WWL>Topics>>3-9 6:15am Tommy, why are prescription drug costs so high?

3-9 6:15am Tommy, why are prescription drug costs so high?

Mar 9, 2017|

Tommy talks to David Howard, Professor in the Dept. of Health Policy and Management at Emory University, about what drives up the cost of prescription drugs.

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Automatically Generated Transcript (may not be 100% accurate)

David Howard joins us right now professor and department of health policy and management and Emory University mornings there. Are Harry I'm doing well thank you Ian I think you've taken a timeless. President trump met with representatives Elijah Cummings and Peter Welch and John's top skins Hopkins. Hopkins president doctor redundant Miller. I about drug pricing and it's hard to believe Elijah Cummings and Donald Trump. Putting everything aside and just you know had been an up and talk about drug prices but apparently that's what happened. Dash or that it has been an issue that prompt this focused on. Even get going docket is campaign which is kind of an unusual issue for Republicans to harp on Republicans to generally. You know but against any type of price controls for prescription drugs they wanted to. Drug companies to have fairly free rein to set their prices in the government to take a hands off approach in terms of negotiating lower prices. So why the difference I do is take his bag Intel's old news story professor if you will about. Drug's development of new ones patents. Why it's so much cheaper in Canada than it is here and other countries etc. please if you can. Terse said that a number of different you know drug market their drugs. They're generic drugs. And there are the competition competition has worked pretty well the few notable exceptions we've heard about instances where there's only one generic manufacturer. Accompanied buys the rights to that drug in chalks up the price but that's really the exception to the rule. On their also branded drugs swears there's only. Can go back for sang in church so how can they. Buy up the rights suited generic. Draw against somebody else is conserved Reagan won and and did cut their price. Chart may be right to a that the wrong word or the wrong word they've brought out the manufacturing plant. And when you buy generic drug also apply kind of the FDA licensed to make it I guess that's I guess I was getting out. But yes certainly on the. I'm just I guess I'm asking and go slow is nominated doctor but it just. Yeah you've gone from something that you can exclusively make. Do the patent expires and anybody can make this medicine but then we're gone back to medicine and only one person makes is that it. Right so that has happened in some instances and strange. Well exactly although again to you when that hasn't happened often times there. Have been new companies that has started that it entered the market and did down prices. Says he give it time that situation will usually resolve itself. So. In terms of developing a new drug either in Canada or here. Or just it did doesn't matter where the drug is developed in how do why the price differential and countries that's what confuses me. Church nested there are plenty of drugs that are marketed in the United States with very high prices that were developed in Japan and ops which landed other countries. In other countries they are much more aggressive about negotiating lower drug prices. In some cases they would refuse to cover drugs altogether I think not to really important because in the US. If the drug is approved by the Food and Drug Administration which does not consider the price of the drug. That it automatically covered by Medicare. And it virtually automatically covered by private ventures. That's not generally true and other countries and to. Price of timing in Iraq for second at the price that the drug manufactures says is the prize non negotiable pretty much. Market. And they determinant Chrysler as saying well. Oh we have someone to money invested in research and develop Ment in we have trials and it's anomalies were the first time and only idiots do this cumbersome. Cumbersome rather FDA approval process some buying on to something here. Well about how they justify prices but that's not how it works in practice I mean in reality date that this by the time the drug is approved and by the time they have to set the price that is called sorority. Distant history and look forward and say you know what price can recharge its gonna. Make the largest returns for our shareholders. Don't bail also say well we need to know is just about return or do they almost like. Returned earnings things there retained earnings thing where they say you know what we need money aside for the next drug that we develop. Well there's always some of that that you know even then I think they're looking to face that the that price that maximizes profits it's as simple as that. On the not always been easy calculation that. Indeed and they do you take into account the fact that they that the price really high it may engender a backlash from congress or patient advocacy groups. Really they're not I think though that the wrong way to think about it is that there trying to fund future research and development. I got you so. When he comes to I think we've kind of talked about the way drug prices are. Established by a in the companies and the big bill I guess they give Medicare the price right is that it and that's what. Medicare reimburses or they say okay no medicine. A right now the pulpit that private companies that provide prescription drug entrant in this Medicare beneficiaries do you have leeway to engage in a little bit of negotiation. When there are multiple drugs that can treat. The condition and they work it in and it they're basically the same even though they're different chemical activities. So for example in the case of diabetes there a lot of different drugs to treat diabetes. And in some cases companies can say listen if you don't give us a price break we're gonna make patients pay higher co payments if they get your drug. That they can use that is tool to bargain down prices and a deal. That's and other types of can't markets for drugs like cancer drugs there's very little negotiation mechanism on. So when it comes to canonized today get drug called les door for blood medicine it's. Go on generic in the last couple weeks. Q what was the price. For something like that in candidacy if it if the patent is. In place in the United States. They pay less in Canada or the company is willing to pay sell it for less in Canada because. Of restrictions by the government or one. There arson cases where they're now price differences but not from boyhood drug particularly that yeah Canada. And other countries in a more willing to say if you don't give us a price disk now we're going to exclude your drug of make it difficult for patients to get. So they're better negotiators is that isn't that simple listening. Well means not just. It being a better negotiator it's. Being able to use it having the threat of exclusions may have to sit across from the negotiating table from the drug company. Is there a lesson we want a better price that it ended the day we're gonna cover your drugs. It's hard to really exhausted the price that count and other thing to keep in mind is that. As consumers we see kind of the top line price of the pharmacy. But companies can do is substantial discounts in the form of and it after the fact payments between. Drug companies and insurers and those payments. Don't that it hoped consumers by lower premiums. But they don't help patient to actually take the drugs into the dot important for members well those types of discount. Are it's kind of an opaque system we don't really know how much money is at stake they negotiated in secret. That in some cases discounts can be substantial. You'd you sum up her insurance company because I would think if you employed 20000 on unemployed in York. Morning 30000 people around the country you would have a little bit of leverage in you insane and I tell you what will give via. X amount it is for the drug gore. If nucleus not wheeled and dog will would that do then put the onus on the patient to pay for hi is there anyway. They might say you know the drug company might signature company looked in the price is. Five dollar per pill for every one okay. But it ended the year were gonna look and see how many of your patients to destruct. And we will send you a rebate equal to 20% of the price of the draw would have been duke cut you could be China. And the insurance company and can use that to cut premiums or whatever they want. That patients don't see patients on the drugs still pay the top line price. If you added it may mean guess or estimate the how big the slice of the pie was a what percentage of health cost. Drug costs are today. Make up in the United States I am asking they clumsily but it. Is it 50% of the price of health care due to the cost of drugs 1060. Or. Probably between fifteen and 20%. On the road really the bulk of health care cost her her attributable to the hospital care. And then physicians' services. So how do you fixes and if being Tommy in a minute would what would the president and Elijah Cummings and now of these people to do. Well known as quite sure exactly where trump is going with that's Medicare already negotiates prices for outpatient prescription drugs. They could do more for. Injectable drug seizure drug he goes to get at this admissions office. So there might be some opportunities there. But otherwise there RD a lot of negotiations they can align its hard to see how they can really lower prices much more without. Denying patient's treatment without being willing to say we're not gonna cover this drug. Kenya and they don't mean and an actor Iran Cervetti gets a news but where where do what is up part. Medicare part. Freddie that the government can't negotiate with drug companies directly however. Private. Medicare beneficiaries get. Prescription drug coverage through private insurance companies that contract with the government. And those private insurance companies are free to negotiate on behalf of the government that they might not have as much negotiating powers to government would itself. But they're still pleased to try to obtain lower prices. Why knowing him and he traveled seems pretty simple Tommy says sarcastically thanked. Or what it is professor I'm glad you came on thank you know we get a chance to talk to you again. Okay thank you so much you know today David Howard professor and department of health policy and management and Emory University.