Senate Committee Discusses the Burden of High Drug Prices and Potential Solutions

Increased transparency, value-based pricing, and other policy reforms are necessary to ensure that Americans can access medications at affordable prices, said a panel of experts during a Senate hearing.

Douglas Holtz-Eakin, PhD, president, American Action Forum; Mark E. Miller, PhD, vice president, healthcare, Laura and John Arnold Foundation; and Peter B. Bach, MD, MAPP, director, Memorial Sloan Kettering Center for Health Policy and Outcomes, joined Kathy Sego, a mother of a child with insulin-dependent diabetes, at a hearing on prescription drug prices before the Senate Finance Committee.

Sego relayed the heartbreaking story of her 22-year-old son, who had been diagnosed with type 1 diabetes around his eighth birthday. Sego’s son, Hunter, found out just before he left for college exactly how much his insulin cost his family when he went to pick it up at the pharmacy and was given a price tag of $1700 for 4 vials. According to Sego, her son panicked at the thought of spending that much money, even with health insurance.

Later, she found out that he only purchased 1 vial and decided to ration it. In 2 weeks, he lost 20 pounds because he had also severely cut his food intake to match the amount of insulin he was taking. According to Sego, her son could have died.

“I’m heartbroken to know my son thought he was a financial burden to us,” she said. “Money over life is not the choice we want him to make.”

At the beginning of the hearing, Senator Ron Wyden, D-Oregon, the ranking Democrat on the committee, highlighted what he called a “grotesque” practice by pharmaceutical companies: ratcheting up the price of older drugs.

He provided the example of Humalog, from Eli Lilly, which cost $21 a vial in 1996 and costs $275 a vial today. That represents a 13-fold price increase for insulin, which was discovered in the 1920s.

“Humalog is not 13 times more effective,” Wyden said. “A vial does not last 13 times longer than it did in 1996.”

These price increases, by companies that have been left unchecked to set prices on their own, have “turned patients into beggars,” he added.

Wyden and Committee Chair Senator Chuck Grassley, R-Iowa, both noted that the heads of the major pharmaceutical companies had all been invited to the hearing, and they all passed. According to Wyden, that is telling. He noted that even cigarette companies, which make a product that kills people, came to testify before the committee.

Grassley noted that it is important to address the rising costs of prescription drugs because they are a basic necessity of life for many Americans and their loved ones. While he acknowledged there needs to be a strong research engine to develop new treatments, he also said there needs to be a discussion about the affordability of new drugs.

“When it comes to drug pricing, you should not need a PhD in economics to understand how much your prescription costs,” Grassley said.

He added that he is in favor of more transparency, and he mentioned the idea of including drug prices in television ads. In October 2018, President Donald Trump proposed requiring drug companies to include prices in ads as part of his blueprint, American Patients First.

According to Grassley, this is a logical step. Drug advertisers tell consumers about the benefits of the drugs and they’re also required to tell consumers about the side effects, “but they don’t seem very gung-ho to tell you how much a drug costs.”

Holtz-Eakin explained how the combination of supply—development costs about $3 billion and only 8% of drugs are ultimately approved by the FDA—and demand—more than half of Americans take drugs with 60% having a chronic condition and 40% having 2 or more—is a recipe for an economic crisis.

He explained that policies need to address how to improve the supply side by lowering the cost, shortening the time between when a drug is tested and when it comes to market, and increasing the number of both branded and generic drugs. “There’s nothing better than having multiple drugs,” he said.

Miller highlighted the importance of protecting innovation while lowering the cost for the patient and the taxpayer.

“You have headroom between the prices being charged and being paid and how much is being spent on [research and development],” he said. “I think you can go after prices and go after spending and not immediately threaten innovation—but you should always keep that in mind.”

Another solution is value-based pricing, which can address expensive drugs that have no current competition, Bach said. Through this mechanism, drug prices would be set based on the drug’s benefits. The current healthcare system has little alignment between costs and benefits.

Bach also discussed value-based insurance design, which reduces the co-payment for patients if the drug has higher value.

“The notion is not that the patient should pay more,” he said. “The notion is that the pharmaceutical company should capture a higher price if their drugs work better relative to if their drugs work less well.”

This would reallocate money away from drugs where the prices don’t match the benefit and frees up money for drugs that work better, Bach said.

The idea of drug reimportation was raised during the hearing after Sego explained her family was visiting Hungary and found that the same vial that costs them more than $400 out of pocket in the United States cost only $10 in Hungary.

While she wanted to stockpile vials, that wasn’t a sustainable option. Her family couldn’t visit Mexico or Canada every time Hunter needed more insulin.

Committee member Debbie Stabenow, D-Minnesota, explained that it’s just a 10-minute drive for some of her constituents to cross the border, where drug prices can be 40% lower. She questioned how a company can make the argument that an FDA-approved drug is not as safe if it’s bought in Canada.

“We have trade on everything else, but we close the border on safe, FDA-approved drugs on both sides of the border,” she said.

Stabenow also said that Sego’s situation is not rare, although she wished it was. She relayed a similar situation she heard from a constituent in Minnesota, only this woman’s son died after rationing his insulin. What, she asked Sego, would she say to the drug company executives if any of the ones invited had actually showed up?

“As a mother, I would probably say to them: ‘I hope you know that there are people who are going without their medication, and because they’re going without their medication, they’re at risk of dying,'” Sego said. She added, “I don’t know how any person would be ok with knowing that the medication is so high that you have to make a decision about life or death.”