Mount Sinai CEO Dr. Kenneth Davis: 5 ways to lower drug prices

High drug prices are one of the most pressing issues facing patients today, and the U.S. government must take action to help relieve the significant burden these prices present.

Here are five areas the American government should address in order to lower drug costs:

1. The Affordable Care Act. The ACA has a little-known provision that pharmaceutical companies consider desirable: 12 years of market exclusivity for proteins and antibodies. This means that the remaining length of these drugs' patents become irrelevant, because from the time they are marketed they have 12 years without competition before generics are introduced.

This one provision encouraged all drug makers to make proteins and antibodies. They cost more to begin with, and are harder to manufacture, but the promise of 12 years of market exclusivity has unintentionally incentivized production of these expensive drugs. Pills, which we used to depend on for new medications, have been subsequently deprioritized by drug makers.

The drug companies are not all to blame for this exclusivity, because the science behind precision medicine means that drugs, particularly drugs for cancer, have a smaller targeted market. Scientists develop antibodies or proteins for specific mutations, and drug companies pick them up, look at the market and say, "Not that many people have this mutation; how are we going to price this drug so we can recover our development costs and still have a profit?" In the world of pharmaceuticals, the smaller the market, the higher the price must be. So, between small markets, scientific opportunity and market exclusivity, we have some very expensive drugs.

One way to solve this problem is to offer market exclusivity for only the most costly and most widespread diseases in the United States: diseases such as Type 2 diabetes, Alzheimer's, and other chronic and pre-existing conditions. This would align the interests of the pharmaceutical industry and the public, and create incentives to provide treatments for our most common conditions.

2. Patent law. Patent law has never really been revised to address the nuances of the pharmaceutical industry, and companies are exploiting its lack of subtle distinction. Prilosec, which blocks stomach acid to help relieve stomach pain, is an interesting compound that exemplifies shortcomings in our patent law. When chemists synthesized this molecule in the laboratory to manufacture it, they generated a d- and an l-form of the molecule. In humans the d-form of drugs does not work; only the l-form is effective. The d-form is neutral. Once Prilosec went off patent, generic competition entered the market and the price went down. Next, Prilosec's manufacturers patented the l-form exclusively, without the d, and introduced it to the market as Nexium. After some work to convince physicians and the public that this new product is more effective, physicians began to prescribe Nexium rather than the generic Prilosec, even though both drugs work the same. There are other examples of d/l mixed drugs being followed on the market by l forms once the mixed compound’s patent expires.

We need patent laws that truly acknowledge invention. Drug makers should have to show that what they have created is novel and inventive, but in some cases, patent law is not sophisticated enough to separate processes that are novel from those that are obvious. This results in the government allowing pharmaceutical companies to exploit the weaknesses in the law that have not kept up with science.         

3. Medicare formulary management. While private-sector businesses can exercise discretion over what drugs are on their formularies, Medicare is not allowed to manage its Part D drug formulary. For instance, drawing upon our last example, the benefits manager of a large company can say they don't need an l-form drug because they already have the combined d and l-form. Government payers currently are not allowed to do that.

Now, let's say there is a new antipsychotic drug for schizophrenia that a drug maker presents as a breakthrough compound. Formulary managers can say it is not such a breakthrough—all it does is block dopamine, the same mechanism as the last 12 drugs in this class. This is exactly what has happened among antipsychotics, antidepressants, anti-anxieties, sleeping medications and many others. They are just the same mechanism of action with different molecules. If Medicare had the ability to manage its formulary, they could tell pharmaceutical companies, "You've got to prove to me that your drug is superior to generics in this class." Right now, Medicare officials cannot ask that.  This is not to say Medicare should negotiate prices; rather, that formulary managers can say this drug is simply no better than generics currently on the market, and hence will not be on our formulary.

Lobbying groups for patients often say, "Do not restrict my drugs, I do not want a formulary to tell me what to do." A midpoint between these positions is with step therapy. With this, before patients are put on a new branded compound, they have to fail with a generic in a class with the same mechanism of action. CMS began allowing Medicare Advantage plans to utilize this cost control mechanism for Part D drugs in the 2019 benefit year. Critics of step therapy have asked why they should suffer for a few weeks and not receive the drug they want right away, but it may be a necessary and rational compromise to address the rising cost of pharmaceuticals to our healthcare system.

CMS has proposed to expand cost control measures by allowing Part D plans to use prior authorization and step therapy for protected class drugs (antidepressants, antipsychotics, anticonvulsants, immunosuppressants for treatment of transplant rejection, antiretrovirals, and antineoplastics) and allow plans to exclude these protected class drugs from formularies if the drug is a new formulation of an existing single-source drug or if the drug's price rises beyond the rate of inflation. If finalized, this change would go into effect in 2020.

4. Drug pricing as a fair trade issue. The government in every country besides the U.S. is the purchaser of drugs for its citizens and sets the price. This is why the rest of the world winds up paying far less for the same drugs than the U.S. does. Typically, the price in the U.S. for a patented compound is three or four times the price for the same product internationally. With all of the current rhetoric about unfair trade practices, we should ask, "Why are American citizens subsidizing the cost of research and development for new medications?" This is the country where drugmakers profit, and that is not fair. In trade negotiations with other countries, our country must request foreign governments raise their drug prices and then tell pharmaceutical companies not to just put this money in their pockets, but pass the savings on to Americans.

In general, pharmaceutical companies are more committed to drug development than they are to drug discovery. Drug discovery comes from basic science that identifies therapeutic targets, with scientists licensing their new compounds to companies for further development. But who pays for those initial steps of drug discovery? The American taxpayer. National Institutes of Health dollars are the fuel behind drug discovery, yet the American taxpayer winds up paying up to five times what citizens of the rest of the world pay for their drugs. This needs to be a top negotiating principle in our trade talks with other countries and pharmaceutical companies.

5. Speed of generics. FDA Commissioner Scott Gottlieb, MD, has done a good job of speeding the approval of generics, identifying areas of no competition, and encouraging the manufacture of new market entrants by fast-tracking competing drugs. We have to continue to do that. There has to be FDA surveillance of when generic prices begin to rise faster than inflation can allow. When that happens, we have got to find ways to encourage other generic companies to move quickly, manufacture the drugs and fast-track their approval. One way to do that is to allow generics to come in from the rest of the world if they have been approved by regulatory bodies we deem credible.

Americans spent over $333 billion on prescription pharmaceuticals in 2017[1]. If the steps outlined above could reduce costs by even 10%, we would save over $33 billion annually, money that could be used in so many more productive ways to improve the health and well-being of our citizens. Let's work together to help reduce the cost of drugs to everyone's benefit.

[1] National Health Expenditure data

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