High drug costs pose challenges to all health insurance plans, from individual to group to Medicaid to Medicare.
One of the most effective ways to cut drug costs has been to allow doctors and pharmacists to substitute lower cost generic drugs for higher price brand-name drugs. For example, Medicare Part D co-pays are far lower for generic drugs than for brand-name drugs. Some insurance plans won’t even pay for brand-name drugs (e.g. Nexium) because lower cost options are available.
This trend works against big pharmaceutical companies’ ability to maximize profits while supporting competitiveness for generic producers.
What’s big pharma to do?
Change the paradigm, i.e., change the way people see the issue.
The latest high-price drugs coming out of big pharma are called “biologics.” They differ from older drugs because they are produced from living cells, not chemical factories. Reports say biologics sales have risen to one-fourth of all U.S. drug sales.
The patents on these drugs – Humira, Avastin, Rituxan, Herceptin and more – are time limited and nearing expiration. Normally that would allow companies to start producing lower cost generics.
The New York Times reports big pharma is taking pre-emptive moves to thwart generic production by getting states to adopt restrictive legislation.
“In statehouses around the country, some of the nation’s biggest biotechnology companies are lobbying intensively to limit generic competition to their blockbuster drugs,” said the NY Times story, “potentially cutting into the billions of dollars in savings on drug costs contemplated in the federal health care overhaul law.”
In Mississippi, Senator Dean Kirby and Representative Bobby Moak introduced big pharma’s bills.
Big pharma’s new paradigm is this. Traditional generic drugs are “similar” but not identical to brand-name drugs. Biologic drugs are far more complex. So, standards for “bio-similar” generic drugs should be much higher and more restrictive.
Standards for drugs are usually determined by the federal Food and Drug Administration (FDA). The FDA, under pressure from the Patient Protection and Affordable Care Act of 2010 (Obamacare) to spur competition in the biotechnology drug market to hold down costs, favors generic production.
Thus big pharma’s focus on state laws.
The Kirby and Moak bills would limit pharmacists’ and doctors’ authority to substitute biologics. Their bills would require the drugs to be “interchangeable” not just “similar,” standards requiring longer, tougher FDA approval processes, and would require pharmacists to obtain patient consent, notify doctors, and maintain records for years.
Generic producers say okay to the “interchangeable” requirement but no to the other provisions, saying they are solely designed to deter biologics substitutions.
Big pharma argues back that their bills seek patient protection… not profit protection.
The Kirby and Moak bills died without committee action last week. But big pharmas’ push didn’t. This ongoing story bears watching.