Pharma price reforms are badly needed


Well, folks, it looks like we're on the verge of getting a parcel of health insurance reforms pushed through Congress.
Health insurance reform isn't precisely health system reform, but it does represent meaningful change, and potentially more accountability for erring health plans. Providers will definitely be impacted by these changes as well, notably by pressures to use comparative effectiveness data, accept bundled payment schemes, deliver coordinated care and more.

That being said, where are pharmaceutical industry cost reforms in this picture? No, I'm not talking about tweaking away at the FDA's role in the process. I'm talking market and business model restructurings as significant as those facing health plans. After all, pharmaceutical costs are a major burden for health plans and government payers alike.

Industry advocates have suggested that having drug costs account for 7 to 8 percent of premiums is reasonable--but the question is, compared to what? The issue isn't just whether health plans can afford to pay right now, but whether it makes good sense to allow pharmaceutical companies to maintain their current aggressive pricing strategies. Yes, I know, I know, we're paying back their research costs. Still, there's other business models that don't require that the public to indirectly fund pharma's R&D budget, including a proposal by Rep. Dennis Kucinich that would finance pharma research through competing publicly-supported research centers.

Oddly enough, however, you're not hearing any talk about taming pharma costs, which have a significant impact on consumers' ability to care for themselves. Other than big pharma's nominal contribution to reform funding, in fact, the industry has escaped the process relatively unscathed. (Yes, I call $80 billion in concessions over 10 years "nominal" in contrast to what the industry could lose if real price reforms were enacted.)

So why hasn't the issue of drug costs become a central one in reform discussions? Well, lobbying is obviously part of the problem. The pharmaceutical industry has spent hundreds of millions of dollars in lobbying Congress. But health plans do a tremendous amount of lobbying, too.

A more serious problem may be that consumers have targeted health plans, not those who sell the meds, as their biggest problem with the system. Health plans' efforts to control their drug expenses get a lot of attention--who can afford co-pays for branded drugs these days?-- but consumers seldom focus on the ultimate costs of the drugs they need. And very few ever have contact with pharmas--out of sight, out of mind. Focusing on health plans was almost certainly a political calculation.

I'd submit that none of the other stakeholders in the equation have screamed loudly enough about the lack of pharmaceutical price regulation. I say, let's yell a bit. While it's far too late to make real changes, it never hurts to remind politicians that their work isn't done. - Anne

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