Lowering Cost and Increasing Access to Drugs Without Jeopardizing Innovation

Lessons From Insulin: Policy Prescriptions for Affordable Diabetes and Obesity Medications

Escalating insulin prices have prompted public scrutiny of the practices of drug manufacturers, pharmacy benefit managers, health insurers, and pharmacies involved in production and distribution of medications. As a result, a series of policies have been proposed or enacted to improve insulin affordability and foster greater equity in access. These policies have implications for other diabetes and obesity therapeutics. Recent legislation, at both the state and federal level, has capped insulin out-of-pocket payments for some patients. Other legislation has targeted drug manufacturers directly in requiring rebates on drugs with price increases beyond inflation rates, an approach that may restrain price hikes for existing medications. In addition, government negotiation of drug pricing, a contentious issue, has gained traction, with the Inflation Reduction Act of 2022 permitting limited negotiation for certain high expenditure drugs without generic or biosimilar competition, including some insulin products and other diabetes medications. However, concerns persist that this may inadvertently encourage higher launch prices for new medications. Addressing barriers to competition has also been a priority such as through increased enforcement against anticompetitive practices (e.g., "product hopping") and reduced regulatory requirements for biosimilar development and market entry. A novel approach involves public production, exemplified by California's CalRx program, which aims to provide biosimilar insulins at significantly reduced prices. Achieving affordable and equitable access to insulin and other diabetes and obesity medications requires a multifaceted approach, involving state and federal intervention, ongoing policy evaluation and refinement, and critical examination of corporate influences in health care.

Price Is Right: Exploring Prescription Drug Coverage Barriers for Irritable Bowel Syndrome Using Threshold Pricing Analysis

BACKGROUND

Prescription drug costs exert profound effects on commercial insurance coverage and access to effective therapy.

AIMS

We aimed to assess threshold pricing to achieve budget neutrality of FDA-approved drugs treating irritable bowel syndrome from an insurance perspective, based on cost-savings resulting in decreased healthcare utilization through effective disease management.

METHODS

We constructed a decision-analytic model from an insurance perspective to assess the budget impact of IBS prescription drugs under usual insurance coverage levels in practice: (1) unrestricted drug access or (2) step therapy in a primary care population of middle-age, care-seeking IBS patients. Budget-neutral drug prices were then calculated which resulted in $0 budget impact to insurers with a short-term, one-year time horizon.

RESULTS

If used according to FDA labeling, IBS-D drugs cost between $4778 and $16,844 per year and IBS-C drugs cost between $4319 and $4955 per year. These drug costs often exceed insurance expenditures of $6999 for IBS-D and $3929 for IBS-C if left untreated. Therefore, for drugs to have $0 budget impact to insurers, their prices would need to be discounted 36.7-74.2% for IBS-D drugs and 59.3-82.5% for IBS-C. IBS drugs are already priced to support step therapy "failing one of several common, inexpensive IBS treatments with a responder rate > 30-40%," reflecting the subpopulation with more severe disease and greater healthcare costs.

CONCLUSIONS

Broader prescription drug coverage for patients failing common, inexpensive IBS treatments to which at least 30-40% of patients would typically respond appears warranted to enable gastroenterologists to offer personalized approaches targeting specific mechanisms of this heterogeneous disease.

Pharmacologic, Dietary, and Psychological Treatments for Irritable Bowel Syndrome With Constipation: Cost Utility Analysis

Introduction. Irritable bowel syndrome (IBS) is the most common gastroenterology referral and one of the most common gastrointestinal complaints in primary care. We performed a cost-utility analysis of the most common treatments available in general practice for IBS with constipation (IBS-C), the most expensive IBS subtype. Methods. We developed a decision analytic model evaluating guideline-recommended and Food and Drug Administration-approved drugs, supplements, and dietary/psychological interventions. Model inputs were derived from "global symptom improvement" outcomes in systematic reviews of clinical trials. Costs were derived from national datasets. Analysis was performed with a 1-year time horizon from patient and payer perspectives. We analyzed a prototypical managed-care health plan with no cost-sharing to the patient. Results. From a payer perspective, global IBS treatments (including low FODMAP, cognitive behavioral therapy [CBT], neuromodulators), which are not specific to the IBS-C bowel subtype were less expensive than on-label prescription drug treatments. From a patient perspective, on-label prescription drug treatment with linaclotide was the least expensive treatment strategy. Drug prices and costs to manage untreated IBS-C were most important determinants of payer treatment preferences. Effects of treatment on missed work-days and need for repeated appointments to complete treatment were the most important determinants of treatment preference to patients. Discussion. Due mostly to prescription drug prices, neuromodulators, low FODMAP, and CBT appear cost-effective compared to on-label drug treatments from a payer perspective in cost-utility analysis. These findings may explain common treatment barriers in clinical practice.

A proposed taxonomy for population-level prescription use patterns

Recent and increasing discussion of prescription price transparency highlights the importance of defining, measuring and communicating prescription drug value. To help advance these goals, the authors propose a taxonomy of population-level prescription drug use patterns. The taxonomy assigns prescription use to one of five categories according to likely population-level health impact. The categories include effective, potentially discretionary, potentially harmful, wasteful, and lifestyle. The authors hope the proposed taxonomy will inform discussion of prescription drug value by providing estimates of population impact, especially the balance of anticipated benefit and harm.

Drug Reimbursement Regulation in 6 Peer Countries

The US has nearly 4.5% of the world's population but accounts for more than 40% of global drug spending. With the upcoming 2020 election, a top priority of many voters is to better control drug prices and reform the pharmaceutical market. In this Special Communication, the drug price mechanisms and government regulations used in 6 representative peer countries are evaluated: Australia, France, Germany, Norway, Switzerland, and the United Kingdom. Drug price regulation is compared with that currently used in the US. Eight key lessons from the regulations used in these countries and which elements are incorporated into the bills currently making their way through the US Congress are evaluated (2 from the US House of Representatives and 1 from the US Senate). None of these bills is as systemic or comprehensive in its drug pricing mechanisms and regulations as the schemes in the other countries.

Evaluation of the effectiveness of comprehensive drug price reform: a case study from Shihezi city in Western China

BACKGROUND

China carried out a comprehensive drug price reform (CDPR) in 2017 to control the growing expense of drug effectively and reduce the financial burden of inpatients. However, early studies in pilot regions found the heterogeneity in the effectiveness of CDPR from different regions and other negative effects. This study aimed to evaluate the effects of the reform on medical expenses, medical service utilisation and government financial reimbursement for inpatients in economically weaker regions.

METHODS

Shihezi was selected as the sample city, and 238,620 inpatients, who were covered by basic medical insurance (BMI) and had complete information from September 2016 to August 2018 in public hospitals, were extracted by cluster sampling. An interrupted series design was used to compare the changing trends in medical expenses, medical service utilisation and reimbursement of BMI for inpatients before and after the reform.

RESULTS

Compared with the baseline trends before the CDPR, those after the CDPR were observed with decreased per capita hospitalisation expenses (HE) by ¥301.9 per month (p < 0.001), decreased drug expense (DE) ratio at a rate of 0.32% per month (p < 0.05) and increased ratio of diagnosis and treatment expenses (DTE) at a rate of 0.25% per month (p < 0.01). The number of inpatients in secondary and tertiary hospitals declined by 458 (p < 0.001) and 257 (p < 0.05) per month, respectively. The BMI reimbursement in tertiary hospitals decreased by ¥254.7 per month (p < 0.001).

CONCLUSION

The CDPR controlled the increase in medical expenses effectively and adjusted its structure reasonably. However, it also reduced the medical service utilisation of inpatients in secondary and tertiary hospitals and financial reimbursement for inpatients in tertiary hospitals.

Policy and Practice Innovations to Improve Prescribing of Psychoactive Medications for Children

Psychoactive medications are the most expensive and fastest-growing class of pharmaceutical agents for children. The cost, side effects, and unprecedented growth rate at which these drugs are prescribed have raised alarms from health care clinicians, patient advocates, and agencies about the appropriateness of how these drugs are distributed to parents and their children. This article examines current prescribing of three classes of psychoactive drugs-stimulants, antidepressants, and antipsychotics-and efforts to improve pediatric prescribing of these agents. Federal policy efforts to curb questionable prescribing of psychoactive medications to children have focused particularly on oversight of antipsychotic use among foster care children. The article reviews system-level interventions, including delivery system enhancements, which increase availability of alternatives to medication treatments, employ electronic medical record reminders, and increase cross-sector care coordination; clinician prescribing enhancements, which disseminate best-practice guidelines, create quality and learning collaboratives, and offer "second opinion" psychiatric consultations; and prescriber monitoring programs, which include retrospective review and prospective monitoring of physicians' prescribing to identify patterns suggestive of inappropriate prescribing. Potential interventions to deter inappropriate pediatric prescribing are briefly described, such as transparency in drug prices and incentives among insurers, public agencies, and pharmacy benefit managers; value-based purchasing, specifically value-based payment for medications; and preventive interventions, such as parent training.

Precision Dosing Priority Criteria: Drug, Disease, and Patient Population Variables

The administered dose of a drug modulates whether patients will experience optimal effectiveness, toxicity including death, or no effect at all. Dosing is particularly important for diseases and/or drugs where the drug can decrease severe morbidity or prolong life. Likewise, dosing is important where the drug can cause death or severe morbidity. Since we believe there are many examples where more precise dosing could benefit patients, it is worthwhile to consider how to prioritize drug-disease targets. One key consideration is the quality of information available from which more precise dosing recommendations can be constructed. When a new more precise dosing scheme is created and differs significantly from the approved label, it is important to consider the level of proof necessary to either change the label and/or change clinical practice. The cost and effort needed to provide this proof should also be considered in prioritizing drug-disease precision dosing targets. Although precision dosing is being promoted and has great promise, it is underutilized in many drugs and disease states. Therefore, we believe it is important to consider how more precise dosing is going to be delivered to high priority patients in a timely manner. If better dosing schemes do not change clinical practice resulting in better patient outcomes, then what is the use? This review paper discusses variables to consider when prioritizing precision dosing candidates while highlighting key examples of precision dosing that have been successfully used to improve patient care.

Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies

IMPORTANCE

Understanding the profitability of pharmaceutical companies is essential to formulating evidence-based policies to reduce drug costs while maintaining the industry's ability to innovate and provide essential medicines.

OBJECTIVE

To compare the profitability of large pharmaceutical companies with other large companies.

DESIGN, SETTING, AND PARTICIPANTS

This cross-sectional study compared the annual profits of 35 large pharmaceutical companies with 357 companies in the S&P 500 Index from 2000 to 2018 using information from annual financial reports. A statistically significant differential profit margin favoring pharmaceutical companies was evidence of greater profitability.

EXPOSURES

Large pharmaceutical vs nonpharmaceutical companies.

MAIN OUTCOMES AND MEASURES

The main outcomes were revenue and 3 measures of annual profit: gross profit (revenue minus the cost of goods sold); earnings before interest, taxes, depreciation, and amortization (EBITDA; pretax profit from core business activities); and net income, also referred to as earnings (difference between all revenues and expenses). Profit measures are described as cumulative for all companies from 2000 to 2018 or annual profit as a fraction of revenue (margin).

RESULTS

From 2000 to 2018, 35 large pharmaceutical companies reported cumulative revenue of $11.5 trillion, gross profit of $8.6 trillion, EBITDA of $3.7 trillion, and net income of $1.9 trillion, while 357 S&P 500 companies reported cumulative revenue of $130.5 trillion, gross profit of $42.1 trillion, EBITDA of $22.8 trillion, and net income of $9.4 trillion. In bivariable regression models, the median annual profit margins of pharmaceutical companies were significantly greater than those of S&P 500 companies (gross profit margin: 76.5% vs 37.4%; difference, 39.1% [95% CI, 32.5%-45.7%]; P < .001; EBITDA margin: 29.4% vs 19%; difference, 10.4% [95% CI, 7.1%-13.7%]; P < .001; net income margin: 13.8% vs 7.7%; difference, 6.1% [95% CI, 2.5%-9.7%]; P < .001). The differences were smaller in regression models controlling for company size and year and when considering only companies reporting research and development expense (gross profit margin: difference, 30.5% [95% CI, 20.9%-40.1%]; P < .001; EBITDA margin: difference, 9.2% [95% CI, 5.2%-13.2%]; P < .001; net income margin: difference, 3.6% [95% CI, 0.011%-7.2%]; P = .05).

CONCLUSIONS AND RELEVANCE

From 2000 to 2018, the profitability of large pharmaceutical companies was significantly greater than other large, public companies, but the difference was less pronounced when considering company size, year, or research and development expense. Data on the profitability of large pharmaceutical companies may be relevant to formulating evidence-based policies to make medicines more affordable.

Waste in the US Health Care System: Estimated Costs and Potential for Savings

IMPORTANCE

The United States spends more on health care than any other country, with costs approaching 18% of the gross domestic product (GDP). Prior studies estimated that approximately 30% of health care spending may be considered waste. Despite efforts to reduce overtreatment, improve care, and address overpayment, it is likely that substantial waste in US health care spending remains.

OBJECTIVES

To estimate current levels of waste in the US health care system in 6 previously developed domains and to report estimates of potential savings for each domain.

EVIDENCE

A search of peer-reviewed and "gray" literature from January 2012 to May 2019 focused on the 6 waste domains previously identified by the Institute of Medicine and Berwick and Hackbarth: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity. For each domain, available estimates of waste-related costs and data from interventions shown to reduce waste-related costs were recorded, converted to annual estimates in 2019 dollars for national populations when necessary, and combined into ranges or summed as appropriate.

FINDINGS

The review yielded 71 estimates from 54 unique peer-reviewed publications, government-based reports, and reports from the gray literature. Computations yielded the following estimated ranges of total annual cost of waste: failure of care delivery, $102.4 billion to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion; fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion. The estimated annual savings from measures to eliminate waste were as follows: failure of care delivery, $44.4 billion to $97.3 billion; failure of care coordination, $29.6 billion to $38.2 billion; overtreatment or low-value care, $12.8 billion to $28.6 billion; pricing failure, $81.4 billion to $91.2 billion; and fraud and abuse, $22.8 billion to $30.8 billion. No studies were identified that focused on interventions targeting administrative complexity. The estimated total annual costs of waste were $760 billion to $935 billion and savings from interventions that address waste were $191 billion to $286 billion.

CONCLUSIONS AND RELEVANCE

In this review based on 6 previously identified domains of health care waste, the estimated cost of waste in the US health care system ranged from $760 billion to $935 billion, accounting for approximately 25% of total health care spending, and the projected potential savings from interventions that reduce waste, excluding savings from administrative complexity, ranged from $191 billion to $286 billion, representing a potential 25% reduction in the total cost of waste. Implementation of effective measures to eliminate waste represents an opportunity reduce the continued increases in US health care expenditures.

An Ethical Analysis of Pharmacy Benefit Manager (PBM) Practices

The high costs associated with pharmaceuticals and the accompanying stakeholders are being closely evaluated in the search for solutions. As a major stakeholder in the U.S. pharmaceutical market, the practices of pharmacy benefit manager (PBM) organizations have been under increased scrutiny. Examples of controversial practices have included incentives driving formulary status and prohibiting pharmacists from disclosing information on lower-cost prescription alternatives. Ethical investigations have been largely omitted within the debate on the responsibilities of these organizations in the health care system. Ethical analysis of organizational practices is justified based on the potential impact during health care delivery. The objective of this study was to analyze several specific PBM practices using multiple ethical decision-making models to determine their ethical nature. This study systematically applied multiple ethical decision-making models and codes of ethics to a variety of practices associated with PBM-related dilemmas encountered in the pharmaceutical environment. The assessed scenarios resulted in mixed outcomes. PBM practices were both ethical and unethical depending on the applied ethical model. Despite variation across applied models, some practices were predominately ethical or unethical. The point of sale rebates were consistently determined as ethical, whereas market consolidation, gag clauses, and fluctuation of pharmacy reimbursements were all predominantly determined as unethical. The application of using provider codes of ethics created additional comparison and also contained mixed findings. This study provided a unique assessment of PBM practices and provides context from a variety of ethical perspectives. To the knowledge of the authors, these perspectives have not been previously applied to PBM practices in the literature. The application of ethical decision-making models offers a unique context to current health care dilemmas. It is important to analyze health care dilemmas using ethics-based frameworks to contribute solutions addressing complexities and values of all stakeholders in the health care environment.