Today U.S. Senator Herb Kohl, Chairman of the Special Committee on Aging,held a hearing investigating ways to significantly cut prescription drug costs without sacrificing patient access or the quality of medical care. At the hearing, Kohl released several policy proposals for lowering drug costs for consumers and Medicare, an investigative report examining why domestic drug costs are higher than in foreign countries, and a letter to Centers for Medicare & Medicaid Services (CMS) seeking an affirmative National Coverage Determination (NCD) for the use of Avastin to treat age-related macular degeneration (AMD) in the Medicare population.
"Left unchecked, health care costs threaten our country, economy and every American family," Kohl said at the hearing. He noted that Americans spent more than $300 billion on prescription medicines last year, with Medicare and Medicaid picking up a third of the total bill.
According to a report by Kaiser Family Foundation, between 2000 and 2009, drug prices rose 3.6 percent per year, 44 percent faster than inflation. Under the current policies, experts predict that drug costs will nearly double in the U.S. over the next 10 years.
Cost-Cutting Policy Options
At the hearing, Kohl outlined nine policies, three of which were pending bills, suggested by experts to significantly reduce prescription drug costs. (Full text available at: http://aging.senate.gov/events/hr236opt.pdf)
"Some of these options would save billions, while others would be more modest," Kohl said. "These options include ways to increase transparency, expand discount programs, and reduce the financial incentives for doctors to prescribe the most expensive or unnecessary drugs.
"This morning, the Judiciary Committee passed one of these bipartisan proposals, which would limit delays in getting generics to consumers."
Kohl referenced his Preserve Access to Affordable Generic Drugs Act, a bill that bans pay-for-delay settlements used to keep lower-cost generic drugs off pharmacy shelves. The bill, which passed the Senate Judiciary Committee by a vote of 10 to 8, would presume these anti-consumer backroom deals to be illegal and give the Federal Trade Commission the authority to stop them.
The Congressional Budget Office estimates that stopping these types of settlement agreements would save the federal government, which pays approximately one-third of all prescription drug costs, $2.68 billion over 10 years.
Additionally, two policies would extend drug price negotiation authority to CMS in an effort to help reduce steadily rising costs in Medicare Part B, the health insurance program, and Part D, Medicare's prescription drug program. Senator Klobuchar introduced the Prescription Drug Price Negotiation Act (S.44), which would give the Health and Human Services (HHS) Secretary the ability to negotiate for drug discounts in Part D, early this year. The other would allow negotiation of physician administered drugs in Part B, when the government is the majority purchaser.
Kohl also suggested that CMS should be again allowed to pay the lowest price for similar drugs deemed equally effective. After exercising this cost-saving authority for more than 15 years, the agency was stripped of this power, called "least costly alternative" (LCA), after a court determined that it was not a mechanism specifically authorized by Congress. A report by the HHS Office of Inspector General estimated a savings of $40 million per year with the institution of an LCA for just two drugs used to treat prostate cancer -- Lupron and Zoladex. When expanded to include more drug classes, the LCA policy is projected to save CMS even more money.
The Committee also reviewed two policy proposals to remove some of the incentives in the health care system to artificially drive up costs. One proposal would create a more equitable payment structure in Medicare for the drugs directly administered to a patient by their doctor, stripping away a long-standing policy that incentivizes more expensive, brand-name prescriptions.
Another would boost transparency in Pharmacy Benefit Manager (PBM) transactions, requiring them to act as a fiduciary and disclose payments received from drug companies to their clients: employers or the federal government. PBMs act as the middlemen between insurers and drug companies and often receive payments from drug manufacturers to promote specific drugs on formularies and increase the utilization of that drug. These payments can lead to higher drug costs for taxpayers and consumers. In 2005, Wisconsin saved over $150 million after switching to a more transparent PBM.
The Medicare Drug Savings Act (S. 1206), introduced by Senator Jay Rockefeller (D-WV), would increase the discounts Medicare receives on prescription drugs for low-income individuals enrolled in Medicare Part D. This would save Medicare $112 billion over the next ten years, reducing the federal deficit and strengthening Medicare.
Finally, the Committee reviewed proposals to require physicians to complete a written certification before they prescribe atypical antipsychotics for nursing home patients and to expand a current drug discount program (340B) to long term care programs and safety net hospitals.
Investigative Committee Report
As part of the hearing, Kohl released a report titled "Prescription Drug Prices: Finds from International Comparisons and a Domestic Story" that indicates that drug companies charge American consumers more because the U.S. government lacks the negotiating power enjoyed by many other countries to reduce drug costs for taxpayers.
On the heels of a 2010 Aging committee hearing that looked at the rising costs of drugs in Medicare Part D, the committee sent letters of inquiry to AstraZeneca, GlaxoSmithKline, Eli Lilly, Novartis, Pfizer, and Sanofi-Aventis to ask why drugs cost American consumers more than consumers in other developed countries.
Authored by the majority staff of the Committee, the report concluded U.S. prices are not determined by costs but rather set by "what the market will ultimately bear."
The second part of the report detailed the pricing reasoning of two pharmaceutical companies, URL Pharma and Avanir, regarding their two drugs, Colcrys and Nuedexta, respectively. Each drug had previously been reported to be available as an "unapproved drug," but once they were approved by the FDA, their prices were many times higher than the reported cost of the unapproved drug.
(The report can be found at: http://aging.senate.gov/events/hr236rpt.pdf)
National Coverage Determination Request
Kohl also highlighted a letter, coauthored by Senator Sherrod Brown (D-OH), sent yesterday to CMS Administrator Donald Berwick, M.D. seeking a National Coverage Determination (NCD) for the use of Avastin to treat age-related macular degeneration (AMD) in the Medicare population.
The National Institute of Health (NIH) recently sponsored a lengthy comparative clinical trial between two highly effective drugs used to treat macular degeneration, a condition that often causes blindness among seniors. The trial found that both Lucentis and Avastin work equally well in treating AMD, however Lucentis costs $2,000 a dose while Avastin costs $50. According to CMS, Medicare is spending more than $1 billion a year on both drugs.
In their letter, Kohl and Brown write: "By issuing a positive NCD for Avastin, more affordable access to AMD treatment will become widely available to Medicare beneficiaries. In addition to this increased access to an effective treatment for blindness, the American taxpayer will also benefit due to savings in Medicare spending.