n case the pharmaceutical industry is unclear what some federal officials think about drug prices, Andy Slavitt has offered a pointed and sobering reminder. In remarks before the BioPharma Congress, an industry conference that was held last Thursday, the acting administrator for the Centers for Medicare & Medicaid Services slammed drug makers — all of them.
“Cost increases are pervasive,” he lamented. “Despite all the attention it has generated this year, Mylan’s Epipen is not even on our top 20 list for either high price increases or spending overall in 2015. Many of these have been ongoing for a while with real patient impact, and some are big stories waiting to happen.”
“You know, last year when I spoke here, the price increases at Turing [Pharmaceuticals] were making news, and I told you I didn’t want this industry to be defined by its worst actors,” he said, referring to the company that was headed by Martin Shkreli at the time. “I defended the industry then, but the more data that’s revealed, the more bad actors you find, and I’m telling you now: it’s too many.”
And Slavitt offered some data to illustrate his concerns: Total prescription drug spending in 2015 was about $457 billion, or 16.7 percent of health care spending. Based on recent trends, Slavitt said CMS is projecting average annual increases of 6.7 percent through 2025. Medicare Part B drug spending, meanwhile, doubled from 2007 to 2015, and Part D costs increased 8.4 percent between 2013 and 2015
“Specialty drugs are a big part of the equation,” he explained. “In 2014, they accounted for 31.8 percent or spending despite representing only 1 percent of prescriptions. However, of the 20 drugs with the highest per-unit cost increases in Medicaid, seven were generic drugs. Those products had increases in price ranging from 140 percent to nearly 500 percent between 2014 and 2015.”
“These numbers don’t give us the full picture, but they do help to draw attention to a problem that is an increasing source of worry for families across the country,” he said. “Drug costs have become the health policy issue Americans are most anxious to see us act on, and we have a responsibility to them to explore all the options available us to make their medications more affordable.”
His remarks, which were subsequently posted on his CMS blog, come at a time of high anxiety over prescription drug prices. A recent Kaiser Family Foundation poll found that reducing costs should be the biggest priority for the next President and Congress when it comes to lowering overall health costs, and 63 percent want government to take action.
Indeed, Californians will vote tomorrow on a ballot measure that would require state agencies to pay no more than the US Department of Veterans Affairs. And a dozen state legislatures, including California, have pursued bills that would require drug makers to either justify certain prices or disclose costs in hopes of gaining transparency into pricing decisions. Only Vermont has passed such a law, though.
To what extent the federal government will take action remains to be seen. A bill similar to the state bills was recently introduced in Congress. CMS is trying to launch what it calls a project to lower Medicare Part B costs. And an increasing number of Congressional lawmakers are calling for probes into various drug makers that have raised prices. Mylan Pharmaceuticals is the latest example.
For its part, the pharmaceutical industry argues innovation will dry up if price caps are enacted. Mostly, though, companies are responding defensively. Drug makers are spending $109 million to fight the California ballot measure and will pay another $100 million to their industry trade group to battle other pricing initiatives and dissuade Congress from passing unfavorable legislation.
Another argument industry makes is about the value of medicines. But Slavitt dismissed that.
“I hear occasionally from some that life sciences needs to tell its ‘value story’ better. Perhaps,” he said, “but it also needs to do the math. If something is growing by 11 percent, unless it’s causing something else to decrease by 12 percent, it’s not going to last forever. The reality is that in the next few years these costs will put unsustainable pressure on the Medicare program, and action is going to be necessary to address them. For my successor, this will likely be a big priority as well.”
Slavitt tried to end his talk on a more conciliatory note, though.
“What you choose to do as an industry will help define the next several years. So the question is: can we have both innovation and the affordability necessary to make it accessible? I think the answer is yes,” he said. “These two goals shouldn’t be in opposition.”
“In every-forward looking industry outside of health care, we see that competition actually fuels innovation, and affordability improves alongside the development of new technologies,” he said. “There are plenty of policy options and certainly a number of ways innovators like you can choose to respond – from disputing the math and fighting it, to looking for win-wins.”