Twenty million more Americans now have health insurance since the Affordable Care Act was signed into law six years ago. This brings the portion of those who are uninsured down to 11.5 percent of the population.
In addition to access, the other two objectives of the triple aim are quality care and cost containment. At $3.207 trillion for 2015, the U.S. continues to spend 1 in 6 dollars each year on health care.
Pharmaceutical costs represent more than $375 billion of the tab. Healing health care in this country will require changing the economic model that drives how the pharmaceutical industry functions. It will also involve changing the favorable deal pharmaceutical companies negotiated under the ACA.
The pharmaceutical lobby was heavily involved in negotiations as the ACA was being crafted. On one hand, Obamacare made major changes to the Medicare prescription drug benefit, reducing drug costs for many seniors while increasing certain rebates. On the other hand, the 20 million Americans with newfound health insurance translate into a larger market for manufacturers. In addition, constraints were placed on Medicare’s ability to negotiate for lower drug prices. Overall, it was a good deal for Big Pharma.
A major driver for corporate behavior is the fact that it can cost $2.6 billion and take as long as 10 years to develop a new drug and bring it to market.
New drugs are given 20-year patents, but this includes seven years to get through clinical trials and then a 13-year patent life for sales. During this window, pharmaceutical companies get monopoly pricing. The point is that all the real money is made in the beginning.
Physicians are accustomed to the highly trained, hard-driving pharmaceutical reps who canvass clinics to market these products.
Also because of the high cost to develop new medicines, drug companies try to curb investment in research and development by making small changes to existing drugs and touting them as far superior to their predecessors.
In addition, because of the high cost of R&D, combined with the time-limited window for brand protection, many useful medicines are never developed simply because the market is not large enough to justify this exercise. New agents for general anesthesia during surgery have been cited as an example.
At the same time, the capacity of biotechnology continues to expand at lightning speed with strategic alliances between the nation’s greatest academic institutions and its pharmaceutical giants. As the ability to prevent and cure illness grows by leaps and bounds, so do the costs for associated products, processes and services. A highly publicized example is Gilead’s two drugs for hepatitis C, Sovaldi and Harvoni. At almost $100,000 per treatment course, these drugs work extremely well and can avoid the need for a liver transplant which is far more expensive. The problem is that Gilead has been able to charge what the market will bear. Because there is no federal authority that controls pricing, each insurance plan has had to do its own negotiating. Europe has fared better on pricing because the national health care systems from multiple countries have banded together.
Although Hillary Clinton, Democratic front-runner for president, has topped the 2016 field in drug industry donations, she has also said: “I am going after them.” Her campaign has posted an ad citing a patient who is now being asked to pay $14,700 for the same medicine that cost her only $180 in the 1980s. In addition to curbing predatory pricing, Clinton’s plan will include a requirement that drug companies put more of their profits into R&D. She also promises to stop these companies from using government grants on advertising. Most importantly, she aims to begin allowing Medicare and the U.S. government to negotiate down prescription drug costs.
More, thoughtful federal oversight is needed. The federal government should establish uniform, national standards so that all treatments can be ranked by how much bang they give for the buck. A highly regarded model for making this assessment is quality-adjusted life years, or QUALYs, which measure the cost per year of healthy life that each medical intervention offers. Healthy life means the ability to engage in education, productive work or enjoyable retirement. More importantly, QUALYs weigh the extra years of life based on how patients subjectively describe the quality of those years.
Obamacare is far too well established to be repealed, but much remains to be done not only to optimize access to quality care but also to skillfully manage costs. For many seniors, the cost of medication is their principal concern. The powerful pharmaceutical lobby must be resisted in favor of reform that restrains aggressive marketing, guards against predatory pricing and helps to ensure that costs are justified by clinical outcomes.
Ira “Kawika” Zunin, MD, MPH, MBA, is a practicing physician. He is medical director of Manakai O Malama Integrative Healthcare Group and Rehabilitation Center and CEO of Global Advisory Services Inc. Please submit your questions to info@manakaiomalama.com.
