Even when accounting for rebates, Americans pay far more than people in other countries for their prescription drugs, according to a House committee report released Monday.
"The system in place now does not work for the Americans who depend on it – by all measures, U.S. consumers pay too high a price for drugs," the Ways and Means Committee staff concluded in the report, which compared U.S. prices for 79 Part D drugs with the prices charged in 11 other markets.
Although prices varied widely among the drugs and by indication, the committee found that U.S. drug prices were nearly four times higher last year than the average prices in Australia, Denmark, France, Germany, Japan, the Netherlands, Ontario, Portugal, Sweden, Switzerland and the U.K. (Although Ontario is a Canadian province, it purchases its drugs independently.)
There are some limitations to the study. For one, the U.S. was the only market with all 79 drugs included in the price comparison. The U.K. had 78 of the drugs, Switzerland had 72, Denmark and Germany each had 65, Australia had 62, and Netherlands had 61. The others each had fewer than 60, with Portugal having only 37.
Another limitation is the lack of transparency that made it difficult for committee staff to determine how much governments actually paid for a given drug once undisclosed manufacturer discounts or rebates were factored in. For the U.S., the report authors assumed an average rebate rate of 22% based on a Congressional Budget Office (CBO) report, though they recognized there is considerable variability in the rebates among therapeutic classes.
Regardless, the report noted that the average U.S. rebate rate would need to be more than 73% for the net U.S. drug prices to match the average list prices in the other markets included in the study. The rebates for drugs that are used to treat diabetes, arthritis and multiple sclerosis (MS) might have to be even larger.
According to the study, insulin averaged $34.75 per dose in the U.S. – 247% of the $10.58 price in the other markets. But the authors said they "found significant variation by drug." For example, Sanofi SA's Lantus (insulin glargine) Solostar in the U.S. was 170% of the average in other countries, while Eli Lilly and Co.'s Humalog (insulin lispro) Mix 75-25 Kwikpen was priced at 620% of the non-U.S. price. Noninsulin diabetes drugs – such as Januvia (sitagliptin, Merck & Co. Inc.), Onglyza (saxagliptin, Astrazeneca plc), Tradjenta (linagliptin, Boehringer Ingelheim GmbH) and Victoza (liraglutide, Novo Nordisk A/S) – fared no better, as they were priced 178% to 1,020% higher in the U.S. than the international average.
In the anti-inflammatory class, the authors reported that Abbvie Inc.'s Humira (adalimumab) is currently priced at $2,436.02 per dose in the U.S., or about 500% of the international average. The study showed that Denmark had the next highest price for Humira at $787.10 per dose, less than one-third of the U.S. price.
The MS drugs in the comparison were typically priced from 350% to 670% in the U.S. With an average U.S. list price of $769.92 per dose compared with $133.99 internationally, MS drugs were 5.75 times more expensive in the U.S.
Support for negotiations
The study authors said their findings were not meant to make a case for one non-U.S. pricing system vs. another nor to determine the factors driving the differences in pricing between the U.S. and other markets.
Even though the study compared only Part D prices, it likely will be used to support House Speaker Nancy Pelosi's (D-Calif.) proposal to allow direct Medicare negotiations on Part B and D drugs, with international pricing as the ceiling. A summary of Pelosi's Lower Drug Prices Now Act, officially unveiled last week, called for the negotiated prices to be available to other government programs and the private sector as well. (See BioWorld, Sept. 20, 2019.)
"A policy of Medicare prescription drug negotiation using international prices would help rebalance a distortion created by Medicare's overpaying for drugs that could yield significant savings for American families," according to the Ways and Means report. "Given that one in four Americans report taking four or more medications, action in Medicare alone is not enough, as 180 million Americans with employer coverage also struggle with prescription drug bills. Efforts at lowering consumers' costs need to be broad in scope so that all Americans are getting a fair deal in what they pay for drugs."
Pelosi's bill would remove the noninterference clause that was included in Part D when it was created. That clause distinguishes Medicare from other federal programs, such as Medicaid, which mandates rebates, and the Department of Veterans Affairs, which pays no more than the lowest price private-sector purchasers pay, according to the report.
As both Republican and Democratic lawmakers have pointed out at hearings, the clause also makes Part D distinct from other Medicare programs, which set the amount paid to doctors, hospitals and other providers.
Pelosi's plan is not the House's first stab at eliminating the noninterference clause. The House voted to eliminate it in 2007 when Pelosi first became speaker, but the Senate refused to take it up. Both chambers were under Democrat control at the time.
Opposition to the 2007 bill was due in large part to the CBO's assertion that it would have "negligible effect on federal spending," because it merely gave the Health and Human Services secretary the authority to negotiate without providing additional tools to do so, according to Monday's report.
"Negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions," the CBO said at the time. "The authority to establish a formulary, set prices administratively or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers."
Since then, the CBO has suggested tools such as a Medicare formulary that excludes some drugs or uses other utilization management restrictions, as well as policies that allow the secretary to set drug prices or take action against companies that don't negotiate in good faith. Pelosi's new proposal, in effect, would do both.
While the CBO has yet to score the savings that could come from the proposal, the Ways and Means report estimated that using international comparisons could reduce Part D spending by 72.8% to 74.7%, resulting in up to $74 billion in savings annually.
Such savings could come at a high price, though, critics of the plan say. "A government price-setting model that links to foreign countries' payment designs . . . puts the speedy access to innovative therapies that we enjoy today at serious risk," Lindsay Bealor Greenleaf, director of policy at ADVI Health, told BioWorld.
"That is a dangerous combination for patient access to current treatments and the development of new cures," she continued. "Compared to the rest of the world, the U.S. places a high value on access to therapies, which is why Americans currently enjoy access to cancer treatments about two years earlier than other developed countries."
That's a point the Ways and Means authors skipped over when they cited, as a limitation to their study, that the U.S. was the only country to offer all 79 drugs used in their comparison.