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Blame Game Over High Drug Prices Escalates With New Ad

Bloomberg logoBloomberg 4/6/2017 Jared S. Hopkins and Zachary Tracer

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 New punches were thrown in the blame game over U.S. drug prices Thursday.

Broadening its efforts to defuse outrage over skyrocketing prices, Pharmaceutical Research and Manufacturers of America, the industry’s lobbying association, started an advertising campaign urging insurers to share with customers more of the benefits of rebates they’ve negotiated. In response, the main health-insurance lobby pushed the blame back on drugmakers: “Enough with the distractions.”

Meanwhile, the head of one of the largest pharmacy benefit managers, who are often criticized by drugmakers for their lack of transparency, said his industry helps save money and manufacturers should stop faulting the middlemen.

Pharmacy benefit managers like Express Scripts Holding Co. -- which manage drug benefits for employers and insurers, and privately negotiate prices on their behalf -- receive discounts from manufacturers. The rebates lead to lower prices, but it’s up to insurers whether they are ultimately passed down to patients, Express Scripts Chief Executive Officer Tim Wentworth said in an interview on Bloomberg Television on Thursday.

“A hundred percent of the time, payers determine how they pass through,” he said.

Drug companies that raise prices “would blame the middleman,” the CEO said. Yet pharmacy benefit managers, or PBMs, are transparent with how they work within the health-care sector with payers. “For us it’s a real simple challenge: get the net cost as low as possible for our clients.”

Opaque System

The three main groups that are involved in the complex and opaque system of setting drug prices in the U.S. -- drugmakers, insurance companies and PBMs -- started to strongly fight off criticism months ago. The sector escalated its defense against Washington this year after drug prices became a frequent target for President Donald Trump. He’s threatened to use the government’s buying power to force prices down, which is the industry’s most dreaded option, but so far has not unveiled any specifics about how.

The new ad from PhRMA, which represents more than 50 companies and is one of the most powerful interest groups, is another step in its endeavor to demonstrate that other parts of the health-care industry are responsible for the costs faced by patients. In January, the group started a major initiative, including TV, radio and digital ads. Unlike most developed countries in the world, the U.S. doesn’t directly regulate medicine prices, and drugmakers have strongly resisted it.

The new campaign, “Share the Savings,” will include advertising across various mediums to educate the public about how the rebates for commercially insured patients with high deductibles and coinsurance aren’t passed along to consumers, PhRMA said in a statement. “Robust negotiations” have resulted in major discounts, the group said.

BC-DRUG-PRICE-BLAME-GAME-1:  © Jared S. Hopkins and Zachary Tracer  

Price Negotiations

“We need to ensure patients receive more of the benefit of price negotiations between biopharmaceutical companies and payers,” PhRMA CEO Steve Ubl said in the statement. “It is a problem that more and more Americans are being asked by their insurers to pay cost sharing based on undiscounted list prices, even though insurers may be receiving significant rebates. Providing access to discounted prices at the point-of-sale could dramatically lower patients’ out-of-pocket costs.”

America’s Health Insurance Plans, the insurance industry’s main lobbying group, answered with a strong push back: “Enough with the distractions. We need drugmakers to be more transparent in their pricing, so people know what they are paying for.”

“Prescription drug costs continue to skyrocket, with consumers paying the price with their health, as well as their wallets,” Kristine Grow, an AHIP spokeswoman, said by email. “The truth is, no one knows how drug prices are determined, and what makes them go up by double-digit percentages year after year.

Losing Strategy’

The Pharmaceutical Care Management Association, which lobbies on behalf of pharmacy benefit managers, said drug company efforts to shift blame are a “losing strategy.”

“Manufacturers in reality by and large understand that rebates and discounts do go to reduce premiums and cost sharing,” Mark Merritt, PCMA’s CEO, said by phone. “The problem is high-priced drugs.”

The industry group has said that it expects greater scrutiny over its role in the price of medicine and wants to make its case “vocally and effectively.” 

Some companies, including Allergan Plc and Swiss giant Novartis AG, have responded with voluntary actions to cap annual price increases, while Johnson & Johnson, Eli Lilly & Co. and Merck & Co. have taken steps to increase pricing transparency.

To contact the reporters on this story: Jared S. Hopkins in New York at jhopkins38@bloomberg.net, Zachary Tracer in New York at ztracer1@bloomberg.net.  To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, John Lauerman, Cecile Daurat 

©2017 Bloomberg L.P.

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