Prescription-price sticker shock: Will federal lawmakers intervene?

As more details emerge chronicling the lengths some pharmaceutical firms have gone to to set a premium price on their products, stakeholders are split on whether the government will act on the crisis.

Drug companies have remained in the spotlight since Turing Pharmaceuticals and its CEO, Martin Shkreli, first announced and then backed away from plans to raise the price of Daraprim. The generic drug, which treats toxoplasmosis, rocketed from $13.50 to $750 a pill shortly after Turing acquired the rights to market the medication in August.

Then last week came reports that federal prosecutors were investigating Canadian drugmaker Valeant Pharmaceuticals International over its drug pricing and distribution policies. In February, Valeant raised the price of two heart drugs, Nitropress and Isuprel, by 525% and 212%, respectively, shortly after acquiring the rights to sell them.

Most recently, Valeant's stock took a 30% hit after short-seller Andrew Left's website Citron Research published a report accusing the company of colluding with specialty pharmacies Philidor Rx Services and R&O Pharmacy in a plan to generate phony sales.

But those reports revealed what many stakeholders have experienced for some time: a painful spike in drug costs, whether they're innovative and breakthrough or older and generic.

Though drug prices have been rising for roughly the past decade, the public really took notice only after the introduction of Gilead Sciences' $84,000 hepatitis C treatment Sovaldi, said John Rother, CEO of the National Coalition on Health Care. In recent years, he's headed a campaign to lower drug prices.

He said the sticker shock felt over Sovaldi and the dozen or so medications that followed has helped to bring public attention to the issue of high drug costs, which has caused a number of politicians to take notice.

“For lawmakers who are concerned about our fiscal standing, this is going to be an ever-more central issue,” Rother said, referring to the impact drug costs have on the federal budget.

A Health Affairs article published in August cited CMS figures that projected drug costs had increased 12.6% in 2014, far outpacing other medical expenses.

Federation of American Hospitals CEO Chip Kahn was not as confident the current climate would necessarily bring about action. He cautioned against government interventions such as price controls, which could give rise to unforeseen problems.

“I'm very worried that on the pricing side, policymakers could be clumsy in trying to fix something and maybe make other problems,” Kahn said.

Several leading presidential candidates, including Democratic contenders Hillary Rodham Clinton and Vermont Sen. Bernie Sanders as well as Republican candidate Sen. Marco Rubio of Florida, have blasted drug companies. Sanders and Clinton have outlined plans that would allow Medicare to negotiate prices for drugs and let patients purchase cheaper drugs from foreign merchants.

The stakes are high for the industry. Providers, insurers and patients are making difficult budgetary decisions on care based partly on their ability to afford treatments.

The overall prices on prescription drugs have steadily risen over the past few years, experiencing an annualized percentage increase of 4.7% in 2015, compared with a 1% rise in hospital-care expenses and a 1% drop in physician and clinical services, according to an October Altarum Institute Center for Sustainable Health Spending report.

“We've seen our generic drug costs increase from $21 per prescription to $32 per prescription in a year,” said Martin Burruano, vice president for pharmacy services at Buffalo, N.Y.-based Independent Health, a not-for-profit insurer with 400,000 members. “We've moved many high-cost generic drugs to a non-covered status over the past year because their prices have increased, in some cases, over 1,000%.”

Burruano said that one such drug was the antibiotic tetracycline, which he said jumped from 5 cents a capsule to about $8 a capsule. Independent Health removed it from its formulary in recent years because of its price. Burruano said drug costs constituted the fastest-growing segment of Independent's health costs, with pharmacy expenses growing from 20% to 24% of all medical costs over the past year.

Like Rother, Independent Health's director of pharmacy services, Sheila Arquette, felt lawmakers more clearly understand the impact drug prices are having on health costs, and that the current path was unsustainable.

She advocated for drugmakers and insurers to collaborate on solutions, and said pharmaceutical companies should become more transparent about the costs of research needed to develop drugs—details some drugmakers have held close to their chests.

“We have to be transparent, because I don't think any of us really understand the whole picture,” Arquette said. “We need the manufacturers to come to the table and just be honest with us.”