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=535&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Stockpiling left toilet paper in short supply on March 19, 2020 at a Walmart in Laval, Que.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
</figcaption>
</figure>
<p>Compulsory licensing helps prevent drug shortages. Simply put, compulsory licensing means that generic companies can get a licence to produce and market a drug even if the drug is still covered by a patent. In return the patent holder gets a royalty. Under the COVID-19 Emergency Response Act, the government can issue the licence almost immediately without having to first enter into negotiations with drug companies. The act doesn’t set out the amount of the royalty.</p>
<h2>Controlling high drug prices</h2>
<p>In 1969, in response to high drug prices in Canada due to the effects of the patent system, <a href="https://www.jstor.org/stable/45131117">Canada introduced legislation allowing compulsory licensing to import</a>. This meant generic companies could import and sell their own versions of drugs in Canada. Compulsory licensing proved to be an effective way to control drug spending.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/323717/original/file-20200327-146678-wzinzc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/323717/original/file-20200327-146678-wzinzc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/323717/original/file-20200327-146678-wzinzc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/323717/original/file-20200327-146678-wzinzc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/323717/original/file-20200327-146678-wzinzc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/323717/original/file-20200327-146678-wzinzc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/323717/original/file-20200327-146678-wzinzc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Stockpiling medications has led to shortage of Ventolin puffers for asthma in Australia.</span>
<span class="attribution"><span class="source">(Pixabay)</span></span>
</figcaption>
</figure>
<p>A <a href="http://epe.lac-bac.gc.ca/100/200/301/pco-bcp/commissions-ef/eastman1985-eng/eastman1985-eng.htm">1984 report</a> found that compulsory licensing had reduced the country’s annual drug bill by $211 million to a total of $1.6 billion, while at the same time brand-name drug companies lost only 3.1 per cent of the market. In fact, according to the report, since compulsory licensing started growth in the pharmaceutical industry was more buoyant in Canada than in the United States.</p>
<p>Despite its success, compulsory licensing was anathema to multinational pharmaceutical companies, especially those in the United States. Companies there influenced the American government to make the <a href="https://doi.org/10.2190/ucwg-ybr3-x3l0-nwyt">termination of compulsory licensing</a> one of the key conditions for successful negotiation of the 1987 Free Trade Agreement between Canada and the U.S. Brian Mulroney’s Conservative government complied with the U.S. demand and significantly weakened compulsory licensing, and then <a href="https://doi.org/10.1016/S0168-8510(96)00886-X">completely eliminated it following the completion of the NAFTA negotiations</a>.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/323721/original/file-20200328-146699-ayvsl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/323721/original/file-20200328-146699-ayvsl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=767&fit=crop&dpr=1 600w, https://images.theconversation.com/files/323721/original/file-20200328-146699-ayvsl8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=767&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/323721/original/file-20200328-146699-ayvsl8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=767&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/323721/original/file-20200328-146699-ayvsl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=964&fit=crop&dpr=1 754w, https://images.theconversation.com/files/323721/original/file-20200328-146699-ayvsl8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=964&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/323721/original/file-20200328-146699-ayvsl8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=964&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An RCMP constable stands guard on Parliament Hill in Ottawa in October 2001 while hazardous materials personnel investigate a possible anthrax contamination.</span>
<span class="attribution"><span class="source">CP ARCHIVE PHOTO/Fred Chartrand</span></span>
</figcaption>
</figure>
<p>That was effectively the end of compulsory licensing as a means of dealing with both drug prices and shortages. Canadians briefly heard about compulsory licensing again <a href="https://www.npr.org/2011/02/15/93170200/timeline-how-the-anthrax-terror-unfolded">in the fall of 2001 when there was a scare about packages of anthrax being sent in the mail</a> to various people in the U.S. Ciprofloxacin was considered the best antibiotic for treating anthrax, but Bayer, the multinational that sold it, said that it couldn’t guarantee a sufficient supply if large numbers of people needed treatment. In return, <a href="https://www.theglobeandmail.com/news/national/patent-war-looming-over-drug-for-anthrax/article4155009/">Health Minister Alan Rock threatened to issue a compulsory licence</a>, but never followed through on the threat as the scare never materialized.</p>
<p>Compulsory licensing also played a role in the fall 2001 meeting of the World Trade Organization. Faced with the growing AIDS crisis and the then-unaffordable prices for HIV medicines, developing countries pushed the WTO to adopt a resolution allowing for the use of compulsory licensing to lower costs. The Doha Declaration applied to all countries, but <a href="http://www.who.int/medicines/areas/policy/WT_L_540_e.pdf?ua=1">Canada and a number of other developed countries pledged not to use compulsory licensing to import lower-priced drugs</a>.</p>
<h2>Rethinking future use</h2>
<p>That’s where compulsory licensing in Canada stood until last week. </p>
<p>Any compulsory licence issued under the COVID-19 Emergency Response Act is only good for one year, and no new licences will be issued after Sept. 30, 2020. The federal government should rethink those positions. </p>
<p><a href="https://www.canadadrugshortage.com/">Drug shortages in Canada have been around for a decade now</a> and they won’t go away once the COVID-19 emergency is over. Public drug spending <a href="https://www.cihi.ca/sites/default/files/document/pdex-report-2019-en-web.pdf">increased 6.8 per cent in 2018</a>, 1.5 percentage points higher than in the previous year. As we move to a national pharmacare plan we will need more ways to control drug prices and compulsory licensing could be one of those tools.</p>
<p>Let’s make compulsory licensing permanent.</p><img src="https://counter.theconversation.com/content/134974/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In 2017-2020, Joel Lexchin received payment for being on a panel at the American Diabetes Association, for talks at the Toronto Reference Library, for writing a brief in an action for side effects of a drug for Michael F. Smith, Lawyer and a second brief on the role of promotion in generating prescriptions for Goodmans LLP and from the Canadian Institutes of Health Research for presenting at a workshop on conflict-of-interest in clinical practice guidelines. He is currently a member of research groups that are receiving money from the Canadian Institutes of Health Research and the Australian National Health and Medical Research Council. He is member of the Foundation Board of Health Action International and the Board of Canadian Doctors for Medicare. He receives royalties from University of Toronto Press and James Lorimer & Co. Ltd. for books he has written. </span></em></p>Toilet paper shortages were bad enough. A shortage of drugs during the COVID-19 pandemic would be worse. A provision in the Canadian government’s relief package aims to prevent that from happening.Joel Lexchin, Professor Emeritus of Health Policy and Management, York University, Emergency Physician at University Health Network, Associate Professor of Family and Community Medicine, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1255292019-12-04T13:31:39Z2019-12-04T13:31:39ZWhy your generic drugs may not be safe and the FDA may be too lax<figure><img src="https://images.theconversation.com/files/304745/original/file-20191202-67023-k3jy0m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Generic drugs can be a great way to save money, but a recent study shows there are risks involved.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hand-hospital-medical-expert-shows-pill-559764592">HQuality/Shutterstock.com</a></span></figcaption></figure><p>Generic prescription drugs have saved the U.S. about <a href="https://accessiblemeds.org/resources/blog/2017-generic-drug-access-and-savings-us-report">US$1.7 trillion</a> over the past decade. The Food and Drug Administration approved a <a href="https://www.fda.gov/drugs/abbreviated-new-drug-application-anda/activities-report-generic-drugs-program-fy-2018-monthly-performance">record 781 new generics</a> in 2018 alone, including generic versions of Cialis, Levitra and Lyrica. They join generic versions of blockbusters from yesteryear, like Lipitor, Nexium, Prozac and Xanax. </p>
<p>Seniors are the biggest purchasers of generics, because <a href="https://www.mdmag.com/conference-coverage/aafp_2010/how-many-pills-do-your-elderly-patients-take-each-day">they take the most medications</a> and are on fixed incomes, but virtually everyone has taken a generic antibiotic or pain pill at one time.</p>
<p>This leads to a vital question: Are generics safe? If drug manufacturers followed the FDA’s strict regulations, the answer would be a resounding yes. Unfortunately for those who turn to generics to save money, the <a href="https://fortune.com/2013/05/15/dirty-medicine/">FDA relies heavily on the honor system</a> with foreign manufacturers, and U.S. consumers get burned. <a href="https://dianerehm.org/shows/2014-02-20/safety-prescription-drugs-made-outside-us">Eighty percent of the active ingredients</a> and 40% of the finished generic drugs used in the U.S. are manufactured overseas. </p>
<p>As a pharmacist, I know that the safety of prescription medications is vital. My research, <a href="https://doi.org/10.1177/1060028019881692">recently published</a> in the “Annals of Pharmacotherapy,” raises alarming concerns about our vulnerabilities. </p>
<h2>Where are your drugs being made?</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/304774/original/file-20191202-66986-cx7lhn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/304774/original/file-20191202-66986-cx7lhn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/304774/original/file-20191202-66986-cx7lhn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/304774/original/file-20191202-66986-cx7lhn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/304774/original/file-20191202-66986-cx7lhn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/304774/original/file-20191202-66986-cx7lhn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/304774/original/file-20191202-66986-cx7lhn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A pharmacist at a drug plant outside Mumbai in 2012, shortly after a change in patent law allowed production of a generic cancer drug.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/India-Generic-Drugs/9d0fb82a0ea441ea9eecbcc8cea2d032/44/0">Rafiq Mugbool/AP Photo</a></span>
</figcaption>
</figure>
<p>Generic drug manufacturers either <a href="https://www.fda.gov/consumers/consumer-updates/generic-drugs-undergo-rigorous-fda-scrutiny">make bulk powders</a> with the active ingredient in them or buy those active ingredients from other companies and turn them into pills, ointments or injectable products. </p>
<p>In 2010, 64% of foreign manufacturing plants, predominantly in India and China, <a href="https://www.gao.gov/assets/690/681689.pdf">had never been inspected by the FDA</a>. By 2015, 33% remained uninspected. </p>
<p>In addition, <a href="https://www.fda.gov/ICECI/Inspections/ForeignInspections/ucm113565.htm#31">companies in other countries are informed</a> before an inspection, giving them time to clean up a mess. Domestic inspections are unannounced. </p>
<h2>Faking results</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/304772/original/file-20191202-66994-pcueld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/304772/original/file-20191202-66994-pcueld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/304772/original/file-20191202-66994-pcueld.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/304772/original/file-20191202-66994-pcueld.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/304772/original/file-20191202-66994-pcueld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/304772/original/file-20191202-66994-pcueld.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/304772/original/file-20191202-66994-pcueld.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The FDA informs manufacturing plants in other countries when it plans to inspect their plants.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/FDA-Generic-Asthma-Inhaler/51460da760a5483e9e8db780ee64a26b/60/0">Andrew Harnik/AP Photo</a></span>
</figcaption>
</figure>
<p>As I detail in my paper, when announced foreign FDA inspections began to occur in earnest between 2010 and 2015, numerous manufacturing plants were subsequently barred from shipping drugs to the U.S. after the inspections uncovered shady activities or serious quality defects. </p>
<p>Unscrupulous foreign producers <a href="https://doi.org/10.1177/1060028019881692">shredded documents</a> shortly before FDA visits, hid documents offsite, altered or manipulated safety or quality data or utilized unsanitary manufacturing conditions. <a href="https://www.bbc.com/news/world-asia-india-22520953">Ranbaxy</a> Corporation pleaded guilty in 2013 to shipping substandard drugs to the U.S. and making intentionally false statements. The company had to withdraw 73 million pills from circulation, and the company paid a <a href="https://corpwatch.org/article/ranbaxy-pays-500-million-fine-selling-bad-batches-generic-medicines">$500 million fine</a>.</p>
<p>These quality and safety issues can be deadly. In 2008, 100 patients in the U.S. died after receiving <a href="https://www.scientificamerican.com/article/heparin-scare-deaths/">generic heparin products</a> from foreign manufacturers. Heparin is an anticoagulant used to prevent or treat blood clots in about <a href="https://www.hepoligo.com/heparin-drugs/heparin">10 million hospitalized patients</a> a year and is extracted from pig intestines. </p>
<p>Some of the heparin was fraudulently replaced with chondroitin, a dietary supplement for joint aches, that had sulphur groups added to the molecule to make it look like heparin.</p>
<p>One of the heparin manufacturers inspected by the FDA received a warning letter after it was found to have used <a href="https://www.yourlawyer.com/pdf/Warning_Letter-04-21-08.pdf">raw material from uncertified farms</a>, used storage equipment with unidentified material adhering to it and had insufficient testing for impurities. </p>
<p>These issues continue to this day. Dozens of blood-pressure and anti-ulcer drugs were recalled in 2018 and 2019 due to contamination with the potentially carcinogenic compounds <a href="https://www.bloomberg.com/news/features/2019-01-30/chinese-heart-drug-valsartan-recall-shows-fda-inspection-limits">N-nitrosodimethylamine</a> or N-nitrosodiethylamine. </p>
<p>One of the major producers of these active ingredient powders used by multiple generic manufacturers was inspected in 2017. The FDA found that the company <a href="https://www.bloomberg.com/news/features/2019-01-30/chinese-heart-drug-valsartan-recall-shows-fda-inspection-limits">fraudulently omitted failing test results</a> and replaced them with passing scores. </p>
<p>This raises a critical question: How many more violations would occur with inspections occurring as frequently as they do in the U.S., and more importantly, if they were unannounced? Relatively speaking, the number of drugs proved to be tainted or substandard has been small, and the FDA has made some progress since 2010. But the potential for harm is still great.</p>
<h2>What’s next?</h2>
<p>How safe should U.S. residents feel when 80% of the active ingredients in our drugs are made overseas? Evidence shows that the FDA can’t trust the documents that foreign manufacturers produce to ensure that their products meet quality standards. The widespread willingness of foreign manufacturers to falsify, manipulate or shred documents in order to sell lower-quality or unsafe drugs to U.S. citizens shows that only frequent unannounced FDA inspections or FDA testing of batches of medications when they reach the U.S. will compel them to follow the rules. </p>
<p>Patients taking prescription drugs are sick and vulnerable; they should not be subjected to poor-quality medications that can make them worse. Similarly, domestic generic drug manufacturers employing U.S. citizens should not have to face strict regulatory compliance that effectively is not required of foreign competitors. </p>
<p>It is expensive, logistically challenging and politically unpalatable for the FDA to show up for unannounced inspections of foreign plants. If the agency is not given that right or the funding to ramp up testing of their products here in the U.S., it should not be subjecting U.S. citizens to the drugs produced in foreign plants. Unless we tackle this issue soon, I am afraid there will be a major incident where patients are killed and the golden goose – those immense savings associated with generic drugs – will also be sacrificed. </p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/125529/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>C. Michael White does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As drug prices soar, consumers look for cheaper generics. A recent study showed safety issues in some generics made abroad, however, suggesting that the FDA’s honor system may not be enough to ensure safety.C. Michael White, Professor and Head of the Department of Pharmacy Practice, University of ConnecticutLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1264732019-11-11T15:39:04Z2019-11-11T15:39:04ZWill drug prices rise following a UK-US trade deal?<figure><img src="https://images.theconversation.com/files/300852/original/file-20191108-194637-h8smwu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">h</span> </figcaption></figure><blockquote>
<p>It doesn’t matter who’s in the White House or what they ask for, there is no way in any deal that we will see drug prices rise or put the NHS anywhere near the table.</p>
</blockquote>
<p><strong>Michael Gove, Conservative politician, November 5 2019</strong></p>
<p>Michael Gove’s <a href="https://www.theguardian.com/politics/live/2019/nov/05/general-election-news-latest-corbyn-brexit-speech-gove-says-labours-claim-uk-us-trade-deal-cost-cost-nhs-500m-per-week-nonsense-live-news?page=with:block-5dc148e18f08e9e197c3969f#block-5dc148e18f08e9e197c3969f">denials</a> that the NHS or UK drug prices will be part of any negotiation lacks credibility, given the recent and clearly stated <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/CEA-Rx-White-Paper-Final2.pdf">US policy objectives</a> (which are to ensure other countries pay higher prices for US drugs in future trade deals), the fact the US has included drug prices in other trade deals with <a href="https://pharmaphorum.com/views-analysis-market-access/secret-us-uk-talks-on-drug-pricing-revealed/">Canada, Mexico and South Korea</a> and that a former trade negotiator for US president Donald Trump said that he <a href="https://pharmaphorum.com/views-analysis-market-access/secret-us-uk-talks-on-drug-pricing-revealed/">doesn’t understand</a> what the UK’s prime minister meant when he said that the NHS was not on the table earlier this year. </p>
<p>Whatever denials might be made in a general election campaign about whether the NHS or drug prices have been put “on the table” in past or future discussions, any attempts to weaken how the NHS assesses new drugs or removes the rebates currently being paid to the NHS as part of the pharmaceutical price regulation scheme would have a serious impact on the health of NHS patients. </p>
<h2>Quite clear</h2>
<p>There have been reports of <a href="https://pharmaphorum.com/views-analysis-market-access/secret-us-uk-talks-on-drug-pricing-revealed/">six meetings between UK and US trade officials</a> where the NHS and the prices of US drugs that the NHS buys have been discussed. The agenda and minutes of these meetings are not publicly available so the details of these discussions remain unknown. However, US objectives in any trade negotiation are quite clearly set out in a report from a <a href="https://www.whitehouse.gov/cea">body appointed by the White House</a>.</p>
<p>The report from the Council of Economic Advisers outlines how US drug companies will reduce domestic prices in return for the administration ensuring they can sell their drugs to foreign countries at higher undiscounted prices in any future trade deals. The <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/CEA-Rx-White-Paper-Final2.pdf">summary of the report</a> is quite clear:</p>
<blockquote>
<p>Foreign governments are able to set drug prices below those that prevail in the United States and erode the returns to innovation manufacturers might otherwise see from selling in their markets … The two goals of reducing American prices and stimulating innovation are consistent, but can be achieved through a combined strategy that corrects government policies that hinder price-competition at home, while at the same time limiting free-riding abroad.</p>
</blockquote>
<p>Indeed, the chair of this committee, <a href="https://en.wikipedia.org/wiki/Tomas_J._Philipson">Tomas Philipson</a> has been a long-time <a href="https://www.forbes.com/sites/tomasphilipson/2016/09/06/eu-vs-us-cancer-care-you-get-what-you-pay-for/#3b526d6a6ba5">critic</a> of single-payer collectively funded healthcare systems, such as the NHS, and has been a <a href="https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.26.3.696">vocal critic</a> of the way the UK’s National Institute for Health and Care Excellence (NICE), makes decisions about the use of new drugs and considers confidential discounts offered by manufacturers to make them affordable to the NHS. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300859/original/file-20191108-194675-1hsvccf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300859/original/file-20191108-194675-1hsvccf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=335&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300859/original/file-20191108-194675-1hsvccf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=335&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300859/original/file-20191108-194675-1hsvccf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=335&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300859/original/file-20191108-194675-1hsvccf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=421&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300859/original/file-20191108-194675-1hsvccf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=421&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300859/original/file-20191108-194675-1hsvccf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=421&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The NHS receives rebates under the Pharmaceutical Price Regulation Scheme.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/drug-prescription-treatment-medication-pharmaceutical-medicament-769176202">Bukhta Yurii/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Huge impact</h2>
<p>The estimate of extra costs the NHS will have to find following any deal that would provide US manufacturers with wider access to the NHS at undiscounted prices is uncertain. But <a href="https://www.york.ac.uk/che/research/teehta/health-opportunity-costs/re-estimating-health-opportunity-costs/">evidence suggests</a> that every £100m that the NHS must find could have been used to avoid over 500 deaths and save more than 2,300 years of life, mainly in cancer, circulatory, respiratory and gastrointestinal diseases. Also, we would expect to see large impacts on quality-of-life outcomes in mental health, and respiratory and neurological diseases.</p>
<p>Instead of prices, a deal might focus instead on restricting how NICE evaluates new drugs and considers confidential discounts to make them affordable for the NHS. Or it might remove the rebates that are currently paid at a national level to control the growth in the UK drugs bill. </p>
<p>Some have estimated that a deal that matched the US stated objectives could mean spending an extra £400m on drugs each week – a truly catastrophic outcome for NHS patients. Yet even if the impact was more modest and removed only the rebates paid as part of the pharmaceutical price regulation scheme, the impact would still be significant. </p>
<p>In 2018, rebates of £614m were paid under this scheme and £215m has already been paid <a href="https://www.gov.uk/government/publications/pprs-aggregate-net-sales-and-payment-information-february-2019">in the first quarter of 2019</a>. Any deal that removes these rebates is <a href="https://www.york.ac.uk/che/research/teehta/thresholds/">likely to lead to</a> between 3,000 and 4,400 additional deaths, the loss of between 14,000 and 20,000 years of life and between 47,000 and 67,000 quality-adjusted life years (a measure of health that captures the impact on length and quality of life) each year.</p>
<h2>Verdict</h2>
<p>Michael Gove’s statement that drug prices are not on the table in a post-Brexit UK-US trade deal is very probably false.</p>
<hr>
<p><em>Checking the Facts is a series by The Conversation in which experts review claims made on the 2019 general election campaign trail. If you have any claims for an expert to check, you can:
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<img alt="" src="https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=140&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=140&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=140&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=176&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=176&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=176&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><a href="https://theconversation.com/uk/newsletters/the-daily-newsletter-2?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKGE2019&utm_content=GEBannerB">Click here to subscribe to our newsletter if you believe this election should be all about the facts.</a></em></p><img src="https://counter.theconversation.com/content/126473/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Karl Claxton receives funding from Department of Health and Social care, Bill & Melinda Gates Foundation, Medical Research Council. He is affiliated with Labour Party. </span></em></p>Michael Gove claims that drug prices are not on the negotiating table.Karl Claxton, Professor of Economics, University of YorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1217232019-09-27T11:18:50Z2019-09-27T11:18:50ZWhy cheaper drugs from Canada likely won’t cure what ails US<figure><img src="https://images.theconversation.com/files/294102/original/file-20190925-51463-8peimj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Could buying drugs from Canada be a solution to high prices for prescription drugs? It's complicated. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/prescription-labels-139652441?src=bQmOJg-VrPi9GmAsgH5Qrw-1-3">Burlingham/Shutterstock.com</a></span></figcaption></figure><p><a href="https://www.businessinsider.com/trump-exploring-imports-of-cheaper-prescription-drugs-from-canada-2019-7">President Trump has called</a> for ways to allow U.S. residents to buy cheaper prescription drugs from Canada. Many drugs are <a href="https://www.thenation.com/article/why-are-canadas-prescription-drugs-so-much-cheaper-than-ours/">cheaper</a> in Canada, thanks to government price controls in that country.</p>
<p><a href="https://www.researchgate.net/publication/322469880_Potential_benefits_and_risks_of_value-based_pricing_of_prescription_drugs">I teach a course in medication economics</a> and have written and spoken about drug pricing at the national and state level. My assessment is that buying prescription drugs from our northern neighbor can be risky in terms of quality and safety. And, it isn’t likely to reduce your drug prices.</p>
<h2>‘O Canada’ price reduction strategies</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/294108/original/file-20190925-51410-1wrv9l6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/294108/original/file-20190925-51410-1wrv9l6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294108/original/file-20190925-51410-1wrv9l6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294108/original/file-20190925-51410-1wrv9l6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294108/original/file-20190925-51410-1wrv9l6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294108/original/file-20190925-51410-1wrv9l6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294108/original/file-20190925-51410-1wrv9l6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Drugs in Canada are generally much less expensive.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/canada-flags-waving-wind-mountain-scenario-1091163974?src=d5HbMTZCe1llhsCduusotw-1-7">Gagliardi Photography/Shutterstock.com</a></span>
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<p>Canada offers the same drugs at cheaper prices because the Canadian government, which foots the bill for prescription drugs, will not pay for a drug if a government review board believes the cost is excessive. This board, the <a href="https://www.canada.ca/en/patented-medicine-prices-review.html">Patented Medicine Prices Review Board</a>, is a quasi-judicial agency. It was established by Canadian Parliament in 1987 under the auspices of the minister of health. If the board thinks a price is too high, it won’t pay. Faced with loss of the entire Canadian market if it doesn’t lower prices, manufacturers capitulate. </p>
<p>Also, Canadians have different expectations about what is covered and what is not. <a href="https://www.medscape.com/viewarticle/835182#vp_">Canadians accept</a> that their health care resources are finite. </p>
<p>In addition, there are price caps after a drug appears on the Canadian market. The price charged each successive year is allowed to rise only with the rate of inflation. In the U.S., even generic drug prices can rise precipitously with little advanced warning.</p>
<p>The result is that drug manufacturers <a href="https://www.healthaffairs.org/do/10.1377/hblog20170307.059036/full/">get the best deal they can</a> from Canada and other countries with price controls as long as they have reasonable profitability and make most of their profit from U.S. consumers.</p>
<h2>Why are US drug prices so high?</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/294105/original/file-20190925-51457-2zj3v8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/294105/original/file-20190925-51457-2zj3v8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294105/original/file-20190925-51457-2zj3v8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294105/original/file-20190925-51457-2zj3v8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294105/original/file-20190925-51457-2zj3v8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294105/original/file-20190925-51457-2zj3v8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294105/original/file-20190925-51457-2zj3v8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Drug advertising in the U.S. leads many people to think they must have a certain drug. While the ads don’t target children, they often include parents or grandparents happily playing with their kids.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/happy-boy-pill-hand-smiling-73651027?src=RPMsLqnA80eoSNZJF19kZA-1-7">ZouZou/Shutterstock.com</a></span>
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<p>In the U.S., price negotiations occur between individual insurers and the manufacturers. The government is not involved.</p>
<p>Also, drug manufacturers in the U.S. can reach consumers and promote drugs directly through advertising, something <a href="https://www.who.int/bulletin/volumes/87/8/09-040809/en">not allowed in any other country</a> except New Zealand. Thus, they create demand – and incur hundreds of millions of dollars in advertising that they recoup in the prices they charge.</p>
<p>Insurers developed a way to allow consumers choice and save money. In this setup, expensive drugs are still covered, but drugs in tier one have much lower copay costs than drugs in higher tiers. </p>
<p>When consumers find they are paying US$100 for a tier two option instead of $20 for a tier one option, they call their doctor and ask for a cheaper alternative. Manufacturers with a higher tiered drug have responded by creating prescription coupons instead of lowering the overall cost of the drug. When the consumer goes to the pharmacy, they pay $20 and the manufacturer pays the other $80 of their copay. </p>
<p>While this pricing system may alleviate the out-of-pocket burden on the consumer, <a href="http://www.hbs.edu/faculty/Publication%20Files/DafnyOdySchmitt_CopayCoupons_32601e45-849b-4280-9992-2c3e03bc8cc4.pdf">manufacturers simply raise the overall price</a> to shift the costs back on the insurers. The additional costs borne by the insurers are then baked into the higher premiums charged to consumers and their employers. </p>
<h2>So why not import from Canada?</h2>
<p>Buying drugs from Canada is illegal in the U.S., but the Food and Drug Administration website says it “typically does not object to personal imports of drugs” if there is no commercialization or promotion of the drug to U.S. residents; individuals verify in writing that the drug is for his or her own use; and the drug doesn’t present an unreasonable risk. </p>
<p>Safety is also an issue. The FDA <a href="https://www.fda.gov/about-fda/fda-basics/it-legal-me-personally-import-drugs">stresses that it cannot ensure the safety</a> and effectiveness of drugs it has not approved. In fact, four former FDA commissioners warn that having prescriptions filled by foreign pharmacies can put <a href="https://healthpolicy.duke.edu/sites/default/files/atoms/files/2017_03_16_commissioners_letter_final_signed.pdf">substandard, counterfeit, adulterated or contaminated drugs</a> into consumers’ hands. </p>
<h2>HHS has a plan, but it has holes</h2>
<p>The Department of Health and Human Services in July announced a <a href="https://www.hhs.gov/about/news/2019/07/31/hhs-new-action-plan-foundation-safe-importation-certain-prescription-drugs.html">drug importation action plan</a> outlining the parameters under which prescription drugs currently routed to Canada could make their way to U.S. consumers. </p>
<p>The agency did this in part because of the need to ensure that the products originate in Canada. In 2005, the <a href="http://www.safemedicines.org/wp-content/uploads/FDA-Operation-Reveals-Many-Drugs-Promoted-as-_Canadian_-Products-Really-Originate-From-Other-Countries-captured-January-2017.pdf">FDA seized 1,700 drug products</a> allegedly imported from Canada, and the majority did not originate there. </p>
<p>The plan requires that only manufacturing plants certified to manufacture drugs for the U.S. market be allowed; that the drugs go to U.S. pharmacies, directly or through a wholesaler; and that the drugs be labeled according to U.S. standards.</p>
<p>Problems would still exist. </p>
<p>The most important would be the loss of an accurate way to track negative drug side effects after drugs reach the market. It would be <a href="https://www.fda.gov/safety/medwatch-fda-safety-information-and-adverse-event-reporting-program/reporting-serious-problems-fda">impossible for the FDA to determine whether adverse events</a> would be due to the U.S. version of the drug, poor quality of the manufacturer, storage or shipment of the drugs into the U.S.</p>
<p>Second, importation likely would eliminate the pharmacist-patient relationship. This could possibly increase the risk of medication errors, such as overdoses and the taking of duplicate medications. This is because consumers likely would get prescriptions from myriad pharmacies. Different drug importation programs would likely focus on certain classes of medications contracted to specific pharmacy chains or mail order facilities. Patients might stop going consistently to the same pharmacy. </p>
<p>Studies have shown that this is important. For every six patients receiving a pharmacist intervention, there was <a href="https://www.ncbi.nlm.nih.gov/pubmed/2867190">one fewer patient requiring emergency room care</a> during transitions of care.</p>
<p>Furthermore, controlled substances like opioids, biological products and drugs you inject or infuse in the body are <a href="https://www.hhs.gov/about/news/2019/07/31/hhs-new-action-plan-foundation-safe-importation-certain-prescription-drugs.html">excluded from pilot testing</a> of imports. Biological drugs are among the <a href="https://lab.express-scripts.com/lab/drug-trend-report/2018-drug-trend-report">most expensive drugs on the market</a>, accounting for 45% of total drug spending in the U.S. in 2018. </p>
<p>Simply put, for the next several years, most Americans will be excluded from importing any prescription drugs from Canada, and everyone will be excluded from importing the most expensive ones.</p>
<h2>No perfect solution</h2>
<p>A recent study estimates that the entire Canadian drug supply would be exhausted in 183 days, if only 20% of U.S. prescriptions were filled using Canadian prescription drug sources. <a href="https://www.omicsonline.org/open-access/us-drug-importation-impact-on-canada8217s-prescription-drug-supply-2471-268X-1000146-99116.htm">The U.S. and Canada cannot force</a> the companies to manufacture more. </p>
<p>Also, Canadians could end up paying more, and <a href="https://www.npr.org/2019/08/04/748002191/canadians-respond-to-u-s-medication-import-plans">Canadians are not happy about</a> this. U.S. drugmakers could give up on Canada and focus on the more profitable U.S. market.</p>
<p>When profitability is reduced, there will be consequences. Manufacturers will invest fewer dollars in research and development and will shift their focus from very high-cost biological drugs for rare diseases back to more reasonably priced drugs for more common diseases. The system will be better for some and worse for others, which is why we haven’t already made these <a href="https://theconversation.com/the-price-of-a-miracle-should-we-limit-spending-on-lifesaving-drugs-79609">difficult choices in the U.S</a>.</p>
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<p class="fine-print"><em><span>C. Michael White does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Politicians and even HHS are now discussing ways to allow US consumers to buy drugs from Canada. Here’s why it’s not as simple as it seems.C. Michael White, Professor and Head of the Department of Pharmacy Practice, University of ConnecticutLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1165722019-09-10T12:41:27Z2019-09-10T12:41:27ZWhy a plan to lower prescription drug prices should not be piecemeal<figure><img src="https://images.theconversation.com/files/291625/original/file-20190909-109927-1ktbv19.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A man looks at a prescription drug bottle. Many Americans will chronic conditions report rationing their drugs because of cost.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/man-reading-prescription-bottle-133606469?src=bQmOJg-VrPi9GmAsgH5Qrw-1-5">Burlingham/Shutterstock.com</a></span></figcaption></figure><p>Demand for prescription medications in the U.S. is at an all time high, given that 50% of adults have at least one chronic condition, and <a href="https://www.cdc.gov/chronicdisease/index.htm">25% have two or more</a>. <a href="https://jamanetwork.com/journals/jama/article-abstract/2467552">Sixty percent of the population</a>, and 90% of Medicare beneficiaries have taken at least one prescription medication in the past month.</p>
<p>Rising health care costs over time are leading to higher out-of-pocket expenses for patients, such that <a href="https://bmchealthservres.biomedcentral.com/articles/10.1186/1472-6963-14-435">one-quarter</a> of families report health spending imposes a significant financial burden. One of the biggest concerns is about the out-of-pocket expenses associated with prescription drugs.</p>
<p>We are both health researchers who focus on strategies to improve access to care and disease management. We recently led an <a href="https://www.atsjournals.org/doi/full/10.1164/rccm.201810-1865ST?url_ver=Z39.88-2003&rfr_id=ori%3Arid%3Acrossref.org&rfr_dat=cr_pub%3Dpubmed">American Thoracic Society Policy Statement</a> on improving the affordability of prescription medications for patients with chronic respiratory disease. In our view, the U.S. could control drug costs in much the same way other countries do, while still meeting patients’ needs for these therapies.</p>
<h2>High stakes, little action</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/291628/original/file-20190909-109919-ldqqf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/291628/original/file-20190909-109919-ldqqf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=446&fit=crop&dpr=1 600w, https://images.theconversation.com/files/291628/original/file-20190909-109919-ldqqf2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=446&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/291628/original/file-20190909-109919-ldqqf2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=446&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/291628/original/file-20190909-109919-ldqqf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=560&fit=crop&dpr=1 754w, https://images.theconversation.com/files/291628/original/file-20190909-109919-ldqqf2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=560&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/291628/original/file-20190909-109919-ldqqf2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=560&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A woman compares the prices of drugs.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/customer-doing-price-comparison-pharmacy-87213745?src=wFltT8tHxqaqy6Q7WNm52A-1-37">Robert Kneschke/Shutterstock.com</a></span>
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<p>The current market for prescription medications in the U.S. is complex, but for most consumers, the bottom line is that drugs are expensive. They are so expensive that <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4945373/">patients report taking smaller doses</a>, skipping doses, delaying refills and borrowing medicines from others. Cost-related nonadherence is <a href="https://www.ncbi.nlm.nih.gov/pubmed/28143838">higher in the U.S</a> than any other economically developed country, affecting nearly <a href="https://www.ncbi.nlm.nih.gov/pubmed/28795170">one-fourth</a> of adults with chronic conditions. </p>
<p><a href="https://jamanetwork.com/journals/jama/fullarticle/2545691">Other economically developed countries</a> have taken greater steps than the U.S. to establish policies to protect patients. Because these mechanisms rely heavily on government regulation, negotiation and price-setting, they have gained little favor in the U.S.</p>
<p>One common approach for individual European Union countries is to use something called <a href="https://www.pharmaceutical-technology.com/comment/industry-experts-believe-external-reference-pricing-is-coming-to-the-us/">external reference pricing</a>, rather than allowing drug companies to set pricing. This means that a country sets its prices based on comparison prices in other member nations, and they often adopt the lowest price. Canada has also adopted reference pricing using EU member nations as common comparators. </p>
<p>Many countries with universal health care or multipayer systems, or both, have national organizations responsible for conducting health technology assessments. These generate evidence to support reimbursement decisions and price setting. Countries that do this include Australia, Canada, Germany, Ireland and the United Kingdom. </p>
<p>Organizations within these countries adopt a range of review criteria including clinical, comparative, and evidence of cost-effectiveness to drive decision-making. In the U.S., these same approaches have been undertaken by nongovernmental organizations such as the <a href="https://icer-review.org">Institute for Clinical and Economic Review</a> and individual physician and patient advocacy groups. These efforts, however, are isolated and generally underfunded, and their work is <a href="https://www.atsjournals.org/doi/full/10.1164/rccm.201810-1865ST">not widely used</a> in practice.</p>
<h2>Pharma not the only player in keeping drug prices high</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/291630/original/file-20190909-109947-174n9if.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/291630/original/file-20190909-109947-174n9if.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/291630/original/file-20190909-109947-174n9if.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/291630/original/file-20190909-109947-174n9if.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/291630/original/file-20190909-109947-174n9if.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/291630/original/file-20190909-109947-174n9if.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/291630/original/file-20190909-109947-174n9if.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Drug research in the U.S. is very costly, due in large part to lengthy clinical trials.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/customer-doing-price-comparison-pharmacy-87213745?src=wFltT8tHxqaqy6Q7WNm52A-1-37">Gorodenkoff/Shutterstock.com</a></span>
</figcaption>
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<p>In the U.S., drug makers set the prices for a new drug, with an eye on recovering their research investment. But consumers can’t really know how much money it took to develop a specific drug, because the process is opaque. Some researchers have estimated that the <a href="https://www.policymed.com/2014/12/a-tough-road-cost-to-develop-one-new-drug-is-26-billion-approval-rate-for-drugs-entering-clinical-de.html">average cost</a> to develop and gain market approval for a drug is about US$2 billion. </p>
<p>While pharmaceutical manufacturers are easy to blame for the high costs of drugs, these companies are important. They engage in drug research, development, evaluation, licensing and marketing with the aim of distributing therapies for a range of diseases. They ensure that innovative therapies are made available to the public. The U.S. is a <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2866602/">key international player</a> in the development of new drugs. </p>
<p>Their research is expensive, with <a href="http://nationalacademies.org/hmd/Reports/2017/making-medicines-affordable-a-national-imperative.aspx">complex clinical trials</a> being one of the biggest costs. These trials are required to evaluate efficacy, inform safety and meet regulatory requirements. These trials can take years.</p>
<p>In addition to setting a price with an eye on protecting their investments, drug companies also protect their investment through <a href="https://www.fda.gov/drugs/development-approval-process-drugs/frequently-asked-questions-patents-and-exclusivity">patents, or property rights</a> to a drug. Patent laws allow the drug manufacturer to prolong a patent, even if the original drug has undergone only a minor change. For example, for inhaled medicines, patent law also applies to proprietary pump designs, delivery systems, formulations and production processes that hinder generic competition when the active ingredient may no longer be patent-protected.</p>
<p>Legal protections also include allowing the drug maker to determine the cost, allowing patient cost of medications to be <a href="https://jamanetwork.com/journals/jama/article-abstract/2545691">influenced by the wholesale price</a> set by manufacturers. </p>
<h2>Another part of the puzzle: Supply chain</h2>
<p>Prescription medications are made available to patients only after passing through several intermediaries. Most recently, a profession has sprung up to bargain for lower drug prices from manufacturers on behalf of health plans and employers. The people who do this are called pharmacy benefit managers (PBMs), and they have become influential intermediaries. </p>
<p>While pharmacies often provide patients with direct access to prescription medications, PBMs work behind the scenes to develop and maintain lists of drugs that are covered by an insurer, called formularies. They also sell medications and provide rebates to pharmacies, negotiate discounts and obtain medications from drug manufacturers, and process prescription drug claims on behalf of insurers. Three large PBMs serve <a href="https://jamanetwork.com/journals/jama/article-abstract/2545691">75% of the U.S. market</a>. </p>
<p>Although there is some consistency within this system for public payers, like Medicaid, prices paid by private insurers are highly variable and typically lack price transparency. As a result, <a href="https://europepmc.org/abstract/med/28817781">the prices paid by insurers</a>, pharmacies and individual patients vary widely. <a href="http://healthpolicy.usc.edu/documents/USC%20Schaeffer_Flow%20of%20Money_2017.pdf">Numerous intermediaries exist between manufacturers and patients</a>; accordingly, each step in the supply chain is associated with markups such that $1 out of every $5 spent on prescription drugs feeds profits in the distribution system. In Europe, the price that such suppliers can charge is limited to a fixed percentage cost of the medication being supplied.</p>
<p>Also, prescribers often lack adequate information or training to prescribe in a way that will keep costs low for patients. Costs vary between patients because of health insurance and how different the drug formularies are among insurers. Formularies, even within one insurer, change frequently making it even more challenging for prescribers to address affordability for individual patients. </p>
<h2>Is there a fix?</h2>
<p>We do not think that adopting <a href="http://nationalacademies.org/hmd/Reports/2017/making-medicines-affordable-a-national-imperative.aspx">highly targeted policies</a> in a piecemeal fashion will sufficiently address the long-term challenges posed by a complex, ever-evolving system. Given the magnitude of the multibillion dollar pharmaceutical industry, and that most all Americans are affected, only the federal government is positioned to facilitate, fund and organize this effort. </p>
<p>Complicating matters, public distrust in government and hyperpartisanship would invariably threaten the impartiality of such a government entity without a high degree of independence from political forces. </p>
<p>In view of that, we believe that the U.S. government should establish and financially support a politically independent, impartial expert <a href="https://www.atsjournals.org/doi/full/10.1164/rccm.201810-1865ST">advisory committee</a> tasked with making critical, evidence-based recommendations on pharmaceutical policy. Their overarching goals would be to ensure affordable access to life-preserving medications, while retaining consumer choice, promoting future innovation and respecting our market-based economy. The fact that <a href="https://www.kff.org/slideshow/public-opinion-on-prescription-drugs-and-their-prices/">75% of Americans</a> already favor the creation of an independent group with specific focus on the costs of prescription medicines lends credence to the acceptability of this recommendation.</p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/116572/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Presidential candidates and the current president have all talked about ways to lower drug costs, but experts know it is going to take more than politics to change how drugs are priced in the US.Minal R. Patel, Associate Professor of Health Behavior & Health Education, University of MichiganJoe Gerald, Associate Professor & Program Director, Public Health Policy & Management, University of ArizonaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1175732019-06-04T12:43:04Z2019-06-04T12:43:04ZCheaper versions of the most expensive drugs may be coming, but monopolies will likely remain<figure><img src="https://images.theconversation.com/files/277686/original/file-20190603-69059-tgvmza.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Some biologics can cost up to a million dollars for a year's worth.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/medical-business-prices-concept-making-money-621316742?src=wFltT8tHxqaqy6Q7WNm52A-1-0">Tero Vesalainen</a></span></figcaption></figure><p>In May, the Food and Drug Administration issued much-anticipated <a href="https://www.fda.gov/media/124907/download">guidance</a> that could revolutionize the pricing of some of the most expensive drugs on the market in the U.S. and, possibly, globally. </p>
<p>In this document, the FDA explains to drug manufacturers how to develop their own copycat versions of a special class of drugs called <a href="https://theconversation.com/biologics-the-pricey-drugs-transforming-medicine-80258">biologics</a>. Unlike most drugs, biologics are not chemically synthesized but are made, for the most part, inside living organisms. This makes them complicated to manufacture and tricky to imitate. </p>
<p>The FDA’s new guidance will allow drug manufacturers to create their own cheaper versions of biologics that could be automatically substituted for one another, including by pharmacists. Just as happened with “generic” drugs, bringing competition into biologics markets will, hopefully, lower the prices of these medicines. But, it is unclear by how much or whether the guidance will do so for all biologics. </p>
<p>As a legal researcher specializing in the regulation of novel biotechnologies, I have been following efforts over the last 10 to 12 years to bring competition into biologics markets in the United States. So, I am excited to see how the FDA’s new guidance affects competition in biologics and whether it ultimately increases patient access to these drugs. </p>
<h2>Why are biologics so expensive?</h2>
<p>Following the maturation of recombinant DNA technology in the 1970s, biologics have been emerging as a prominent class of pharmaceuticals. To illustrate, <a href="https://www.genengnews.com/a-lists/top-15-best-selling-drugs-of-2018/">seven out of the 10 best-selling pharmaceuticals in 2018</a> were biologics, including Humira, Opdivo, Keytruda, Enbrel, Herceptin, Avastin and Rituxan. The world’s best selling pharmaceutical, Humira, which is prescribed for a variety of autoimmune diseases, including <a href="https://www.niams.nih.gov/health-topics/arthritis-rheumatic-diseases">rheumatoid arthritis</a>, <a href="https://www.niddk.nih.gov/health-information/digestive-diseases/crohns-disease">Crohn’s disease</a>, <a href="https://www.niddk.nih.gov/health-information/digestive-diseases/ulcerative-colitis">ulcerative colitis</a>, <a href="https://www.niams.nih.gov/health-topics/psoriasis">psoriasis</a> and juvenile idiopathic arthritis, brought in nearly <a href="https://www.genengnews.com/a-lists/top-15-best-selling-drugs-of-2018/">US$20 billion</a> in worldwide sales last year. </p>
<p>The <a href="https://www.forbes.com/sites/theapothecary/2019/03/08/biologic-medicines-the-biggest-driver-of-rising-drug-prices/#548079af18b0">growing importance of biologics</a> is due, in large part, to their remarkable therapeutic qualities. Biologics provide treatment and sometimes even a cure for some of the most devastating and often previously untreatable illnesses, including numerous types of cancer, autoimmune diseases such as <a href="https://www.niams.nih.gov/health-topics/arthritis-and-rheumatic-diseases">arthritis</a>, <a href="https://www.niddk.nih.gov/health-information/digestive-diseases/crohns-disease">Crohn’s disease</a> and psoriasis, some forms of blindness and more. </p>
<p>But biologics are also very expensive, typically costing in the range of <a href="https://www.nytimes.com/2018/01/06/business/humira-drug-prices.html">many tens of thousands</a> to <a href="https://www.reuters.com/article/us-usa-healthcare-cancer-costs/the-cost-of-cancer-new-drugs-show-success-at-a-steep-price-idUSKBN1750FU">hundreds of thousands</a> of dollars a year. In a few cases of biologics indicated for the treatment of rare diseases such as <a href="http://pharmatimes.com/news/brineura_hit_with_nice_rejection_1279019">neuronal ceroid lipofuscinosis type II</a> or Batten disease and <a href="https://icer-review.org/announcements/icer-issues-final-report-on-sma/">spinal muscular atrophy</a> the price comes closer to a million dollars per treatment year. As a result, although biologics account for only about <a href="https://www.forbes.com/sites/theapothecary/2019/03/08/biologic-medicines-the-biggest-driver-of-rising-drug-prices/#314eccda18b0">1 to 2% of prescriptions written in the United States</a>, they are <a href="http://doi.org/10.1056/NEJMp1902240">responsible for more than 30%</a> of the spending on pharmaceuticals overall and their “share” in pharmaceutical spending only continues to grow.</p>
<p>The high price of biologics is partly due to the costly manufacturing facilities and the large investment in research and development necessary in order to take biologics through clinical trials and FDA approval processes. In 2009, the R&D cost for a copycat biologic was estimated at between <a href="https://www.ftc.gov/sites/default/files/documents/reports/emerging-health-care-issues-follow-biologic-drug-competition-federal-trade-commission-report/p083901biologicsreport.pdf">$100–200 million</a>. Conducting the research and clinical trials necessary to develop a <em>new</em> biologic is estimated to cost in the range of hundreds of millions dollars for a typical biological product. </p>
<p>But the <a href="https://www.healthaffairs.org/do/10.1377/hblog20190405.396631/full/">primary reason biologics prices are so steep</a> is that the manufacturers of these drugs enjoy a monopoly and are able to keep their prices very high for a very long time.</p>
<p>The reason most pharmaceutical companies have monopolies on biologics is that these products are structurally and chemically complex. It is very difficult and sometimes even impossible – at least using current technologies – to know their exact structure and composition. This, in turn, makes it difficult to produce identical or near-identical replicas of biologics, which is what generics drugs are. This is why there are no generic biologics on the market. But that might soon change.</p>
<h2>FDA guidance could make biologics cheaper</h2>
<p>Congress has long recognized that the best way to lower the prices of expensive pharmaceutical products is through competition. That was the rationale behind the enactment of the <a href="https://www.govinfo.gov/content/pkg/STATUTE-98/pdf/STATUTE-98-Pg1585.pdf">Hatch-Waxman Act</a> in 1984, which created a legal pathway for approval of imitation or “generic” versions of pharmaceuticals. </p>
<p>The Hatch-Waxman Act revolutionized competition in pharmaceutical markets that led to significant price drops – often by as much as 80-90% – in thousands of pharmaceutical products. This has saved American consumers <a href="https://accessiblemeds.org/sites/default/files/2018_aam_generic_drug_access_and_savings_report.pdf">hundreds of billions of dollars each year</a>. </p>
<p>Following Europe’s lead, in 2010, as part of the Affordable Care Act, or Obamacare, Congress passed the <a href="https://www.fda.gov/media/78946/download">Biologics Price Competition and Innovation (BPCI) Act</a>. This was meant to do for biologics markets what the Hatch-Waxman Act did in 1984 for non-biologic pharmaceuticals. </p>
<p>But the BPCI Act only created the legal pathway for approval of imitation biologics. It did not address the technical challenge of comparing the original, expensive biologic with its cheaper imitation. That is something that the FDA must still figure out. Not an easy task. </p>
<p>Now, more than nine years after the enactment of the BPCI Act, the FDA issued its guidelines which explain, for the first time, to potential follow-on biologics manufacturers what the FDA requires in order to approve a copycat biologic. In the guidance, the FDA provides instructions how to prove that two products – the original biologic and the copycat – are similar enough to be deemed substitutable.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/277703/original/file-20190603-69087-1b77y8m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/277703/original/file-20190603-69087-1b77y8m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/277703/original/file-20190603-69087-1b77y8m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/277703/original/file-20190603-69087-1b77y8m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/277703/original/file-20190603-69087-1b77y8m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/277703/original/file-20190603-69087-1b77y8m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/277703/original/file-20190603-69087-1b77y8m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Manufacturing facilities for biologics are wildly expensive making it difficult for competitors to enter the market.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/pharmaceutical-factory-woman-worker-protective-clothing-1042879324">TRAIMAK/Shutterstock.com</a></span>
</figcaption>
</figure>
<h2>Monopolies may persist</h2>
<p>Once FDA approves interchangeable versions of biologics, this should drive competition in biologics and, ultimately, cause their prices to drop. As many regulatory agencies in countries around the world follow the FDA’s lead, agencies in other countries will likely do the same, leading to larger cost savings globally. </p>
<p>But concerns remain that the FDA’s guidance might not be enough to drive prices down significantly. Development of similar biologics is estimated to cost about <a href="https://www.ftc.gov/sites/default/files/documents/reports/emerging-health-care-issues-follow-biologic-drug-competition-federal-trade-commission-report/p083901biologicsreport.pdf">$100-200 million</a>. This is much higher than the development of generic drugs, which is estimated to cost, typically, between $1-5 million. There are not very many companies with the kind of facilities, expertise, and money necessary to develop interchangeable versions of biologics and chaperon them through the FDA’s approval process. As a result, it is quite possible that there will not be a lot of companies able to compete. </p>
<p><a href="https://www.fda.gov/about-fda/center-drug-evaluation-and-research/generic-competition-and-drug-prices">Previous research shows</a> that significant price drops in pharmaceuticals occur only after several competitors enter the market. So, it is quite possible that many biologics will have too few competing interchangeable versions to drive prices down significantly. </p>
<p>Also, original biologics makers have been taking a variety of measures to avoid losing their monopolies. Some have been amassing large patent portfolios. Others have been known to file lawsuits and abuse regulatory processes to delay the entry of competing products into the market. It is likely that they will continue to do so in order to prevent interchangeable versions of their biologics from entering the market. </p>
<p>Finally, the FDA guidance itself only applies to protein products, which are only one kind of biologics. So, there still is no clear regulatory path for FDA to approve interchangeable versions of some of the most expensive biologics – like <a href="https://ghr.nlm.nih.gov/primer/therapy/genetherapy">gene therapies</a>. </p>
<p>The FDA guidance may prove to be an important step toward lowering the prices of biologics. It comes at a good time, given the drug pricing crisis in the United States. But the guidance alone may not be enough.</p><img src="https://counter.theconversation.com/content/117573/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yaniv Heled has served as consultant on biosimilar litigation. </span></em></p>Biologics, therapies made inside or of living cells, are a growing share of pharmaceutical sales. But the cost of these miracle treatments makes them unaffordable for many. New FDA guidance may help.Yaniv Heled, Associate Professor of Law, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1119552019-02-28T11:41:25Z2019-02-28T11:41:25ZA new way to pay for innovative drugs, provide universal access and not break the bank<figure><img src="https://images.theconversation.com/files/261320/original/file-20190227-150718-2gacs7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sen. Chuck Grassley, R-Iowa, chair of the Senate Finance Committee, prepares for the Feb. 26, 2019 hearing with CEOs from several U.S. drug makers.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Senate-Drug-Prices/deaf2df9290341db926692b08fbf443f/4/0">Pablo Martinez Monsivais/AP Photo</a></span></figcaption></figure><p>On the heels of congressional testimony by the <a href="https://www.wsj.com/articles/live-analysis-drug-company-ceos-take-the-hot-seat-before-congress-11551191988">CEOs of major drug makers</a>, there are some important things to keep in mind. The U.S. faces a drug pricing crisis in large part because pharmaceuticals are in a golden age of advancement. A new pill cures hepatitis C. Immunotherapies devour cancer cells. Regenerative medicine promises longer life spans. </p>
<p>All of that advancement comes at a high cost. Drug companies seek recovery through high prices, which guarantees profits but reduces widespread access to the remedies. In particular, <a href="https://www.medicaid.gov/">Medicaid</a>, the federal and state health program for the poor, disabled and elderly, which enrolls 70 million Americans, <a href="https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2019/02/21/the-health-202-states-scramble-to-head-off-future-medicaid-shortfalls/5c6db0641b326b71858c6bec/?utm_term=.e30475b6c8ee">faces major hurdles</a> in paying for lifesaving treatments. </p>
<p>It has turned into a politically explosive predicament. A National Academies of Science consensus <a href="http://www.nationalacademies.org/hmd/reports/2017/national-strategy-for-the-elimination-of-hepatitis-b-and-c.aspx">report</a> which I was involved with and a <a href="https://annals.org/aim/fullarticle/2681481/novel-strategy-increasing-access-treatment-hepatitis-c-virus-infection-medicaid">paper</a> in a leading medical journal that I authored suggests a way out, and Louisiana will be the first state to put this solution into practice.</p>
<h2>A novel approach in a very poor state</h2>
<p>Louisiana, which has a severe hepatitis C problem, is on the cusp of proving to other states that drug companies can make the money they need, while every Medicaid recipient who needs a cure gets one. </p>
<p>Nationally the hepatitis C story is a scandal. Even with a cure on the market, more than <a href="https://www.cdc.gov/media/releases/2016/p0504-hepc-mortality.html">20,000</a> Americans still die of the disease each year, more than the combined toll of 60 other infectious diseases. The reason for this high death toll is the <a href="https://www.nbcnews.com/health/health-news/hepatitis-c-cure-eludes-patients-states-struggle-costs-n870846">high price tag of the curative drugs</a> and as a result Medicaid <a href="https://www.chlpi.org/state-medicaid-programs-continue-restrict-access-hepatitis-c-drugs/">restricts access to these drugs</a>. </p>
<p>In Louisiana, only <a href="https://www.nola.com/politics/index.ssf/2018/07/louisiana_hepatitis_c.html">384 of the 35,000</a> infected people who are on Medicaid or in prison got treatment in 2017 because of the prohibitive cost. Prices have dropped by two-thirds from the introductory level of US$80,000 per treatment, but even at that level eliminating the disease among Medicaid recipients would cost the state $700 million. Louisiana, which like other states shoulders part of Medicaid costs with the federal government, could afford that only if it blew up its budget for schools and health care, among other services. </p>
<p>The state is now on a path to secure immediate treatment for all infected prisoners and people on Medicaid by buying a license from a drug company. It is a concept that can be applied to other ground breaking remedies. The idea was first outlined in a <a href="http://www.nationalacademies.org/hmd/reports/2017/national-strategy-for-the-elimination-of-hepatitis-b-and-c.aspx">consensus report</a> for the National Academies of Sciences, Engineering and Medicine and later in a <a href="https://annals.org/aim/fullarticle/2681481/novel-strategy-increasing-access-treatment-hepatitis-c-virus-infection-medicaid">paper</a> in the Annals of Internal Medicine. Here is how it will work: </p>
<p>Louisiana spent <a href="https://www.statnews.com/pharmalot/2019/01/10/louisiana-hepatitis-netflix-drug-prices/">$35 million last year</a> on hepatitis C treatments spread among several pharmaceutical companies. On Jan. 10, 2019, the state announced that it intends to use that amount as leverage, drawing the companies into a competition for the state’s business. </p>
<p>Louisiana is seeking to negotiate a contract with a single drug manufacturer to provide all the hepatitis pills the state needs for a lump sum, payable annually over a five-year contract that is roughly equal to the state’s current $35 million hepatitis C spending among all makers. Once a contract is signed in April, the company that won the contract will stand ready to supply as many pills as the state requires. The price-per-pill model disappears, so Louisiana can treat as many patients as it wants without worrying about the costs of treating additional patients. </p>
<p>Louisiana State Health Director Rebekah Gee spearheaded the effort to establish a license after the NAS study was published. The strategy exploits market competition among firms in a voluntary transaction that nevertheless breaks the current stranglehold high prices have over access to the medicines. </p>
<p>Under the status quo of “price-based contracting,” firms derive profits from high prices, which in turn means reduced access to the drugs. Instead, the Louisiana system is based on what is called “revenue based contracting,” which severs the link between profits and restricted access. That is, a firm that wins the contract with the state can ensure profitability by negotiating an appropriate lump sum payment, guaranteed over five years. Once a lump sum payment is set, the state’s cost of providing drugs to additional patients is close to zero because the contract stipulates that the pharmaceutical company is obligated to meet the volume of the state’s needs.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/261370/original/file-20190228-150721-2xq5tf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/261370/original/file-20190228-150721-2xq5tf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=410&fit=crop&dpr=1 600w, https://images.theconversation.com/files/261370/original/file-20190228-150721-2xq5tf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=410&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/261370/original/file-20190228-150721-2xq5tf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=410&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/261370/original/file-20190228-150721-2xq5tf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=516&fit=crop&dpr=1 754w, https://images.theconversation.com/files/261370/original/file-20190228-150721-2xq5tf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=516&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/261370/original/file-20190228-150721-2xq5tf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=516&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Packages of Sovaldi, one of the drugs that cures hepatitis C, in Paris.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/paris-france-feb-9-2017-male-583382596">Hadrian/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>The question now is will drug makers participate in a competition to license their product to the state. The early outlook is positive. <a href="https://www.statnews.com/pharmalot/2019/01/10/louisiana-hepatitis-netflix-drug-prices/">Gilead and Merck</a>, makers of major hepatitis C drugs, both told the state in 2018 that they were interested, and AbbVie has said it intends to participate. </p>
<p>The deadline for submitting a proposed contract is Feb. 28, 2019, and the state hopes to implement the program by July 1. At that point, Louisiana could begin eradicating hepatitis C in its Medicaid and prison populations.</p>
<p>Other states should not be far behind. A long-awaited <a href="https://www.nga.org/wp-content/uploads/2018/08/Public-Health-Crises-and-Pharmaceutical-Interventions.pdf">report</a> from the National Governors Association on controlling drug costs endorsed the idea. In January 2019, <a href="https://www.statnews.com/pharmalot/2019/02/06/washington-netflix-hepatitis-drug-prices/">Washington state</a> began soliciting bids from drug makers for a guaranteed price for its Medicaid beneficiaries. </p>
<p>There is every reason to believe that the licensing model will work for containing costs of other expensive new drugs as well. States, or a consortium of states, can offer long-term contracts that can assure drug companies of the return they need to satisfy shareholders and pay for development costs. The large number of possible contracts in the 50 states means there is plenty of business for companies to seek. </p>
<p>Licenses are a time-tested way to guarantee streams of revenue to manufacturers while lowering users’ marginal costs to zero. This model is common in many knowledge-based industries such as software where product development costs are high but once a product is developed, the cost of providing the product to an additional user is close to zero. It’s time to implement this pricing model in health care. It can lead us out of our prescription drug crisis by bringing universal access without breaking the bank.</p><img src="https://counter.theconversation.com/content/111955/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Neeraj Sood has been a paid scientific advisor to several organizations in the health care industry including health insurers, drug distributors, pharmacuetical firms, economic consulting firms, litigation consulting firms, health care start-ups, and professional organizations.</span></em></p>As concern grows for the escalating prices of prescription drugs, a novel approach to lower the price of drugs to treat hepatitis C in Louisiana holds promise, a policy expert says.Neeraj Sood, Professor of Public Policy, University of Southern CaliforniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1112562019-02-07T11:31:35Z2019-02-07T11:31:35ZWhy the US has higher drug prices than other countries<figure><img src="https://images.theconversation.com/files/257593/original/file-20190206-174870-77ut05.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Policymakers and consumers are well aware of rising pharmaceuticals prices.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Pharma-Pills/c1bebab162b84b9084c5640d04daaa4f/34/0">AP Photo/Elise Amendola</a></span></figcaption></figure><p>Spending on pharmaceuticals is <a href="https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/paying-prescription-drugs-around-world-why-us-outlier">on the rise worldwide</a>. And it well should be. Today, we are able to cure some diseases <a href="https://www.healthline.com/health/hepatitis-c/can-it-be-cured">like hepatitis C</a> that were virtual death sentences just a few years ago. This progress required significant investments by governments and private companies alike. Unquestionably, the world is better off for it.</p>
<p>Unfortunately, as <a href="https://www.nytimes.com/interactive/2019/02/05/us/politics/trump-state-of-union-speech-transcript.html">President Trump pointed out in the State of the Union address</a>, the United States has borne a significant amount of the negative effects associated with this development. For one, its <a href="https://www.penguinrandomhouse.com/books/318776/an-american-sickness-by-elisabeth-rosenthal/9780143110859/">regulatory apparatus has focused largely on drug safety</a>, yet regulators have failed to emphasize cost-effectiveness when it comes to both new and existing drugs. </p>
<p>At the same time, the United States also pays significantly higher prices than the rest of the developed world when it comes to prescription drugs, due primarily to <a href="https://www.penguinrandomhouse.com/books/318776/an-american-sickness-by-elisabeth-rosenthal/9780143110859/">limited competition among drug companies</a>. </p>
<p>These two problems are well-known to policymakers, consumers and scholars alike. The Trump administration’s recent <a href="https://www.hhs.gov/about/news/2019/01/31/trump-administration-proposes-to-lower-drug-costs-by-targeting-backdoor-rebates-and-encouraging-direct-discounts-to-patients.html">proposal</a> seeks to lower costs by restructuring drug discounts that occur between pharmaceutical companies, health insurers and entities called <a href="https://www.statnews.com/2018/08/27/pharmacy-benefit-managers-good-or-bad/">pharmacy benefit managers</a>. </p>
<p>But in my view as a health policy scholar, the plan does little to address the underlying problems of prescription drugs in the U.S. I believe the U.S. can refocus its regulatory approach to pharmaceuticals, adapted from the one used in Europe, to better connect the value prescription drugs provide and their price. </p>
<h2>The US and other countries</h2>
<p>Until the mid-1990s, the <a href="https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/paying-prescription-drugs-around-world-why-us-outlier">U.S. was really not an outlier</a> when it came to drug spending. Countries like Germany and France exceeded the U.S. in per capita drug spending. However, since then, spending growth in the U.S. has dramatically outpaced other advanced nations. While per capita spending in the <a href="https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/paying-prescription-drugs-around-world-why-us-outlier">U.S. today exceeds US$1,000 a year, the Germans and French pay about half</a> that.</p>
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<p>And it is not like Americans are overly reliant on prescriptions drugs as compared to their European counterparts. Americans <a href="https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/paying-prescription-drugs-around-world-why-us-outlier">use fewer prescription drugs</a>, and when they use them, <a href="https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/paying-prescription-drugs-around-world-why-us-outlier">they are more likely to use cheaper generic versions</a>. Instead the discrepancy can be traced back to the issue plaguing the entirety of the U.S. health care system: <a href="https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/paying-prescription-drugs-around-world-why-us-outlier">prices</a>.</p>
<p>The reasons for the divergence starting in the 1990s are relatively straightforward. For one, dozens of so-called blockbuster drugs like <a href="https://www.kiplinger.com/slideshow/investing/T027-S001-the-15-all-time-best-selling-prescription-drugs/index.html">Lipitor</a> and <a href="https://www.kiplinger.com/slideshow/investing/T027-S001-the-15-all-time-best-selling-prescription-drugs/index.html">Advair</a> entered the market. The number of drugs grossing more than <a href="https://www.nytimes.com/2018/11/12/upshot/why-prescription-drug-spending-higher-in-the-us.html">$1 billion in sales increased from six in 1997 to 52 in 2006</a>. The recent introduction of <a href="https://www.healthline.com/health/hepatitis-c-treatment-cost">extremely pricey drugs treating hepatitis C</a> are only the latest of these. </p>
<p>Lacking even rudimentary price controls, U.S. consumers bore the full brunt of the expensive development work that goes into new drugs. These costs were further augmented by marketing expenditures and profit seeking by all entities within the pharmaceutical supply chain. Consumers in Europe, where there are government-controlled checks on prices, were not as exposed to those high costs.</p>
<p>The Food and Drug Administration has also consistently moved to <a href="https://www.nytimes.com/2018/11/12/upshot/why-prescription-drug-spending-higher-in-the-us.html">relax direct-to-consumer advertising regulations</a>, a practice that is either banned or severely limited in most other advanced nations. While there are limited information benefits to consumers, this <a href="https://www.penguinrandomhouse.com/books/318776/an-american-sickness-by-elisabeth-rosenthal/9780143110859/">practice has certainly increased consumption of high-priced drugs</a>.</p>
<p>Additionally, the overall complexity of the <a href="https://theconversation.com/us-health-care-system-a-patchwork-that-no-one-likes-85252">U.S. health care system</a> and the lack of transparency in the drug supply chain system create conditions favorable to limited competition and price maximization.</p>
<p>All entities in the <a href="https://avalere.com/research/docs/Follow_the_Pill.pdf">pharmaceutical supply chain</a>, including manufacturers and wholesale distributors, have become extremely skilled at finding regulatory loopholes that allow them to maximize profits. This includes, for example, creatively <a href="https://www.penguinrandomhouse.com/books/318776/an-american-sickness-by-elisabeth-rosenthal/9780143110859/">expanding the life of patents</a>, or having them <a href="https://khn.org/news/drugmakers-manipulate-orphan-drug-rules-to-create-prized-monopolies/">recategorized as “orphan drugs” for rare disease to preserve monopolies</a>. So-called pharmacy benefit managers, the middlemen that administer prescription drug programs, add further complexity and often <a href="https://www.statnews.com/2018/08/27/pharmacy-benefit-managers-good-or-bad/">may be driven by profit maximization</a>. </p>
<p>Finally, the U.S. has undergone a series of <a href="https://read.dukeupress.edu/jhppl/article-abstract/40/2/281/13726">coverage expansions</a>, including the prominent creation of the <a href="https://www.cambridge.org/core/journals/journal-of-policy-history/article/inching-toward-universal-coverage-statefederal-healthcare-programs-in-historical-perspective/E94A03DD1F60F9DCBE3DDE9728DA3224">Children’s Health Insurance Program</a>, <a href="https://www.medicare.gov/drug-coverage-part-d">Medicare Part D</a>, and the <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1541-0072.2012.00446.x">Affordable Care Act</a>. For many of the newly covered, this meant access to prescription drugs for the first time and pent-up demand was released. However, it also encouraged pharmaceutical companies to take advantage of the newfound payers for their drugs.</p>
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<h2>Trump’s proposed fixes</h2>
<p>The consequences of pricey pharmaceuticals are significant in terms of costs and diminished health. Close to <a href="https://www.commonwealthfund.org/publications/journal-article/2018/nov/whats-driving-prescription-drug-prices-us">20 percent of adults</a> report skipping medications because they are concerned about costs. Nonetheless, the U.S. may be spending <a href="https://www.healthaffairs.org/do/10.1377/hblog20180726.670593/full/">close to $500 billion annually</a>.</p>
<p>The <a href="https://www.hhs.gov/about/news/2019/01/31/trump-administration-proposes-to-lower-drug-costs-by-targeting-backdoor-rebates-and-encouraging-direct-discounts-to-patients.html">plan proposed by the Trump administration</a> basically replaces an <a href="https://avalere.com/research/docs/Follow_the_Pill.pdf">opaque discount arrangement between drug makers, insurers and middlemen called pharmacy benefit managers</a> with a discount program directly aimed at consumers. Particularly benefiting from the change would be those <a href="https://khn.org/news/winners-and-losers-under-bold-trump-plan-to-slash-drug-rebate-deals/">individuals requiring costly non-generic drugs</a>. Unquestionably, their lives would improve due to increased access and lower costs.</p>
<p>At the same time, costs would be shifted to <a href="https://khn.org/news/winners-and-losers-under-bold-trump-plan-to-slash-drug-rebate-deals/">healthier consumers who do not rely on expensive drugs, as well as those relying on generic versions</a>. Both will be faced with higher overall insurance premiums while not seeing any reductions in the prescription drug bills. That’s because insurers would no longer be able to use drug discounts to hold down premiums.</p>
<p>The Trump administration’s discounting approach, however, is not uncommon. The <a href="https://www.commonwealthfund.org/blog/2016/drug-price-control-how-some-government-programs-do-it">Veterans Health Administration’s has done so quite successfully</a>, obtaining discounts in the range of 40 percent. Likewise, <a href="https://www.commonwealthfund.org/blog/2016/drug-price-control-how-some-government-programs-do-it">Medicaid programs</a> are also using their purchasing power to obtain discounts. And calls for Medicare to negotiate discounts with pharmaceutical companies are common.</p>
<p>The way I see it, there are three major issues inherent in negotiating discounts for drugs. </p>
<p>For one, true negotiations would only take place if Medicare or any other entity was willing to walk away from certain drugs if no discounts could be obtained. In a country that heavily values choice, and where such activities would become a political football, this is highly unlikely. </p>
<p>Moreover, it would only work for drugs where viable alternatives are available. After all, most Americans would likely be hesitant to exclude a drug, even at high costs, when no alternative cure exists.</p>
<p>Yet even if some version of a discount program were to be implemented more widely, such a program does not change the underlying pricing or market dynamics. Crucially, relying on discounts does nothing to reduce list prices set by manufacturers. Pharmaceutical companies and all other entities in the <a href="https://avalere.com/research/docs/Follow_the_Pill.pdf">supply chain</a> remain free to set prices, bring products to the market, and take advantage of loopholes to maximize corporate profits.</p>
<p>Ultimately, pharmaceutical companies and all other entities involved in the pharmaceutical supply chain are unlikely to be willing to simply give up profits. Quite likely, steeper discounts for Medicaid and Medicare may lead to higher costs for employer-sponsored plans. </p>
<h2>Focusing on effectiveness and consumer information</h2>
<p>The question then emerges: What could be done to truly improve the twin issues of high costs and limited cost-effectiveness when comes to pharmaceuticals in the U.S. health care system?</p>
<p>While Americans are often hesitant to learn from other countries, looking to Europe when it comes to pharmaceuticals holds much promise. Countries like <a href="https://www.nice.org.uk/">Britain</a> and <a href="https://www.healthaffairs.org/do/10.1377/hblog20161229.058150/full/">Germany</a> have taken extensive steps to introduce assessments of cost-effectiveness into their health care systems, refusing to pay higher prices for new drugs that do not improve effectiveness of treatment over existing options.</p>
<p>Since reforming its system in the early 2010s, <a href="https://www.healthaffairs.org/do/10.1377/hblog20161229.058150/full/">Germany</a> has allowed manufacturers to freely set prices for a limited period when bringing new drugs to the market. It then uses the data available from that period for a nongovernmental and nonprofit research body to evaluate the benefit provided by the new drug, as compared to existing alternatives. This added benefit, or lack thereof, then serves as the foundation for price negotiations between drug manufacturers and health plans. </p>
<p>While the <a href="https://theconversation.com/us-health-care-system-a-patchwork-that-no-one-likes-85252">legal restrictions and the fragmented nature of the U.S. health care system</a> severely limit the ability of the U.S. to fully translate such a model, in my opinion, the underlying approach bears great value.</p>
<p>Lacking the corporatist nature of the Germany economy, the U.S. should resort to a <a href="https://www.annualreviews.org/doi/abs/10.1146/annurev-publhealth-082313-115826">bottom-up approach</a> focused on investing in assessing and subsequent publicizing of cost-effectiveness data as well as cost-benefit analyses for all drugs. In order to minimize politicization, these analyses would be best handled by one or multiple independent research institutes.</p>
<p>Ultimately, knowing what drugs provide what value would equally benefit consumers, providers, and payers, and serve as a meaningful first step towards connecting the prices we pay for prescriptions to the value we derive from them.</p><img src="https://counter.theconversation.com/content/111256/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon F. Haeder is a Fellow in the Interdisciplinary Research Leaders Program, a national leadership development program supported by the Robert Wood Johnson Foundation to equip teams of researchers and community partners in applying research to solve real community problems.</span></em></p>The Trump administration’s proposal to lower drug prices focuses on discounts. A health policy scholar argues that the US could learn from Europe’s system of measuring drug value and effectiveness.Simon F. Haeder, Assistant Professor of Political Science, West Virginia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/966082018-05-17T21:42:05Z2018-05-17T21:42:05ZNo, raising drug prices in Canada will not help the U.S.<figure><img src="https://images.theconversation.com/files/219464/original/file-20180517-26255-1lc8ms.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Donald Trump releases a 'blueprint' to reduce prescription drug prices, with Health and Human Services Secretary Alex Azar, in the Rose Garden of the White House in Washington, May 11, 2018. </span> <span class="attribution"><span class="source">(AP Photo/Carolyn Kaster)</span></span></figcaption></figure><p>Donald Trump’s solution to <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-blueprint-lower-drug-prices/">soaring American drug prices</a> is to have other countries, such as Canada, raise their prices. This is not a new position; <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1261198/pdf/bmj33100958.pdf">American officials have been advocating this approach</a> for at least the past 15 years. </p>
<p>The call for Canada to increase prices just reinforces a recent <a href="https://ustr.gov/sites/default/files/files/Press/Reports/2018%20Special%20301.pdf">report from the Office of the United States Trade Representative</a>. This castigated Canada’s attempt to rein in drug costs by tightening up our rules for how much drug companies can charge.</p>
<p>The bizarre logic behind the U.S. proposal is that Canada, and other countries that regulate drug prices, have been “freeloading” off high prices in the United States. </p>
<p>Because Canada keeps the price of brand-name drugs lower than those in the U.S., drug companies are supposedly “forced” to charge Americans high prices — to generate the profits necessary to pay for research and development (R&D) to produce new life-saving medicines.</p>
<p>Raising Canadian drug prices is not going to lower those in the U.S. But it may put more money into the pockets of the most profitable drug companies. </p>
<h2>Rewarding Big Pharma</h2>
<p><a href="http://fortune.com/fortune500/list/filtered?sortBy=profits&sector=Health%20Care">Profits of Big Pharma companies</a> were projected to be <a href="https://www.forbes.com/sites/liyanchen/2015/12/21/the-most-profitable-industries-in-2016/#5e49eec65716">over 25 per cent in 2016, with biotech companies not far behind at 24.6 per cent</a>.</p>
<p>Most of this money does not go into researching new drugs.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/219467/original/file-20180517-26274-b4s6cx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/219467/original/file-20180517-26274-b4s6cx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/219467/original/file-20180517-26274-b4s6cx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/219467/original/file-20180517-26274-b4s6cx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/219467/original/file-20180517-26274-b4s6cx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/219467/original/file-20180517-26274-b4s6cx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/219467/original/file-20180517-26274-b4s6cx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">In this 2016 photo, a prescription is filled at a pharmacy in Sacramento, Calif.</span>
<span class="attribution"><span class="source">(AP Photo/Rich Pedroncelli)</span></span>
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</figure>
<p>In 2015, out of the <a href="https://nurses.3cdn.net/e74ab9a3e937fe5646_afm6bh0u9.pdf">top 100 pharmaceutical companies by sales</a>, 64 spent twice as much on marketing and sales as on research and development. Fifty-eight spent three times as much, 43 spent five times as much and 27 spent 10 times the amount. </p>
<p>Only 8.3 per cent of their revenue went into developing new drugs.</p>
<p>Besides marketing and sales, more money goes into <a href="https://www.ineteconomics.org/uploads/papers/WP_60-Lazonick-et-al-US-Pharma-Business-Model.pdf">paying out dividends and buying back corporate stock</a> than is spent on R&D. Between 2006 and 2015, the 18 U.S.-based companies listed in the S&P 500 Index spent US$465 billion on R&D but US$261 billion on stock buybacks and paid out US$255 billion in dividends. </p>
<p>Incentivizing these buybacks is stock-based compensation that rewards senior executives for stock-price “performance.” </p>
<p>Buybacks automatically increase earnings per share because there are fewer shares. This in turn leads to an increase in demand for shares and higher share prices, which rewards executives who receive most of their income through stock-based pay.</p>
<h2>‘Me too’ drugs</h2>
<p>When companies do produce new drugs it is not just their money that has generated these products. The <a href="http://www.pnas.org/content/early/2018/02/06/1715368115">National Institutes of Health invested in every one of the 210 new drugs</a> approved by the Food and Drug Administration from 2010 to 2016. </p>
<p>For the 40 years since 1970, <a href="https://www.nejm.org/doi/full/10.1056/NEJMsa1008268">public sector research in the U.S.</a> resulted in 153 new drugs, vaccines or new uses for existing drugs — more than half of which have been used in the treatment or prevention of cancer or infectious diseases.</p>
<p>Most of the drugs that companies produce are “me too” products: Drugs designed not to provide better treatment but rather to generate more profits. </p>
<p>Figures from the Patented Medicine Prices Review Board, a Canadian federal agency that sets the maximum price for new patented drugs, show that out of 691 new drugs introduced onto the Canadian market from 2010 to 2016 <a href="http://www.pmprb-cepmb.gc.ca/view.asp?ccid=1334">only one in 10 were either substantial improvements or breakthroughs</a>.</p>
<h2>NAFTA concerns</h2>
<p>If Trump is serious about pushing this demand then we should worry, especially with NAFTA up for renegotiation. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/219465/original/file-20180517-26255-mmi0s1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/219465/original/file-20180517-26255-mmi0s1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/219465/original/file-20180517-26255-mmi0s1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/219465/original/file-20180517-26255-mmi0s1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/219465/original/file-20180517-26255-mmi0s1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=507&fit=crop&dpr=1 754w, https://images.theconversation.com/files/219465/original/file-20180517-26255-mmi0s1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=507&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/219465/original/file-20180517-26255-mmi0s1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=507&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">President Donald Trump speaks with Health and Human Services Secretary Alex Azar in the Rose Garden of the White House in Washington, May 11, 2018. He has accused Canada and other countries of ‘freeloading’ off high drug prices in the United States.</span>
<span class="attribution"><span class="source">(AP Photo/Carolyn Kaster)</span></span>
</figcaption>
</figure>
<p>The original 1994 version pushed Canada to <a href="https://doi.org/10.1016/S0168-8510(96)00886-X">delay the entry of lower-priced generics</a>. When the U.S. was part of the Trans-Pacific Partnership (TPP) negotiations it <a href="https://doi.org/10.1177/1468018117734153">pushed countries to further strengthen their patent laws</a>. </p>
<p>Rules in the U.S. delay the entry of equivalent versions of biologics for 12 years and the U.S. tried, unsuccessfully, to get all of the other countries that were part of the TPP agreement to adopt that standard. </p>
<p>Already here in Canada, <a href="http://www.pmprb-cepmb.gc.ca/view.asp?ccid=1334">eight of the top 10 drugs, as measured by cost per person treated,</a> are biologics. Five of these cost more than CDN$10,000 per year. </p>
<p>We don’t know what is happening with NAFTA but given its track record on drug patents it’s hard to believe that this is not an issue for the U.S. In fact, in <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-blueprint-lower-drug-prices/">Trump’s speech on May 11, 2018,</a> he promised that “the U.S. Trade Representative will prioritize addressing unfair intellectual property and market access policies in our trade agreements, so that partners contribute their fair share to innovation.”</p>
<p>The solution for U.S. drug prices is for the American government to take on the drug companies — not to blame other countries for its unwillingness to do so. </p>
<p>If Canada gives in to Trump, we will be paying more for our drugs and that may lead to even further delays in <a href="https://theconversation.com/pharmacare-and-the-chaotic-world-of-canadian-drug-prices-93343">launching a national pharmacare plan</a>.</p><img src="https://counter.theconversation.com/content/96608/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In 2015-2017, Joel Lexchin was a paid consultant on two projects: one looking at indication-based prescribing (United States Agency for Healthcare Research and Quality) and a second deciding what drugs should be provided free of charge by general practitioners (Government of Canada, Ontario Supporting Patient Oriented Research Support Unit and the St Michael’s Hospital Foundation). He also received payment for being on a panel that discussed a pharmacare plan for Canada (Canadian Institute, a for-profit organization). He is currently a member of research groups that are receiving money from the Canadian Institutes of Health Research and the Australian National Health and Medical Research Council. He is member of the Foundation Board of Health Action International and the Board of Canadian Doctors for Medicare. </span></em></p>The logic behind U.S. president Donald Trump’s proposal that Canada and other countries have been “free-riding” off high prices in the United States is bizarre at best.Joel Lexchin, Professor Emeritus of Health Policy and Management, York University, Emergency Physician at University Health Network, Associate Professor of Family and Community Medicine, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/938262018-03-28T10:41:19Z2018-03-28T10:41:19ZHospitals hit back on drug pricing, but will they knock out the problem?<figure><img src="https://images.theconversation.com/files/212013/original/file-20180326-159078-1xvspoh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Heather Bresch, CEO of Mylan, holds two EpiPens as she testified before Congress Sept. 21, 2016 about rising costs of the drug.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/EpiPen-Mylan-Overcharges/51ae0fa265de46ce916afdda81f62404/13/0">AP Photo/Pablo Martinez Monsivais</a></span></figcaption></figure><p>Drug manufacturing and pricing vaulted into the news several years ago when a privately held company <a href="https://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html">raised the price of a drug</a> used for infections from US$13.50 to $750 for one pill.</p>
<p>After an outcry from hospitals, the company later relented, dropping its price by a small margin. Still, this single dramatic increase shed light on the once obscure arena of older generic drugs that continue to be in short supply and whose <a href="https://www.theatlantic.com/health/archive/2015/09/daraprim-turing-pharmaceuticals-martin-shkreli/406546/">prices occasionally skyrocket</a>.</p>
<p>Frustrated with these shortages and alarmed by the potential for price gouging, a coalition of hospitals has recently struck back. Four not-for-profit, religiously affiliated hospital systems and the U.S. Veterans’ Administration announced their intent to form a company that <a href="https://www.nytimes.com/2018/01/18/health/drug-prices-hospitals.html">would manufacture generic drugs</a>, thereby helping to mitigate or eliminate shortages and prevent future massive price spikes for rarely used generic drugs. </p>
<p>I’m an economist who has studied the health care industry, including the U.S. generic industry, and I see a few regulatory and business hurdles to this approach.</p>
<h2>Worthy goal, but challenges aplenty</h2>
<p>The formation of a generic drug company by not-for-profit hospital chains to address continuing drug shortages and mitigate periodic price spikes of old, rarely utilized generic drugs is understandable and reflects a worthy goal. It is important to realize, however, that there are reasons the markets for these old drugs are small. <a href="http://www.nber.org/papers/w23640">Most are unprofitable</a>, and drug availability may not be guaranteed even if they are produced and marketed by not-for-profit organizations. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/rKRza3aiQ5Q?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Prof. Ernst Berndt explains three challenges facing the consortiun.</span></figcaption>
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<p>Three substantial challenges face the new generic company, each involving coordination clashes within the buying consortium. First, what specific generic drugs should the new generic company manufacture and market? A press release accompanying the announced collaboration suggested the consortium would market about <a href="https://www.sltrib.com/news/health/2018/01/19/utahs-intermountain-healthcare-fights-skyrocketing-drug-prices-shortages-by-forming-its-own-company-project-rx/">20 generic drugs</a>. </p>
<p>But which generic drugs? Those drugs with the greatest price increases? Those whose shortages most threaten public health? Those critical drugs currently available, but whose possible price increases or supply disruption pose the potentially greatest threat to the public health? Those associated with the lowest production costs or least complex manufacturing? Given diverse preferences among its membership, the coalition may find it very difficult to reach a consensus on which generic drugs to manufacture. </p>
<p>Second, once a decision has been reached on which generic drugs to manufacture and market, the consortium must obtain <a href="https://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/AbbreviatedNewDrugApplicationANDAGenerics/default.htm">regulatory approval</a> from the FDA via the Abbreviated New Drug Approval process, either by reaching an agreement with an existing manufacturer with that approval, or by filing completely anew.</p>
<p>If the former, the consortium would need to utilize the identical manufacturing processes, facility sites and equipment as specified in its Drug Master File accompanying its original application for new drug approval. That would have to happen even if those manufacturing processes were now antiquated and inefficient given technological progress in biochemical manufacturing.</p>
<p>If instead the consortium decided to upgrade the manufacturing processes, then it would need to work with the FDA to satisfy regulatory <a href="https://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm075207.htm">bioequivalence</a> requirements with the new equipment, a process that involves capital expenditures and can take several years. Bioequivalence means that there is no important difference in the rate and extent of absorption of the active pharmaceutical ingredient. In this latter case, it may instead be preferable to file a completely new application. </p>
<p>Even in that case, though, the consortium would need to decide whether it would self-manufacture the generic product or outsource it to a willing and FDA-acceptable contract manufacturing organization. Agreements and contracts would be required for each generic product, although it is possible that a single contract manufacturer could be identified who could manufacture several of the desired generic drugs. The process by which necessary FDA regulatory approval would be obtained would therefore involve drug-specific approvals and numerous contractual negotiations, consume a considerable amount of time and potentially require substantial capital investments. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/212015/original/file-20180326-159066-73q6b5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/212015/original/file-20180326-159066-73q6b5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/212015/original/file-20180326-159066-73q6b5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/212015/original/file-20180326-159066-73q6b5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/212015/original/file-20180326-159066-73q6b5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/212015/original/file-20180326-159066-73q6b5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/212015/original/file-20180326-159066-73q6b5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">With thousands of drugs on the market, it would be hard to know which drugs the consortium would try to manufacture.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/colorful-medication-pills-above-324566462?src=SY1p0ssuaQGCyZXI9PNBiQ-1-3">Pavel Kubarkov/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>
Third, once decisions were made on which generic drugs to market and how they would be manufactured to ensure they satisfy FDA regulatory requirements, the consortium must determine how to store, distribute and price the medicines. If, given the prices charged by the consortium, the demand for the generic drugs exceeds available supply, how will the unsatisfied demand be rationed – by price increases, an algorithm based on members’ previous purchases from the consortium or by profit versus not-for-profit considerations? How to unload product if supply exceeds demand, generating unused inventories of old generic drugs?</p>
<p>It is possible, of course, that the newly announced generic consortium will be able to overcome coordination challenges and mitigate the market imperfections – and it is important that private, public and philanthropic organizations provide the consortium with various forms of support – but the challenges are indeed daunting. The ultimate success of this generic drug consortium initiative would be a wonderful development – but I wouldn’t count on it.</p><img src="https://counter.theconversation.com/content/93826/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ernst Berndt does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The rising costs of generic drugs have led to outcries. In a search for solutions, four hospital systems are proposing to make drugs on their own. Could their idea work?Ernst Berndt, Professor of Management, MIT Sloan School of ManagementLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/802582017-07-25T01:13:46Z2017-07-25T01:13:46ZBiologics: The pricey drugs transforming medicine<figure><img src="https://images.theconversation.com/files/179471/original/file-20170724-28293-q0p57w.jpg?ixlib=rb-1.1.0&rect=76%2C6%2C864%2C613&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The cells inside this bioreactor are the real pharmaceutical factories.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/sanofi-pasteur/5283861272">Sanofi Pasteur</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>In a factory just outside San Francisco, there’s an upright stainless steel vat the size of a small car, and it’s got something swirling inside.</p>
<p>The vat is studded with gauges, hoses and pipes. Inside, it’s hot – just under 100 degrees Fahrenheit. Sugar and other nutrients are being pumped in because, inside this formidable container, there is life.</p>
<p>Scientists are growing cells in there. Those cells, in turn, are growing medicine. Every two weeks or so, the hot, soupy liquid inside gets strained and processed. The purified molecules that result will eventually be injected into patients with Stage IV cancer.</p>
<p>Drugs that are made this way – inside living cells – are called biologics. And they’re taking medicine by storm. By 2016, biologics had <a href="http://www.imshealth.com/files/web/Global/white%20paper/QI_Disruption_and_maturity_The_next_phase_of_biologics.pdf">surged to make up 25 percent</a> of the total pharmaceutical market, bringing in US$232 billion, with few signs their upward trend will slow.</p>
<h2>Distinct from conventional drugs</h2>
<p>Common medicines such as aspirin, antacids and statins are chemical in nature. Though many were initially discovered in the wild (aspirin is a cousin of a compound in willow bark, the first statin was found in a fungus), these drugs are now made nonbiologically.</p>
<p>Conventional medicines are stitched together by chemists in large factories using other chemicals as building blocks. Their molecular structures are well defined and relatively simple. Aspirin, for example, contains just 21 atoms (nine carbons, eight hydrogens and four oxygens) bonded together to form a particular shape. A single aspirin tablet – even kid-sized – contains trillions of copies of the drug molecule.</p>
<p>Biologic drugs are a different story. This class of medication is not synthesized chemically – instead they are harvested directly from biology, as their name suggests. Most modern biologics are assembled inside vats – or bioreactors – that house genetically engineered microbes or mammalian cell cultures. Efforts are underway to <a href="http://doi.org/10.1002/bit.25352">make them in plants</a>.</p>
<p>Biologic drugs can be <a href="https://www.ncbi.nlm.nih.gov/pubmed/9446633">whole cells</a>, alive or dead. They can be the biomolecules produced by cells, like <a href="https://doi.org/10.1038/nbt1137">antibodies</a>, which are normally secreted by our immune system’s B cells. Or they can be some of the internal components of cells, like <a href="https://doi.org/10.1016/S0140-6736(10)60665-4">enzymes</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=341&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=341&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=341&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=428&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=428&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176165/original/file-20170629-10672-1hcosdd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=428&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Biologics can dwarf conventional drugs in size, and that gives them added specificity.</span>
<span class="attribution"><span class="source">Ian Haydon</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Biologics are typically much larger molecules than those found in conventional pharmaceuticals, and in many cases their exact composition is unknown (or even unknowable). You’re unlikely to find biologic drugs in tablet form – they tend to be delicate molecules that are happiest in liquid solution.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=680&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=680&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=680&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=854&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=854&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179479/original/file-20170724-23039-l0snac.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=854&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Animals were the original producers of serums used in vaccines.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:JimHorse.png">AAMiller</a></span>
</figcaption>
</figure>
<p>While biologics are one of the <a href="https://doi.org/10.1016/j.amsu.2014.09.001">fastest-growing drug categories</a> in the U.S., they aren’t exactly new. The <a href="https://history.nih.gov/exhibits/history/docs/page_03.html">Biologics Control Act</a>, passed in 1902, was the first law aimed at ensuring the safety of some of the earliest biologics – vaccines. Congress was moved to pass the law after a contaminated batch of diphtheria shots left 13 children dead. Jim, the horse from which the diphtheria antitoxin had been extracted, <a href="https://www.fda.gov/AboutFDA/WhatWeDo/History/CentennialofFDA/CentennialEditionofFDAConsumer/ucm096141.htm">had contracted tetanus</a>.</p>
<p>Fortunately, scientists have dramatically <a href="https://www.fda.gov/aboutfda/centersoffices/officeofmedicalproductsandtobacco/cber/">improved the way they manufacture</a> biologic drugs since then. For starters, the recombinant DNA revolution of the 1970s means that drug makers no longer have to extract many of the most important biologics from whole animals.</p>
<p>The gene that codes for human insulin, for example, can be pasted into a microbe which will happily churn out the drug in bulk. After a <a href="http://doi.org/10.1007/978-3-642-59990-3">multi-million dollar purification process</a>, the injectable insulin that results <a href="https://www.fda.gov/aboutfda/whatwedo/history/productregulation/selectionsfromfdliupdateseriesonfdahistory/ucm081964.htm">is indistinguishable</a> from the version a healthy human body would produce. This is how some forms of insulin are made today.</p>
<h2>The biologic advantage</h2>
<p>Both conventional and biologic drugs work by interacting with our own biology. Most conventional drugs function as inhibitors – they’re just the right size and shape to jam themselves into some molecular cog in our cells. Aspirin’s pain-reducing power comes from its <a href="https://doi.org/10.1016/S0049-3848(03)00379-7">ability to disrupt an enzyme</a> in the body called cyclooxygenase, an important player in pain signaling.</p>
<p>Conventional drug discovery largely consists of finding new compounds that specifically disrupt only disease-associated processes. Because these drugs are quite small, and because the inside of any cell is a sea of other molecular components, finding a new small drug that blocks only problematic processes is tricky. Off-target interactions can <a href="https://doi.org/10.1002/cmdc.200700026">produce side effects</a> of all types.</p>
<p>The large size of biologic drugs can be an asset here. An antibody, for example, has lots of specific points of contact with its target. This enables therapeutic antibody drugs to bind with extreme precision – only their target molecule should be an exact match. This binding can lead to inhibitory effects, much like a conventional drug might. In some cases, therapeutic antibodies can also <a href="https://doi.org/10.1038/74704">stimulate the immune system</a> in a problem area, like at a tumor, prompting the body to <a href="https://theconversation.com/as-scientists-train-the-immune-system-to-fight-cancer-others-look-to-combat-costs-77364">take it out</a>.</p>
<p>Many biologics target molecular processes that no conventional drug can, and they can treat <a href="https://doi.org/10.12688/f1000research.9970.1">a growing list of diseases</a>. Cancer treatments <a href="https://doi.org/10.1016/j.biotechadv.2016.07.004">dominate the list</a>, but since 2011 the U.S. Food and Drug Administration has approved new protein-based biologics for the treatment of Lupus, Crohn’s disease, rheumatoid arthritis, multiple sclerosis, kidney failure, asthma and high cholesterol.</p>
<p>New types of biologic drugs continue to emerge as well. In late 2015, the FDA approved a first-of-its-kind treatment for patients with advanced <a href="https://www.cancer.org/cancer/melanoma-skin-cancer.html">melanoma</a>: an engineered herpes virus. Researchers genetically programmed the virus, called <a href="https://doi.org/10.1186/s40425-016-0158-5">T-VEC</a>, to target only cancerous cells, and it can also prompt the immune system to start wiping out cancer. <a href="https://doi.org/10.1111/cas.13027">Additional virus-based therapies</a> are currently working their way through the lengthy U.S. drug approval process.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=456&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=456&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=456&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=573&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=573&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179511/original/file-20170724-28519-3wibif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=573&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Biologics can be good news for patients, like this boy with Batten disease, but can also come with formidable price tags.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Associated-Press-Domestic-News-California-Unite-/91b4b13acfe1da11af9f0014c2589dfb/5/0">AP Photo/Sang H. Park</a></span>
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</figure>
<h2>Crippling costs</h2>
<p>Amgen, the company that produces T-VEC, estimates it will cost an average of <a href="http://www.marketwatch.com/story/fda-approves-imlygictm-talimogene-laherparepvec-as-first-oncolytic-viral-therapy-in-the-us-2015-10-27">$65,000 per patient</a> – and that doesn’t come close to topping the list of priciest biologic medications. The most expensive drug ever made recently <a href="https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm555613.htm">won approval</a> by the FDA. Brineura, a biweekly enzyme replacement therapy produced by BioMarin Pharmaceutical, delays the loss of walking in individuals with a rare genetic disorder. Its price tag? $27,000 per injection, or <a href="https://www.bloomberg.com/news/articles/2017-04-27/biomarin-prices-orphan-drug-at-702-000-promises-big-discounts">more than $700,000</a> for a full year’s treatment.</p>
<p>The steep prices of biologic drugs are alarming to many patients, physicians and researchers. In an effort to drive costs down, provisions of the Obama administration’s <a href="https://www.fda.gov/drugs/guidancecomplianceregulatoryinformation/ucm215089.htm">Affordable Care Act</a> accelerated the approval process for new biologics intended to compete with already approved medicines. Like generic drugs, so-called biosimilars are designed to be interchangeable with the biologic they seek to replace.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179475/original/file-20170724-24759-lk4sxj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Aryogen in Iran produces a biosimilar form of Blood Coagulation factor VII Novoseven called AryoSeven.</span>
<span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/File:Inside_Aryogen.jpg">Asemi</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Unlike generic versions of conventional drugs, however, biosimilar drugs are often only similar to – not identical with – their competition. This means these complex drugs still require lengthy and expensive trials of their own to make sure they’re effective and safe. Because of this, the Federal Trade Commission estimates that biosimilars may only produce an overall <a href="https://www.ftc.gov/sites/default/files/documents/reports/emerging-health-care-issues-follow-biologic-drug-competition-federal-trade-commission-report/p083901biologicsreport.pdf">10 to 30 percent discount</a> for patients.</p>
<p>Cost-cutting innovations in the biologic production pipeline are desperately needed. The FDA has <a href="https://doi.org/10.1038/ajg.2014.151">called on scientists and drug developers</a> to invent biosimilars that resemble FDA-approved medicines and to develop the tools needed to quickly demonstrate their safety.</p>
<p>As this promising class of drugs continues to grow in number and popularity, their lifesaving power will be limited if costs make them inaccessible to patients who need them.</p><img src="https://counter.theconversation.com/content/80258/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian Haydon does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Rather than being designed by chemists, this class of pharmaceuticals is produced by living cells. Here’s where they come from and how they work.Ian Haydon, Doctoral Student in Biochemistry, University of WashingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/814822017-07-24T21:27:10Z2017-07-24T21:27:10ZNew Zealand steamrolls Australia on the pharmaceutical paddock too<p>It’s a good thing for the baby boomers that young people have been locked out of the property market. If Gen X and Gen Y were allowed to fritter away their earnings on mortgage repayments, selfishly amassing their own wealth, they would have less money to subsidise pharmaceuticals for the baby boomers as they hit the outer years.</p>
<p>The Pharmaceutical Benefits Scheme (PBS), once a reasonably efficient beast which cost taxpayers $6.5 billion a year, is likely to surpass $11 billion this year. Most of it goes to Big Pharma, but just how much is hard to tell.</p>
<p>Transparency, from both government and industry, is poor. So it is that Australian taxpayers are held ransom by the power of the pharma lobby, its large political party donations, and the timidity of government to negotiate hard on behalf of its citizens.</p>
<p>With the Bledisloe Cup season almost upon us, it will not cheer Australian rugby supporters to hear that the Kiwis are trouncing us on the pharmaceutical benefits paddock too. Yes, <a href="https://grattan.edu.au/report/cutting-a-better-drug-deal/">we pay three times as much</a> as the Kiwis.</p>
<h2>Australia’s most costly drug revealed</h2>
<p>The cost of Australia’s most expensive drug was finally revealed over the weekend – not by government, and not by a drug company, but by an infectious diseases expert at an AIDS conference in Paris.</p>
<p>Professor Margaret Hellard of the Burnet Institute showed the listed price of Harvoni, the hepatitis C “blockbuster” drug, at US$5,799. The total taxpayer subsidy works out at $A59,079 for a standard 12-week treatment.</p>
<p>Looking at Hellard’s chart, the listed price for a 12-week course of Harvoni (branded sofosbuvir/ledipasvir) is US$91,589 in the US and US$900 in Egypt, where hep C infections run at 10%. Australia is the third-most affordable on the chart – after Egypt and India – but in South America prices remain at more than US$50,000.</p>
<p>Globally, access to this critical cure for hep C is simply unattainable in many poor countries where people are dying daily of the disease.</p>
<h2>R&D comes second to share buybacks</h2>
<p>From an Australian perspective, the immediate public policy issues are price, transparency and accountability. As a rich nation, Australia can still fund blockbuster drugs publicly, but growth in the PBS is unsustainable in the longer term and Big Pharma – heavily subsidised on one front and heavily avoiding tax on the other – is “gaming” government.</p>
<p>In its defence, industry contends the costs of research and development are high, but a study this month found the 18 drug companies listed on the S&P 500 Index spend more money buying back their own shares on Wall Street and paying dividends than they spend on R&D.</p>
<p>The trade-off between shareholders, taxpayers and patients is <a href="https://www.ineteconomics.org/research/research-papers/us-pharmas-financialized-business-model">out of whack</a>: US$516 billion spent on dividends and buy-backs versus US$465 billion spent on R&D over the ten years to 2015. </p>
<p>Gilead Sciences was a major culprit, splashing US$27 billion on buybacks and US$17 billion on research. Buybacks are a capital management initiative that manipulates a share price higher and therefore executive bonuses too. They do nothing for taxpayers and very little for people dying of a disease who can’t afford the cure.</p>
<p>Citing a share market research firm, The New York Times <a href="https://www.nytimes.com/2017/07/14/business/big-pharma-spends-on-share-buybacks-but-rd-not-so-much.html">reports</a> that some US$390 billion in share buybacks have been announced this year, US$13 billion more than at the same time in 2016.</p>
<p>Meanwhile, in Australia, the same Big Pharma companies operate effectively in the dark. A <a href="https://www.michaelwest.com.au/exposed-how-johnson-johnson-cut-its-risk-in-vaginal-mesh-lawsuit/">study by michaelwest.com.au</a> found most of them file Special Purpose financial reports, which allow them to conceal related party transactions with their associates offshore. </p>
<p>As regulators and the Australian Accounting Standards Board dither on closing financial reporting loopholes, many of these pharma giants have switched from the more meaningful General Purpose reports to Special Purpose reporting – all with the trademark connivance of the Big Four global accounting firms.</p>
<p>In the case of <a href="https://theconversation.com/gilead-and-the-billion-dollar-odyssey-80961">Gilead’s hep C cure</a>, it is a sorry state of affairs that basic information about a drug that is so critical to public health and so costly for taxpayers could be withheld for so long from medical professionals and patients.</p>
<p>The financial reporting needs fixing too. The companies fail to properly disclose how much money they make from government. They even fail basic reporting standards.</p>
<p>With enough patience it is possible to find information in the PBS on particular companies and how much they make, but the information is often old and does not drill down clearly to the particular PBS item.</p>
<p>Novartis tops the most recently available list, costing government almost A$800 million for its 3.5 million prescriptions sold. The figures that really stand out, however, are “government cost per script” of $21,572.75 per script for Gilead Sciences and $1,740.04 per Abbvie scipt.</p>
<p>According to Dr James Freeman, who started up a “buyers’ club” to help patients access hep C drug Harvoni at far lower prices, some 34,200 patients were treated in the first year out of about 250,000 infected: “So we only managed 14%.”</p>
<p>“In the context of a real capped price deal, I would have expected that the government would have spent $20 million to $50 million on a TV advertising blitz to maximise uptake,” said Freeman. “We see this for depression, asthma, haemochromatosis. We have not seen it for HCV drugs.”</p>
<hr>
<p><em>This column, co-published by The Conversation with <a href="http://www.michaelwest.com.au/">michaelwest.com.au</a>, is part of the <a href="https://theconversation.com/au/topics/democracy-futures">Democracy Futures</a> series, a <a href="http://sydneydemocracynetwork.org/democracy-futures/">joint global initiative</a> between The Conversation and the <a href="http://sydneydemocracynetwork.org/">Sydney Democracy Network</a>. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century.</em></p><img src="https://counter.theconversation.com/content/81482/count.gif" alt="The Conversation" width="1" height="1" />
<h4 class="border">Disclosure</h4><p class="fine-print"><em><span>Michael West was commissioned by GetUp! and the Tax Justice Network to investigate multinational companies operating in Australia and their tax affairs. </span></em></p>Drug prices in Australia are three times higher than in New Zealand. A key reason is the lack of transparency about taxpayer subsidies for Big Pharma and the companies’ own finances.Michael West, Adjunct Associate Professor, School of Social and Political Sciences, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/770902017-05-04T01:46:00Z2017-05-04T01:46:00ZNew drugs on the PBS: what they do and why we need them<figure><img src="https://images.theconversation.com/files/167678/original/file-20170503-21637-4oi5od.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Some of the notable additions to the PBS include drugs to treat eye and HIV infections, cystic fibrosis, multiple sclerosis, and cancer.</span> <span class="attribution"><span class="source">from shutterstock.com</span></span></figcaption></figure><p>This week, the government <a href="http://www.pbs.gov.au/browse/changes">announced the latest additions, amendments, and deletions</a> from the Pharmaceutical Benefits Scheme (PBS): the program through which essential medicines are subsidised for Australian patients. The new medicines on the scheme are reportedly worth <a href="http://www.greghunt.com.au/Media/MediaReleases/tabid/86/ID/4230/Making-310-million-of-new-vital-drugs-available-for-Australian-patients.aspx">A$310 million</a>.</p>
<p>Listing on the PBS is different to a drug being approved for sale by Australia’s drug regulator, the <a href="http://www.tga.gov.au">Therapeutic Goods Administration (TGA)</a>. Once approved by the TGA, it is available to patients and hospitals at the full price. It only becomes subsidised if later listed on the PBS. </p>
<p>Some of the notable additions to the list include drugs to treat eye infections, human immunodeficiency virus (HIV), cystic fibrosis, multiple sclerosis, cancer, and <a href="http://lungfoundation.com.au/wp-content/uploads/2012/06/Idiopathic-Pulmonary-Fibrosis.pdf">idiopathic pulmonary fibrosis</a> – a type of scarring in the lungs. Below is a list of seven most notable new additions to the scheme.</p>
<h2>1. Chloramphenicol eye drops (Chlorsig)</h2>
<ul>
<li><p><strong>Maximum cost to Aboriginal and Torres Strait Islanders: A$0-6.10</strong></p></li>
<li><p><strong>Maximum cost to other patients: A$20.11</strong></p></li>
</ul>
<p>Chloramphenicol is the generic name of an antibiotic drug used to treat eye infections. It has been <a href="http://www.pbs.gov.au/medicine/item/11112W">added to the PBS</a> with the restriction that it is only available to patients who identify as Aboriginal or Torres Strait Islander (ATSI). </p>
<p>The rate of eye infections, like <a href="https://theconversation.com/why-is-trachoma-blinding-aboriginal-children-when-mainstream-australia-eliminated-it-100-years-ago-63526">trachoma</a> (which leads to blindness), is three times higher for ATSI patients than for other Australians. The lower price for ATSI patients is because of extra funding under the government’s <a href="http://www.pbs.gov.au/info/publication/factsheets/closing-the-gap-pbs-co-payment-measure">Closing the Gap PBS co-payment</a> program.</p>
<h2>2. Ivacaftor (Kalydeco)</h2>
<ul>
<li><p><strong>Maximum price from the manufacturer: A$22,547.02</strong></p></li>
<li><p><strong>Maximum cost to the patient: A$38.80</strong></p></li>
</ul>
<p>Ivacaftor – <a href="https://www.ebs.tga.gov.au/servlet/xmlmillr6?dbid=ebs/PublicHTML/pdfStore.nsf&docid=E059E457A00C1B93CA2580D0003CA6C0&agid=(PrintDetailsPublic)&actionid=1">first approved by the TGA in September 2016</a> – is used to treat <a href="http://www.cysticfibrosis.org.au/all/learn/">cystic fibrosis</a>, a genetic disorder that affects the digestive system and lungs of patients. It causes a buildup of thick and sticky mucus in the airways. </p>
<p>There is no cure for cystis fibrosis, but <a href="http://www.kalydeco.com/">ivacaftor</a> acts by better regulating the flow of salts and water in and out of cells, which leads to less mucus buildup. </p>
<p>While <a href="https://www.cysticfibrosis.org.au/media/wysiwyg/CF-Australia/medical-documents/CFA_DataRegistryReport_2014_Final.pdf">around 3,300 people in Australia live with cystic fibrosis</a>, only around 10% of patients will benefit from the drug. This is because patients need to have a specific mutation in their DNA called <em>R117H</em> for the drug to be effective. </p>
<hr>
<p><em><strong>More information - <a href="https://theconversation.com/weekly-dose-kalydeco-the-drug-that-treats-the-cause-of-cystic-fibrosis-not-just-symptoms-76934">Weekly Dose: Kalydeco, the drug that treats the cause of cystic fibrosis, not just symptoms</a></strong></em></p>
<hr>
<h2>3. Blinatumomab (Blincyto)</h2>
<ul>
<li><p><strong>Maximum price from the manufacturer: A$61,975.54</strong></p></li>
<li><p><strong>Maximum cost to the patient: A$38.80</strong></p></li>
</ul>
<p><a href="http://www.pbs.gov.au/medicine/item/11115B-11116C-11117D-11118E-11119F-11120G">Blinatumomab</a> is a new type of immunotherapy – a treatment that <a href="https://theconversation.com/au/search?utf8=%E2%9C%93&q=immunotherapy+">empowers the body’s immune system</a> to fight diseases such as cancer.</p>
<p>The drug is approved for use to treat a specific subset of <a href="http://www.leukaemia.org.au/blood-cancers/leukaemias/acute-lymphoblastic-leukaemia-all">acute lymphoblastic leukaemias</a> (ALL). Around 350 Australians each year are diagnosed with some form of ALL, and it is the most common type of cancer in children.</p>
<p>Blinatumomab was first approved by the TGA in November 2015 but an application to list the medicine on the PBS that same year <a href="http://www.pbs.gov.au/industry/listing/elements/pbac-meetings/psd/2015-11/files/blinatumomab-psd-november-2015.pdf">was rejected</a>. It <a href="https://www.greghunt.com.au/Home/LatestNews/tabid/133/ID/4230/Making-310-million-of-new-vital-drugs-available-for-Australian-patients.aspx">has been reported</a> that the cost for patients before the PBS subsidy was A$127,700 per course of treatment. </p>
<h2>4. Fosaprepitant (Emend IV)</h2>
<ul>
<li><p><strong>Maximum price from the manufacturer: A$115.03</strong></p></li>
<li><p><strong>Maximum cost to the patient: A$38.80</strong></p></li>
</ul>
<p>This drug is used to help patients overcome the nausea and vomiting side-effects
associated with chemotherapy treatment. <a href="http://www.pbs.gov.au/medicine/item/11103J-11107N">Fosaprepitant</a> has been available for doctors to prescribe since 2011, when it was <a href="https://www.pbs.gov.au/pbs/industry/listing/elements/pbac-meetings/pbac-outcomes/2011-03/positive-recommendations">first recommended</a> to be put on the PBS.</p>
<h2>5. Emtricitabine</h2>
<ul>
<li><p><strong>Maximum price from the manufacturer: A$1,500 - $2,600 depending on the formulation</strong></p></li>
<li><p><strong>Maximum cost to the patient: A$38.80</strong></p></li>
</ul>
<p>Four <a href="http://www.pbs.gov.au/pbs/search?term=EMTRICITABINE&analyse=false&search-type=medicines">formulations of this drug</a> have been added to the PBS as part of a cocktail of medicines used to treat HIV infection. </p>
<p>Emtricitabine acts by stopping the HIV virus from copying itself into human cells. It was first <a href="https://www.ebs.tga.gov.au/servlet/xmlmillr6?dbid=ebs/PublicHTML/pdfStore.nsf&docid=5C59BB9C228068B0CA257FE8004216C7&agid=(PrintDetailsPublic)&actionid=1">approved by the TGA in 2005</a> and other formulations of the drug – such as it being <a href="http://www.pbs.gov.au/medicine/item/10347N">coupled with antiviral Tenofovir</a> under the brand name Truvada – have been listed on the PBS previously. In Australia, there are around <a href="http://www.hivmediaguide.org.au/hiv-in-australia/hiv-statistics-australia/">25,000 people living with HIV</a>.</p>
<hr>
<p><em><strong>More information: <a href="https://theconversation.com/weekly-dose-truvada-the-drug-that-can-prevent-hiv-infection-61525">Weekly Dose: Truvada, the drug that can prevent HIV infection</a></strong></em></p>
<hr>
<h2>6. Daclizumab (Zinbryta)</h2>
<ul>
<li><p><strong>Maximum price from the manufacturer: A$2,231</strong></p></li>
<li><p><strong>Maximum cost to the patient: A$38.80</strong></p></li>
</ul>
<p><a href="http://www.pbs.gov.au/medicine/item/11101G">Daclizumab</a> is used to treat <a href="https://www.msaustralia.org.au/what-ms">multiple sclerosis (MS)</a>, a condition that affects the nervous system and interferes with nerve impulses in the brain, spinal chord, and optic nerves (those responsible for vision). It was first <a href="https://www.ebs.tga.gov.au/servlet/xmlmillr6?dbid=ebs/PublicHTML/pdfStore.nsf&docid=CC481F65EA7BE336CA258060003CA91D&agid=(PrintDetailsPublic)&actionid=1">approved by the TGA in September 2016</a>. </p>
<p>While there is no cure for MS, this drug helps to stop infection-fighting blood cells called <a href="http://www.medicinenet.com/script/main/art.asp?articlekey=11300">T-cells</a> from getting into the brain. This protects the brain from swelling. There are currently around 24,000 Australians who live with MS.</p>
<h2>7. Nintedanib (Ofev)</h2>
<ul>
<li><p><strong>Maximum price from the manufacturer: A$3,385.48</strong></p></li>
<li><p><strong>Maximum cost to the patient: A$38.80</strong></p></li>
</ul>
<p><a href="http://www.pbs.gov.au/medicine/item/11100F-11106M">Nintedanib</a> was <a href="https://www.ebs.tga.gov.au/servlet/xmlmillr6?dbid=ebs/PublicHTML/pdfStore.nsf&docid=0AEB4B2429304039CA2580B2003CA221&agid=(PrintDetailsPublic)&actionid=1">approved by the TGA in September 2015</a>. It is used to treat <a href="http://lungfoundation.com.au/wp-content/uploads/2012/06/Idiopathic-Pulmonary-Fibrosis.pdf">idiopathic pulmonary fibrosis</a>, a condition that causes scarring in the lungs. The amount of scar disease builds up over time. While nintedanib does not cure patients, it provides relief by stopping the enzymes that help create the scarring, thus slowing the disease.</p>
<p>The condition is most prevalent in people over 60 years of age, and <a href="http://lungfoundation.com.au/wp-content/uploads/2012/06/Idiopathic-Pulmonary-Fibrosis.pdf">affects around 2,600 Australians</a>.</p><img src="https://counter.theconversation.com/content/77090/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Wheate in the past has received funding from the ACT Cancer Council, Tenovus Scotland, Medical Research Scotland, Scottish Crucible, and the Scottish Universities Life Sciences Alliance. He is affiliated with the Royal Australian Chemical Institute.</span></em></p>An independent expert provides his pick of the most notable drugs added to the PBS on May 1, 2017.Nial Wheate, Senior Lecturer in Pharmaceutics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/741442017-03-17T00:06:45Z2017-03-17T00:06:45ZSky-high drug prices for rare diseases show why Orphan Drug Act needs reform<figure><img src="https://images.theconversation.com/files/160595/original/image-20170313-9620-7duhkb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The FDA headquarters in Silver Spring, Maryland.</span> <span class="attribution"><span class="source">AP/Andrew Harnick</span></span></figcaption></figure><p>When <a href="https://www.wsj.com/articles/marathon-pharmaceuticals-to-charge-89-000-for-muscular-dystrophy-drug-1486738267">Marathon Pharmaceuticals</a> announced in February it would market a drug for treating Duchenne muscular dystrophy for US$89,000 a year, the negative reaction was so intense that the company immediately suspended the rollout. (On Thursday, March 16, Marathon announced it was selling the drug to PTC Therapuetics for US$140 million in cash and stock, plus a one-time payment of $50 million if sales reach a certain milestone).
Even the industry’s <a href="http://www.bizjournals.com/chicago/news/2017/02/17/89-000-drug-could-cost-marathon-pharma-its-place.html">trade group</a> cried foul.</p>
<p>A good part of the outrage stemmed from the fact that FDA approval of the drug simultaneously closed the door on <a href="http://www.bizjournals.com/chicago/news/2017/02/17/89-000-drug-could-cost-marathon-pharma-its-place.html">much cheaper imports</a>. Deflazacort, a steroid which Marathon wanted to market in the U.S. under the brand name Emflaza, has been sold abroad for decades. The cost to U.S. families who imported it was only <a href="http://www.bizjournals.com/chicago/news/2017/02/17/89-000-drug-could-cost-marathon-pharma-its-place.html">$1,000 to $1,600 a year</a>.</p>
<p>The outrage was intensified by the nature of the patients. Duchenne muscular dystrophy predominantly affects boys, depriving them of the ability to walk by ages seven to 15 and killing them in their late teens and 20’s. <a href="https://www.cdc.gov/ncbddd/musculardystrophy/data.html">It strikes about one in 7,500 males between the ages of five and 24.</a></p>
<p>The Marathon case is the latest example of what has gone wrong with the <a href="https://www.fda.gov/RegulatoryInformation/Legislation/SignificantAmendmentstotheFDCAct/OrphanDrugAct/">Orphan Drug Act (ODA)</a>, which was passed 34 years ago to promote development of drugs aimed at diseases that afflict small groups, typically under 200,000 people. Marathon sought and <a href="https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm540945.htm">won approval</a> for Emflaza under ODA provisions.</p>
<p>As health economists who study drug pricing, we see an opportunity for change.</p>
<h2>Even great ideas sometimes go awry</h2>
<p>The ODA contains a powerful inducement for pharmaceutical firms: New treatments for rare diseases earn <a href="https://www.fda.gov/downloads/drugs/developmentapprovalprocess/smallbusinessassistance/ucm447307.pdf">seven years of market exclusivity</a>, including protection from imports. That means the companies can price without fear of competition and sell to dependent populations. It also means patients with rare diseases have some hope that their conditions are not neglected.</p>
<p>However, the nature of drug development has changed. The number of requests for orphan designation <a href="https://docs.google.com/viewer?url=http%3A%2F%2Fwww.fda.gov%2Fdownloads%2FAboutFDA%2FReportsManualsForms%2FReports%2FBudgetReports%2FUCM488554.pdf">has quadrupled since 2000.</a> The result has been a boom in drug sales and profits. The average price of an orphan drug exceeds <a href="https://www.statista.com/statistics/373353/average-cost-for-orphan-drugs-per-patient-per-year/">$100,000 a year.</a> Orphan drugs now make up <a href="http://www.nature.com/nrd/journal/v11/n4/full/nrd3654.html">one in three drugs approved by the FDA.</a> Sales of orphan drugs rose 12 percent in 2016 to $114 billion, compared to a rise of <a href="https://www.statnews.com/pharmalot/2017/02/28/orphan-drugs-prices/">2.4 percent for all other branded drugs to $578 billion.</a></p>
<p>Some of the drugs developed under the ODA are lifesaving, and many are cost-effective. But over the years many other drugs, such as Emflaza, have won ODA status even if they are not new or represent a scientific breakthrough.</p>
<p>For example, a cheap off-patent drug approved by the FDA for one condition, but widely prescribed as an “off-label” treatment for an orphan disease, can be transformed into a big moneymaker. By putting the drug through clinical trials to document its safety and effectiveness, a pharmaceutical company can gain FDA approval for use on the disease. The accompanying seven years of monopoly status can mean large price hikes for a drug that was already in wide use.</p>
<p>Insurers are usually stuck with the bill, but – as should be clear to everyone by now – these costs get passed to consumers via higher premiums.</p>
<p>Even though Emflaza’s price tag is relatively small compared to many orphan drugs (Biogen introduced a <a href="http://www.xconomy.com/boston/2016/12/28/biogen-sets-750000-initial-price-for-first-ever-spinal-atrophy-drug/">$750,000 drug</a> to treat spinal muscular atrophy in December), it seemed to hit a nerve. In February, <a href="http://www.npr.org/sections/health-shots/2017/03/07/518980280/gop-senators-ask-gao-to-investigate-high-prices-for-orphan-drugs">Sen. Chuck Grassley (R-Iowa)</a>, the chairman of the Senate Judiciary Committee, announced that he will convene a formal inquiry into potential abuses of the Orphan Drug Act.</p>
<h2>What to do?</h2>
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<img alt="" src="https://images.theconversation.com/files/160600/original/image-20170313-9637-1so79hm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/160600/original/image-20170313-9637-1so79hm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/160600/original/image-20170313-9637-1so79hm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/160600/original/image-20170313-9637-1so79hm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/160600/original/image-20170313-9637-1so79hm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/160600/original/image-20170313-9637-1so79hm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/160600/original/image-20170313-9637-1so79hm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/many-white-drugs-pills-shapes-outside-170390432">from shutterstock.com</a></span>
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<p>The first reaction is to call for government price setting. But this is not just a public payer issue, and the government doesn’t set prices in the private insurance plans. </p>
<p>In addition, in some ways the ODA is doing what it was designed to do: Offer temporary monopolies as an incentive for drug discovery. The FDA could factor pricing into its decision-making, but this is a slippery slope for an agency that has never explicitly factored prices into review.</p>
<p>Something could be done, though. </p>
<p>On the access side, patients with these diseases are costly to society, but their care is valued. This means patients with rare diseases should have guaranteed access to high-risk insurance pools – an issue of some importance in the current Obamacare replacement debate – and these high-risk pools cannot skimp on orphan coverage. </p>
<p>On the pricing side, private insurers haven’t scrutinized these orphan products enough. Traditionally, it wasn’t worth the insurers’ time. While prices are high, the total costs are small when spread over the entire population, and the patient communities are vocal. (In the Duchenne example, <a href="http://www.cnbc.com/2017/02/13/reuters-america-update-1-marathon-pauses-duchenne-drug-launch-amid-price-outcry.html">only about 800 patients receive the drug currently</a>.)</p>
<p>But the world is changing. Advances in personalized medicine and genomics also demand change. We now face the prospect that more common treatments – like cancer vaccines – could be custom designed for each patient, and that these will be reflected in even more orphan applications. </p>
<p>Insurers need to hold the line with manufacturers, and make them accountable to offer <a href="http://healthaffairs.org/blog/2015/04/28/its-time-for-value-based-payment-in-oncology/">value-based prices for all products</a>, including orphan drugs. The FDA can help by insisting manufacturers collect rigorous and complete post-market surveillance data about how patients fare after taking orphans – across all payers, private and public. </p>
<p>We have the tools to deal with this problem. We just need to start using them.</p><img src="https://counter.theconversation.com/content/74144/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dana Goldman is a founder and owns equity in Precision Health Economics, a health care consultancy which provides services to the life sciences industry, including some companies with orphan drugs.</span></em></p><p class="fine-print"><em><span>Jay Bhattacharya does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Orphan Drug Act was enacted 34 years ago to encourage the development of drugs for rare diseases. Drug companies were guaranteed seven years of exclusivity. Then the rush was on to run up prices.Dana Goldman, Director, Leonard D. Schaeffer Center for Health Policy & Economics, University of Southern CaliforniaJay Bhattacharya, Professor of Medicine, Stanford UniversityLicensed as Creative Commons – attribution, no derivatives.