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Will Drug Companies Announce 'Massive' Price Cuts?

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USA — June 7. 2018

President Donald Trump said on Wednesday he expects major drug companies to decrease prices on their products in two weeks.

But he did not provide details on which of them would do so or how such reductions would be made.

"I think we're going to have some of the big drug companies in two weeks say they're going to announce, because of what we did, they're going to announce voluntary massive drops in prices," Trump said at a signing ceremony for a new law “the Right to Try Act of 2017”, making it easier for seriously ill people to try experimental treatments.

A Health and Human Services Department (HHS) spokeswoman said he couldn't make comments on Trump's remarks.

The Administration also has yet to issue any new regulations or pilot programs to lower drug prices based on the new plan.

It's known that the NYSE Arca Pharmaceutical Index <.DRG>, comprised of major drug makers, fell about a quarter of a percent just after Trump's comments on Wednesday. But it steadily recovered and closed up 1.6 percent, while the broader S&P 500 Index closed up 1.3 percent.

“It is exceedingly rare for drug companies to lower prices prior to facing competition from cheap generics.” added a spokeswoman.

RIGHT TO TRY ACT OF 2017

Trump remarked: “People who are terminally ill should not have to go from country to country to seek a cure — I want to give them a chance right here at home.”

Its adoption means resolutions in experimental drugs to be administered to terminally ill patients who have exhausted all approved treatment options and are unable to participate in clinical drug trials.

According to the bill, “Right to Try” gives the over 1 million Americans who die of a terminal illness every year a new tool to fight and make potentially lifesaving decisions about their treatment.

It gives them the right to make healthcare choices that could save their lives.

AREAS OF CONCERN

The rising cost of cancer care will be the focus of the American Society of Clinical Oncology (ASCO) and the government.

For example, HHS has yet to issue any new regulations or pilot programs to lower drug prices based on the new plan.

PBMs and insurers have said they are part of the solution for lowering costs and blame the high pricing on drug makers.

PhRMA, BIO and other groups for the pharmaceutical and biotechnology industries as well as several drug makers also did not choose to comment on Trump's statement.

 A leading group of U.S. cancer doctors is wary of Trump's statements on lowering drug prices. They had sharp and negative words about the situation:

"It will mean the U.S. government won't pay for all cancer drugs in the "Medicare health program" for older people." said one of the company representatives. "So the government hints that we have to pay for medical breakthroughs by ourselves. In particular, we are talking about “the Right to Try Act of 2017".

He noticed that, while it's good to help seriously ill people, there should be an ability to negotiate prices, noting that "we are always driven by our belief that patients should not be denied the most effective drugs for their condition. It's all a balancing act."

THE FINE LINE OF A DISPUTE

Drug prices are raised by manufacturers each year. And really, oncologists and other specialists benefit from price increases on drugs that are administered in their offices.

“Without percentage-based fees, oncology practices would lose their ability to make considerable sums off their relationship with the pharmaceutical industry,” said Dr. Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy Outcomes in New York.

In this regard, ASCO have proposed their own methods for reducing healthcare costs, but not to reduce their prices of medicines. They have recommended ranking drugs on their comparative clinical value, including relative efficacy and side effects, but not price.

ASCO's will publicize their full response after submitting it to the Trump administration July 16.

Why Are US Drug Prices So High?

Drug prices are higher in the US than other developed countries. According to Pharmaceutical Research and Manufacturers of America (PhRMA), it's misleading to focus on U.S. list prices that exclude discounts struck behind closed doors with insurers.

A Bloomberg News analysis finds that even after these discounts, prices are higher in the U.S. than abroad. Seven of the eight top-selling drugs examined still cost more in the U.S. than most other countries.

Here are the statistics of drug prices from Bloomberg:

Will Drug Companies Announce 'Massive' Price Cuts?

"The entire health-care system in the United States is more expensive than other countries," said a spokesman for the Pharmaceutical Research and Manufacturers of America trade group Robert Zirkelbach. "The difference in prices here in the U.S. compared to other countries is often vastly overstated," because comparisons don’t include all the discounts drug makers give to various payers.

It's true: insurers and pharmacy managers often obtain significant discounts on drugs' list prices. Sometimes the discounts can be 50% or more.

Of the eight drugs analyzed, seven cost more in the U.S. after estimated discounts than in most other high-income countries.

Why did this happen?

In the US, drug companies set their own prices and raise them over time.

In Europe, on the other hand, drug prices are often set by government health systems and decline over time as countries demand additional price cuts.

Here we find the whole answer, put simply: the US government doesn’t set and cannot control drug prices.

Take for example its 127% jump between 2008 and 2014, compared with an 11% rise in a basket of everyday household goods.

EFFECTIVENESS VS PRICE

U.S. spending on cancer drugs reached almost $50 billion last year and can project to double again to $100 billion in five years.

New cancer treatments are contributing to the increase. Among them Merck & Co’s $162,000-per-year immunotherapy Keytruda and Gilead Sciences Inc’s $373,000 blood cancer therapy Yescarta.

The drug prices are raised by manufacturers each year. And oncologists and other specialists tend to benefit from price increases on drugs that are administered in their offices.

“Without percentage-based fees, oncology practices would lose their ability to make considerable sums off their relationship with the pharmaceutical industry,” said Dr. Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy Outcomes in New York.

SMALLER COMPANIES ARE LEFT OUT

Another significant trend has been the increasing role given to large drug companies. They are wielding their influence to persuade their customer contacts for help, thus offering them more options.

It may be creating an entirely new market, drawing in new users with quality versions of successful drugs, and along with it could be replacing the traditional market for poorer companies.

“If we can show people that the demand is there, that could convince markets to expand these programs and allow access for us,” said the global manager of one the pharmaceutical companies.

AT THE END OF THE APPLICATION

Hence why the dispute may be delayed for quite a long time. The optimal solution could be General talks for all parties that could include the identification of inherent problems and potentially working towards a future verdict.

Author: USA Really