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Points to Consider about the Center for American Progress Prescription Drug Discussion

April 26, 2016
This afternoon, the Center for American Progress (CAP) Action Fund hosted an obviously one-sided discussion on prescription drug pricing. Below are some key questions and points to consider in this important debate that you likely didn't hear about at the CAP event:

Prescription Drugs Only Small Part of Overall Health Spending: Despite the increasingly shrill rhetoric on this issue, the fact remains that prescription drugs are only a small fraction of total health expenditures in the U.S. – about 14 percent. A recent report from IMS projects that spending on medicines will grow in line with overall health care costs through 2024. That same report found that the net price growth for branded drugs was a mere 2.8 percent last year as discounts and rebates negotiated by payers rose sharply.  According to a recent study by Avalere that examined insurance premium increase rate justifications submitted by health plans for 2016, premium growth is primarily driven by inpatient and outpatient hospital spending, accounting for 53.4% of premium growth.  Professional services (e.g., doctor visits) account for 21.5% and prescription drugs account for 17.5%.  This begs the question—why isn’t CAP focused on what is actually driving up premiums the most?

Innovation Ecosystem:  Of the approximately 1,200 biopharma companies in the United States, more than 90 percent of these enterprises do not earn a profit – yet they are on the frontlines in the search for the new cures and therapies that continue to transform modern medicine. According to the BioMedTracker Clinical Trial database, there are approximately 5,070 clinical programs in Phase I, Phase II, or Phase III for medicines being developed by companies world-wide. Seventy percent of the clinical pipeline is attributed to small, emerging companies. These companies also are pursuing the next generation of innovation, including major advances in gene therapy, immunotherapy and RNAi therapy. How can we ensure that the rest of the health care ecosystem (e.g., health insurers, hospitals, providers) is keeping pace with these innovative entrepreneurs in terms of delivery of care?

Access to Innovation: People buy insurance to protect the important things in their lives: our homes, our car, our health. We expect that when something terrible happens the insurance policies we pay for will help cover these expenses. Yet, the health insurance industry routinely denies access and payment for certain cures and therapies for diseases. Recently, the New York Attorney General sued a health plan in the state for denying hepatitis C patients access to curative therapies. Harvard recently a series of assessments of health plans on state Exchanges and found widespread access problems. In Michigan, for example, more than half of plans place covered HIV medications on the highest cost-sharing tier, with most plans requiring co-insurance rates of 50%. Why will insurance companies pay for almost all of a life-saving surgery, but they make a patient pay an excessive out-of-pocket share of the cost for a life-saving medicine?  Are there policies that we should be considering that will ensure that insurance actually helps patients get access to the drugs and therapies that their doctors believe will be the best course of treatment for their disease? What impact will rate hikes by insurance companies have on the ability of patients to afford the type of coverage they need?