While treating patients in Louisiana’s charity hospital system for two decades, I saw the tension between giving drug companies incentives to develop new treatments for diseases such as Alzheimer’s and cancer while making sure the patients could afford the innovations.
Society rewards companies that invent such drugs by allowing them to set the price and giving exclusive patents, which enables the industry to earn back the cost of research and development. But if a groundbreaking medicine is too costly for patients, it can be as if the innovation never occurred. And if the new drug is life-saving but financially out of reach, the patient may die. My goal as senator is to make sure that patients can afford these lifesaving drugs while promoting research to create the cures. Unfortunately, too many medicines are priced too high. Things must change.
Defenders of the current system point out that when patents expire, generic or “biosimilars” come on to the market and drive down the price. But many companies have adopted the practice of using secondary patents that have the effect of preventing cheaper versions from entering the market and driving down the price. In this case, companies use laws meant to encourage innovation to stop competition.
Other causes of high drug prices include high list prices that have “rebates.” Rebates are a portion of the total price which the drug manufacturer pays back to an insurance company buying the drug. But a patient with a deductible pays the full price, which may be three times or more the actual, net price. If an insulin prescription costs $400 and $300 is the rebate, the patient pays $400 and the extra $300 goes to the insurance company or another entity in the system.
In some cases, federal law allows taxpayers and patients to be charged more. In Medicare, there are lists of medications which, by law, the program must buy, no matter the cost. These medicines are in so-called, “protected classes.” This law was originally passed because Congress thought it important that seniors have access to all the medications of a certain type, such as anti-psychotics.
Unfortunately, some drug companies use protected classes to take advantage of taxpayers, patients and seniors. These companies skyrocket the price, knowing taxpayers are forced to foot the bill, even at exorbitant prices. As an example, Latuda is an antipsychotic drug in a Medicare protected class. Between 2013 and 2017, Latuda’s price increased 20 percent per year, going from about $600 to $1200 for a bottle of 30 doses. The price didn’t increase because Latuda was more popular or effective; market forces were eliminated. Manufacturers don’t have to compete when taxpayers are required to buy the drug regardless of its cost.
Ultimately, high drug prices are a product of a health care system in which every stakeholder has power except the patient and the taxpayer. Symptomatic of this is that every stakeholder potentially benefits from higher drug prices (especially if higher prices are rebated) except for the patient and the taxpayer. The problem isn’t a free market failure; it stems from the lack of a free market. To lower drug prices, we need to give patients and taxpayers the power. We need to end the rigged system.
To achieve this, I have worked with fellow senators and introduced 20 different pieces of legislation to lower the cost of medicines while continuing to provide incentives for new cures. These bills and others take on industry gimmicks used to exploit patients, taxpayers and especially Medicare beneficiaries.
We passed legislation in the Senate Finance Committee to end price-gouging. It does not stop a drugmaker from setting the price of their product. It does limit the ability to exploit protected classes to hike prices as done with Latuda.
Inevitably, those profiting from the status quo oppose this legislation. Some are running ads criticizing this legislation. They want to protect their monopolies. They want to continue raking in record profits in a system rigged against patients. This needs to change.
There is no silver bullet to bring down drug prices, but there is silver buckshot. We will fight in Congress to pass legislation and make sure they hit their mark.
Bill Cassidy is one of Louisiana's U.S. senators.