As debate rages over where to lay the blame for the USA’s drug affordability crisis, Katie Payne, senior vice president for strategic communications for the Pharmaceutical Care Management Association (PCMA) sets out a defence of the country’s pharmacy benefit manager (PBM) industry. Payne instead raises concerns with big drug companies’ patent schemes and presents solutions for Congress to support proper market competition and fairer prices for patients.
To address the challenge of prescription drug affordability, effectively lower prices, and create a more affordable and sustainable future for patients, policymakers in Washington must focus on increasing competition by stopping patent abuse
For millions of Americans, the prescription drug delivery system works: people, for the most part, can access the medications they need when they need them, and at the cost they expect and can afford. But “millions of Americans” does not include all Americans. For too many patients, a lack of competition in the marketplace and the corresponding high price of many prescription drugs continue to inflict financial uncertainty and burden, with as many as one-in-four Americans saying it is difficult for them to afford their prescription medication.
The primary cause of this gap in affordability is extensive big drug company patent schemes designed to extend monopoly pricing on blockbuster products without any corresponding increase in clinical value for patients, undermining competition and pushing prices higher.
In an effort to stifle competition, big drug companies are regularly granted additional and overlapping patents on the same drug under the current system. For the top ten best-selling drugs in the US, there are on average 74 granted patents, preventing generics and biosimilars from entering the market. Patent thickets, as these overlapping patents have come to be known, on five of the ten top-selling drugs in the US resulted in more than USD 500 billion in additional sales. Patent thickets are just one of several examples of how big drug companies extend their monopolies and protect profitable franchises far beyond what policymakers initially intended.
Blocking more affordable options beyond a reasonable period of exclusivity has enabled big drug companies, who are responsible for setting prices on the products they make and sell, to institute substantial and sustained price increases on brand-name prescription drugs, imposing massive costs on the system.
The overall price of prescription drugs rose 2.1 percent on the consumer price index in January 2023, the largest increase since 1969 when records began. That same month, big drug companies increased prices on nearly 600 brand-name prescription drugs. At least 16 big drug companies increased prices on products in their portfolio by more than 10 percent.
To address the challenge of prescription drug affordability, effectively lower prices, and create a more affordable and sustainable future for patients, policymakers in Washington must focus on increasing competition by stopping patent abuse. Congress must also reject the policies big drug companies are pushing that do nothing other than distract from the root cause of high prices and boost pharma bottom lines at the expense of patients and other entities who are working to lower costs in the supply chain, like pharmacy benefit companies.
Pharmacy benefit companies provide drug benefits for more than 275 million Americans, to whom we share a deep commitment to making prescription drugs more affordable. Our companies work every day to secure savings and push big drug companies for price concessions — generating USD 1,040 in savings on prescription drugs per patient per year. Pharmacy benefit companies also enable better health outcomes by equipping clinicians and patients with data and information, improving adherence to doctor-prescribed treatment programs, and providing employers with options and pharmacy benefit expertise to build quality prescription drug coverage plans that work for them and their workforce.
Unfortunately, other partners in the supply chain have sought to distort the role of pharmacy benefit companies in the hopes of weakening our negotiating power – weakening our ability to secure savings, which of course, boosts their own profits. The result of this self-interested finger-pointing strategy has been the proposal of legislation that would undermine pharmacy benefits that patients rely on for significant savings, increase the pricing power of big drug companies, and lead to higher costs for employers, taxpayers, and patients.
That is why it is important to understand how drug pricing negotiations work: First, drug companies set initial list prices on the products they make and sell. Then, pharmacy benefit companies, who are hired by health insurers and employers for their specialised pharmacy benefit expertise, negotiate lower prices by leveraging their collective bargaining power as representatives of millions of American patients. If the price is too high, pharmacy benefit companies can exclude the drug from placement on a formulary and include competing drugs with lower prices. This is just one important way that pharmacy benefit companies provide invaluable downward pressure on prices for drugs that face competition by leveraging the bargaining power of scale.
For brand-name drugs that face no therapeutic competition, however, big drug companies already have unilateral pricing power — underscoring the importance of stopping the undue extension of monopolies. And, despite the tired narrative to the contrary, we observe a consistent pattern of price increases among some of the highest-priced drugs, despite the fact that these are the very drugs for which there are no rebates. How can rebates be the cause of price increases on drugs that don’t have rebates? That’s the question Congress should be asking.
Lawmakers have already taken encouraging steps forward. In the very first vote on prescription drug issues in the 118th Congress, lawmakers advanced a package of bills designed to encourage competition in the marketplace. The suite of solutions advanced with unanimous bipartisan support by the US Senate Committee on the Judiciary included the “Affordable Prescriptions for Patients Act,” which aims to crack down on product-hopping and patent thickets.
Such legislation will help foster a more competitive marketplace that allows for more affordable alternatives to enter the marketplace which will push drug companies to lower prescription drug prices.
In a letter to the US Patent and Trademark Office (USPTO) last summer, senators from both sides of the aisle noted, “patent thickets harm competition through sheer numbers. In the drug industry, with the most minor, even cosmetic, tweaks to delivery mechanisms, dosages, and formulations, companies are able to obtain dozens or hundreds of patents for a single drug. This practice impedes generic drugs’ production, hurts competition, and can even extend exclusivity beyond the congressionally mandated patent term.”
Promoting greater competition from biosimilars and supporting investment in these important products will be particularly critical. Patent abuse blocking biosimilars from the market alone will cost patients an estimated USD 30 billion over the next decade — on top of a USD five billion heightened price tag from lost biosimilar competition between 2015 to 2020. We should be welcoming policies that allow more affordable alternatives from entering the market, not maintaining the status quo of high prices.
Policies that enhance competition will make drugs more affordable. Direct competition among products lowers prices, and competition in the prescription drug market has proven effective, with as few as six generic competitors lowering prices by 95 percent.
Pharmacy benefit companies remain focused on building a more competitive prescription drug marketplace to increase affordability for all patients, and we look forward to working with policymakers and others in the supply chain on this critical endeavour.