Healthcare Business News
John Castellani president and CEO of PhRMA

Reform Update: Drugmakers lash back at insurers in war of words over Rx prices

By Paul Demko
Posted: June 13, 2014 - 3:00 pm ET

The pharmaceutical industry is fighting back.

After enduring a rhetorical bashing over the cost of hepatitis C wonder drug Sovaldi, drug manufacturers released a study this week documenting the high cost-sharing rates charged by some insurers on health plans sold through the public exchanges.

The study was conducted by the consulting firm Avalere Health on behalf of Pharmaceutical Research and Manufacturers of America, the main industry group. It looked at drug formularies on 123 silver plans, which are designed to cover 70% of medical costs, including at least one plan sold in the largest city in every state.

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Avalere found that a fifth of the plans required cost-sharing of at least 40% for some specialty drugs used to treat multiple sclerosis, cancer, HIV/AIDS and other illnesses. The study also determined that 60% of silver plan formularies placed all drugs for cancer, Crohn's disease and other illnesses in the top cost-sharing tier.

John Castellani, president and CEO of PhRMA, called on HHS to take action to limit out-of-pocket costs for individuals with insurance coverage. “The exchanges were meant to provide patients access to the medicines they need, especially for the sickest among us,” Castellani said in a statement. “Yet this report paints a very different picture, one in which many Americans still find themselves unable to access the care they desperately need due to high out-of-pocket costs.”

PhRMA received backing from an array of advocacy groups representing the interests of individuals with different diseases. Carl Schmid, deputy executive director of the AIDS Institute, said that some HIV patients with health plans purchased through the exchanges are skipping drug treatments because they can't afford the cost. “Drugs are paramount to HIV care,” Schmid said. “You have to have access to drugs every day of your life.”

The broadside against the insurance industry by pharmaceutical interests came less than a month after Karen Ignagni, the president and CEO of America's Health Insurance Plans, blasted drug manufacturers while sharing a stage with Castellani at a forum in Washington. Ignagni went so far as to suggest that government price controls could be on the horizon if the industry didn't change its ways.

“Manufacturers are charging whatever they can get away with,” she said. “We can't have a system that operates that way. We can't sustain it.”

Last month, the National Coalition on Health Care—an advocacy group whose members include unions, businesses and religious organizations—announced a campaign to raise awareness of “unsustainable and abusive” drug prices. John Rother, the group's president and CEO, said it isn't currently seeking any specific solution from Congress, but merely trying to spark a dialogue among interested parties. He's more sympathetic, however, to the point of view of the insurance industry.

“Trying to cast the problem as higher co-pays kind of ignores the fundamental issue, which is the price,” Rother said. “That's the more basic problem that we face.”

If the issue of drug prices eventually turns into a fight over regulatory or legislative proposals in Washington, both sides are well-prepared to exercise their influence. PhRMA spent more than $25 million on lobbying last year, according to a database maintained by the U.S. Senate. That included nearly $18 million spent on direct lobbying by the trade group and another $8 million paid to contract lobbyists.

PhRMA's political action committee spent just over $100,000 on political contributions, split almost evenly between Republicans and Democrats, so far this election cycle, according to the nonpartisan Center for Responsive Politics. In the previous election cycle, the PAC doled out $128,500 to federal House and Senate candidates.

AHIP is also well-represented at the Capitol. Last year it spent $11.5 million on lobbying, according to the Senate database. Just over $1 million of that money was spent to hire lobbying firms to push its agenda.

AHIP's political action committee has made roughly $100,000 in political contributions to federal candidates so far this election cycle, according to the Center for Responsive Politics. It contributed nearly twice that amount to candidates in the prior election cycle, with 55% of that money going to Republicans.

“It is always of interest to see two giants go after each other,” said Judith Feder, a healthcare and public policy expert at Georgetown University. “It doesn't seem that either one is shy about or limited in its ability to protect their industry's interests.”

Wyden, Grassley seek input on healthcare transparency

Sens. Ron Wyden (D-Ore.) and Chuck Grassley (R-Iowa), the top two members of the influential Senate Finance Committee, are seeking advice from healthcare officials on how to improve data transparency. In a letter sent to industry stakeholders this week, they requested suggestions about what kinds of data might improve the efficiency and effectiveness of the healthcare system. “Our job really needs to be to keep knocking down the barriers that keep healthcare data walled off from the public and identify the data that isn't being collected but ought to be,” Wyden said during an address on Thursday at an event in Washington sponsored by the AARP and Business Roundtable. Comments are due Aug. 12.

Lawsuit over lawmaker and staffer subsidies heads to court

Sen. Ron Johnson's lawsuit over Obamacare subsidies for lawmakers and their staffers is heading to court, according to Politico. The Wisconsin Republican is seeking to invalidate the Obama administration's decision to allow the federal government to pay a portion of their premiums, which he and other Republicans believe is illegal. The case is scheduled to be heard on July 7 before a U.S. District judge in Wisconsin.

Follow Paul Demko on Twitter: @MHpdemko

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