The Pharmaceutical Research and Manufacturers of America (PhRMA) is making news with changes to its membership rules, but in an era of skyrocketing brand drug prices, it remains to be seen whether patients will actually benefit.
The changes are reportedly intended to eliminate from membership small pharmaceutical companies who aren’t developing their own drugs, but instead acquire patents to old drugs and then dramatically increase the price.
Perhaps the most famous case of this is when Turing Pharmaceuticals, led by notorious “Pharma Bro” Martin Shkreli, increased the price of Daraprim from $13.50 per pill to $750 per pill. This led to Shkreli becoming the target of fierce media criticism and backlash from Congress. Turing eventually backed down, and PhRMA was quick to point out that Turing was not a member.
The problem with that narrative for PhRMA is that it isn’t just companies like Turing and other small pharmaceutical companies that are imposing steep price hikes on patients.
One recent example that drew the ire of lawmakers on Capitol Hill is Marathon’s increase in the cost of deflazacort, a drug that treats muscular dystrophy. When Sen. Bernie Sanders and Rep. Elijah Cummings sent a letter to Marathon’s CEO blasting it for pricing the drug at $89,000 in the U.S., while it is available for $1,500 elsewhere, the company responded by announcing it was pausing its commercial launch of deflazacort.
Again, this is hardly an isolated incident. Many large brand drug manufacturers, who make up PhRMA’s core group of companies, are engaging in the same kind of increases:
Johnson & Johnson raised its prices on several top-selling products, including the leukemia drug Imbruvica, the diabetes treatment Invokana, and Xarelto, an anti-clotting drug, according to a research note published last week by an analyst for Leerink, an investment bank. Other major companies that have raised prices this year include Amgen, Gilead and Celgene, the analyst reported.
Makers have raised prices on brand-name drugs by double-digit percentages since the start of the year, according to interviews with executives at Express Scripts and CVS Caremark, two major drug-benefit managers. And a report last week by the research firm IMS Health found that in 2015, list prices for drugs increased more than 12 percent, in line with the trend over the five previous years.
And industry experts don’t expect this trend to change anytime soon. Rather they anticipate that pharmaceutical companies will just try to be shrewder about how they increase prices to avoid the kinds of massive public relations backlashes experienced by Turing and Marathon.
That brings us back to PhRMA’s new membership rules. According to yesterday’s press release, the lobby group for the brand pharmaceutical industry will mandate that members have a “three-year average global R&D spending of at least $200 million per year.” They’ll also have to have to show that their R&D spending amounts to at least 10 percent of their global sales. This might seem like a laudable investment in finding new cures, until one notes that the brand industry’s annual spending on direct-to-consumer advertising for its pricey products regularly exceeds this threshold.
The reality is that focusing solely on investment in R&D is unlikely to result in reducing drug prices in the short-term, and unless drug makers change the way they spend their money, it isn’t likely to make a difference in the long run, either. Consider that nine out of 10 biggest pharmaceutical companies spend more on marketing than on research. On top of that, very little of the money these companies spend on research goes into the development of groundbreaking new treatments. Instead, the money is mostly spent on variations of existing drugs.
So, is this a legitimate effort to push its member companies toward corporate responsibility, or is this merely a typical Washington PR smokescreen designed to get friendly media coverage and reduced scrutiny from Congress on the front end, without delivering the goods on the back end?
No one can say for sure, but it would be in the public interest for Members of Congress and media willing to give PhRMA positive reviews now to hold them accountable for ensuring these rule changes produce tangible short-term and long-term results.
As Congress moves forward on trying to repeal and replace Obamacare, more and more Americans are facing the possibility of being unable to afford health insurance, particularly for pre-existing conditions. This means that patients who rely on prescription medications for conditions they already have will be the most at risk for no longer getting coverage for those drugs. If a patient with Hepatitis C were to suddenly lose coverage for that pre-existing condition, the outrageous $84,000 cost of a 12-week course of Harvoni would be unaffordable.
There are lives at stake, and drug companies owe it to patients to take serious steps to keep treatments as affordable as possible. Hollow public relations stunts are not good enough.
PhRMA may be enjoying some positive headlines now for their rule changes, but one would hope that Congress stays on the case to ensure they lead to lower drug prices and better outcomes for patients.