Drugs and coins Is all thepolitical fury surrounding drug prices merely the act ofpoliticians and executives warming themselves against a chilly windof public outrage. (Photo: Shutterstock)

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Elected officials claim to be putting Big Pharma's feet to the fire as they pursue a multi-prongedcampaign to rein in runaway (and highly unpredictable) prescriptiondrug prices.

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But some of those observing these investigations wonder: Areboth the executives summoned to testify and the politicians merelywarming themselves against a chilly wind of public outrage?

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If intentions are cloudy, the focus of government regulation isnot. At the state and federal level, politicians are targeting:

  • Rebates provided by pharmacy benefit managers
  • Price fluctuations for the same drug
  • Patent lengths
  • An overall lack of transparency about how prices are setand where the money goes

The pols and Big Pharma find themselves in a tough spot aspublic pressure forces deeper digging into drug pricing policies.For years, Big Pharma has been dumping millions into the campaignchests of Democrats, Republicans and Independents, at the state andfederal level. But the Obama Administration, with its health carereform act, effectively released from its bottle the genie ofprescription drug gouging. Now a much better informed voting publicwants action from its legislators. And what better way to respondthat lengthy Congressional and state legislative hearings?

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One can easily see that the public is far wiser today about thelack of guidelines (and scruples?) for setting prices. Surveys nowshow members of the general public can respond thoughtfully toquestions about the pharmaceutical industry. A Kaiser Family Foundation survey found thateight in 10 respondents believe the prices they pay for drugs are“unreasonable.” Three in 10 said they stopped taking their meds dueto cost. More than half the respondents to a Maine survey said theywere very or somewhat concerned about drug prices. Other surveyquestions revealed a deep understanding of drug companies practicesthat lead to higher prices. And considerable research underscoresthe public's expectation that their elected officials do somethingabout it.

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Recent hearings in Washington, D. C., and Augusta, Maine, offerinsights into where legislators think they can affect the drugpricing policies and practices of the major pharmaceuticalplayers.

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Drugmakers under federal scrutiny

In the nation's capital, U.S. Senate Finance Committee ChairmanChuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Oregon) areabout to host their third hearing this year on drug pricing. Theyhave been examining drug development costs, the effects of rebateson prices, the lack of transparency the industry exhibits whendiscussing and disclosing pricing matters, and other pieces of theprescription drug chain that are shrouded in secrecy, rife withinconsistencies, and are difficult for consumers to comprehend.

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In February, they took testimony from a group of pharmaceuticalcompany executives, probing them (respectfully) on how prices areset, what the effects of rebates have on prices, and why prices canfluctuate for the same drugs. The execs tended to throw thepharmacy benefit managers (PBMs) under the bus, claiming at onepoint they were to blame for unnecessary increases andfluctuations.

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Up next: the PBMs themselves, called to testify before thecommittee April 3. In their summoning letter to representatives ofCigna Corporation, CVS Caremark and CVS Health Corporation, HumanaInc., OptumRx and Prime Therapeutics LLC, Grassley and Wyden said:“Middlemen in the health care industry owe patients and taxpayersan explanation of their role. There's far too much bureaucracy andtoo little transparency getting in the way of affordable, qualityhealth care. … Witnesses from these companies should come preparedto provide real information and discuss real solutions.”

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And with that, the letter required seven pages to list thequestions to be asked and the information about price setting to beproduced by those testifying. The topic will be a narrow one:insulin pricing. The drug has been one of themost susceptible to wild price swings, and the senators want toknow why.

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The Maine event

In Augusta, the Maine legislature has been among the busiestwhen it comes to churning out bills designed to address drugprices. In mid-March, Maine Democrats in the state Senate unveileda package of bills to address price hikes and inconsistencies. Themajor outcome appears to be the Dems' proposal to create aPrescription Drug Affordability Board that would establish paymentrates that “would apply to purchasers throughout the health caresystem” and require Big Pharma to justify “excessively expensive”prescription drug prices. The board would set the definition of“excessively.”

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Other states have taken steps in similar directions. Vermont'selected officials were the first to ratify a law permitting theimportation of drugs from foreign countries. (The state law needs afederal waiver to become effective.) Maine passed a prescriptiondrug transparency law last year, and the California legislature isconsidering a similar bill. These require manufacturers to producelists of drugs and their current prices; California's would requirea 60-day notice prior to a price increase.

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Action at the state level is likely to produce speedier resultsthan at the federal level, says Ann Woloson, executive director ofConsumers for Affordable Health Care, Augusta, Maine.

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“States, Maine in particular, have a long history as serving ascatalysts for change, particularly in the area of health care,”Woloson says. “Maine, for example, created a health plan in 2005which became a model for Massachusetts which now has one of thelowest, if not the lowest uninsured rates in the nation.” Whenstates create a model in this way, other states can adopt andrevise it rather than starting from scratch.

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Woloson acknowledges crafting such laws at the federal level ismore difficult, given the politics of the situation. But, she says,if Congress picks its battle thoughtfully, it can begin to chipaway at the current pricing system.

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“There are policy makers who are sincere in their quest to doso, and one easy place they could start would be to allow theprices the U.S. pays for drugs purchased under Medicare Part D tobe negotiated,” she says.

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She also believes public outrage over drug pricing won'trecede.

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“The pressure is mounting and policy makers are talking moreabout doing something, as are the drug companies,” she says. “Theproblem is they are just nibbling around the edges or not takingthe real steps necessary to change the situation.”

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But many in the broker community are skeptical that Congresswill ever move beyond the “nibbling around” phase. Zach Jones,senior sales executive at ScriptSource, speaks for many when hesays, “The way the politicians work to appease the people is tobring in the Big Pharma people [to public hearings] and have themtalk about things they could do to control prices. And that's allthey do, is talk about it.”

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Add Gary Becker, founder and CEO at ScriptSource: “You have BigPharma … putting in office the people who make these decisions. Thegovernment is walking a fine line: 'Do we support the people whoput us in office, or our constituents, who want us to try newthings?' How do they respond to the demand and calm people downwithout interfering with Big Pharma's process?”

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Dan Cook

Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.