By Dave Andrusko
Almost single-handedly, over decades, NRLC has opposed “cost-cutting” measures that would likely have the effect of rationing care in general and/or limiting access to life-saving medication, in particular. Nowhere is that pressure to reduce costs today more intense than lowering the cost of prescription drugs.
This is why NRLC has closely examined a proposed rule change to Medicare Part D drug coverage, specifically its implications on limiting access to lifesaving drugs through potential use of drug price controls. *
According to the proposed rule, Medicare could now “exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period.” NRLC, of course, understands the desire to reduce drug costs for the Medicare program. But we believe that the proposed rules changes to Medicare Part D amount to price controls which likely will both deter drug innovation and reduce access to life-saving medication.
To understand why price controls limit access to life-saving drugs requires a few words about the economics of bringing drugs to market.
Research into and the development of new drugs is financed by investors. The truth is many promising leads fail to work out and never make it to market. In a word, investment in pharmaceutical development is risky.
And this is even more so of late. According to a 2018 ongoing analysis conducted by Deloitte, returns on research and development “have declined to 1.9 percent, down from 10.1 percent in 2010—the lowest level in nine years…Returns have been impacted by the growing cost of bringing a drug to market which now stands at $2,168 million—almost double the $1,188 million recorded in 2010.”
Given the high odds against any given potential drug ever getting to the market and then actually making money, only the possibility of that high rate of return can induce investors to invest. Put another way, the high research costs of the many drugs that fail to make it to market must be covered by the profit made on the few drugs that are successful, or the drug company will no longer continue to innovate.
Now, back to the proposed Medicare Part D drug coverage change.
Medicare has long-provided a prescription Part D drug benefit. The proposed Part D rule would not eliminate any of the six protected classes (HIV, mental illness, cancer, epilepsy, and for those undergoing organ transplantation). But it will (as noted above) “exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period.”
The proposed rule would make significant changes to the program that could harm a Medicare recipient’s access to medically-appropriate therapies by requiring “step therapy.”
Step Therapy requires that a patient tries a less-expensive medication before the drug plan will pay for another drug that his or her physician may have originally prescribed. NRLC’s central concern is that the new step therapy guidelines can result in an approach that deters physicians from providing the most effective life-preserving treatment for particular patients.
Who would create these guidelines? How would these guidelines take into account a person’s age, disability, or terminal illness in a way that did not discriminate against these qualities? What would the consequence be for a doctor who felt that due to the particular nature of his patients failed to use step therapy?
Under step therapy, patients are forced to first try older, cheaper, and potentially less effective drugs before being able to receive the newer, but more expensive drug their physician believes is best for them. To put it bluntly, step therapy can cost lives. A cancer or HIV patient may not have the time left to be forced to try older and less effective drugs first.
To come full circle, it is a simple fact that price increases for health care have consistently outpaced the “average” rate of inflation across the economy for a variety of reasons, among which is the inherent labor intensiveness of the health care sector. It is neither realistic nor just to tie limits on health care spending, which must reflect inflation in the health care sector, to a measure of inflation that is less than the real rate of medical inflation.
While we can understand the need to bring drug costs down for our seniors in the Medicare program, the proposed rules risk deterring innovation and could also reduce access to existing life-saving medication.
*Here is a concise definition of Medicare Part D. It is “simply insurance for your medication needs. You pay a monthly premium to an insurance carrier for your Part D plan. In return, you use the insurance carrier’s network of pharmacies to purchase your prescription medications.”