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Rx DRUG PRICES COULD RAISE PATIENTS' HEALTH CARE COSTS INDIRECTLY

Executive Summary

Rx DRUG PRICES COULD RAISE PATIENTS' HEALTH CARE COSTS INDIRECTLY through higher insurance premiums under the Clinton Administration's health care reform proposal, a summary of the plan's pharmaceutical pricing provisions prepared by Senate Special Committee on Aging staffers concludes. The analysis was revised from an earlier version and circulated on Capitol Hill by Chairman Pryor (D-Ark.) Oct. 18. Although the White House proposal limits beneficiaries' out- of-pocket expenditures on pharmaceuticals and other health care services, the analysis states, "the prices of new drugs are very important to consumers and families." Beneficiaries "will still pay a percentage of the costs of drugs under some plans," and "increases in total health care spending as a result of higher new medication prices will ultimately result in higher insurance premiums for employers and consumers," the document maintains. In an implicit defense of the Clinton plan's proposal for a breakthrough drug committee, the analysis maintains that, despite stop-loss limits, now drug prices remain "important" to private and public health care plans. New drug prices "in the recent past have been and will continue to be potentially financially devastating for plans of all sizes," the summary states. "Plans will have little bargaining power or leverage over manufacturers' charges for these new drugs, especially those drugs that have no close therapeutic competitors on the market." In a "Dear Colleague" letter accompanying the summary, Pryor explained that the revision was needed because a calculation of beneficiaries' drug expenses "failed to take into account the proposed annual out-of-pocket expenditure limits ($1,500 per person and $3,000 per family for private health insurance plans; $1,000 for Medicare beneficiaries)." Out-of-pocket caps "may be higher" in final legislation than those currently provided in the White House proposal, Pryor noted. "But at this point both individuals and families would be protected against the high costs of prescription medications." In his original analysis, circulated Oct. 1, Pryor said covered patients will pay a percentage of drug costs under some plans. Patient cost-sharing of high-priced drugs can be expensive, he noted, citing as an example Genzyme's Ceredase, 20% of whose annual cost would reach $28,000. Genzyme wrote to the senator Oct. 4 to point out that the stop-loss provisions in the health reform proposal would cap patients' out-of-pocket expenditures for all health care, including drugs, at $1,000-$1,500, depending on the plan ("The Pink Sheet" Oct. 4, p. 4 and Oct. 11, p. 8). Pryor announced a hearing scheduled for Nov. 16 before his Senate Special Committee on Aging to examine the extent to which competition contains prices of breakthrough products. "I am not convinced that market forces have helped to contain the price of the Gaucher disease treatment Ceredase, the AIDS drug Foscavir or the [multiple sclerosis] treatment Betaseron, all important breakthrough therapies for which there are no competitors," Pryor said. Ranking Republican William Cohen (R- Maine) added that "recent merger and acquisition trends in the industry pose potential problems for the consumer" and price competition. The senator congratulated Genentech for offering to meet his mid-September challenge to industry not to raise the price of any of its prescription drug products faster than inflation. In an Oct. 19 statement on the Senate floor, Pryor said "only one drug manufacturer has even so much as responded to my" voluntary price containment proposal. Genentech "indicated in a letter to me that they are willing to pledge for the next three years to maintain the list prices of each of [its] marketed products so that future price increases, if any, are at or below the Consumer Price Index," he said. Pryor added that he would update the Senate in a month as to whether any other companies agree to his proposal. In a Sept. 15 Senate floor speech, the Arkansas Democrat announced his proposal that all manufacturers voluntarily limit price increases for every drug product to inflation. He expressed concern that voluntary price control pledges have been made by only 17 companies and that those pledges involve average prices, allowing for individual, frequently prescribed products to rise faster than inflation. In an Oct. 11 letter to Pryor, Genentech President & CEO Kirk Raab said his company would meet the senator's challenge as long as government price controls are not imposed on the industry ("The Pink Sheet" Oct. 18, T&G-3 and Sept. 20, p. 17).
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