American Prescription Drug Prices Are Out of Control. One Man’s Furious Quest to Get to the Bottom of It.
Sky-high prices. Confusing co-pays. Maddening bureaucracy. Why is our pharmaceutical system such an impenetrable mess? (Warning: This story may make you reach for a sedative.)
I was at the end of the long table in the conference room when I realized the drugs had become a problem.
As I tried to focus on the presentation — some suit droning on about tax benefits and pricing tiers — I zoned out, and my face became flushed. Burning-hot rage pulsed across my skin, crackled down to my fingertips, then shot back. I wasn’t sure I could make it out of the room without doing something I’d regret.
I’d always known that it could come to this — that the compounds I’d been injecting all these years could have consequences. Back then, even though I knew vaguely how much it all “cost,” someone else was always picking up the tab. And because I liked how the drugs made me feel — safe — I didn’t ask too many questions. You can’t put a price tag on security.
But suddenly, there was a price tag. And a big one. Specifically: 20 percent co-insurance after deductible.
This was going to get expensive.
I’m on drugs for multiple sclerosis and have been since 2004. MS meds are what are called maintenance drugs, meaning you take them daily or weekly from the moment of diagnosis till death or untenable side effects do you part. They’re also some of the most jaw-droppingly expensive drugs on the market. Today, in 2019, the four different name-brand medications I’ve been prescribed at different points in my treatment list for between $75,816 and $98,899. Per year. Prices are indeed high. And they’re going up fast.
Like everyone else, I’d been hearing the drumbeat: The cost of prescription drugs was out of control. But because the insurance plans I’ve been on had decent-enough prescription drug coverage — my meds had generally cost me a co-pay in the $100-to-$150-per-month range — I’d been shielded from the issue. And a few years back, I discovered that if you ask, some drug manufacturers will actually pay your co-pays for you. So I was getting drugs that listed for a decent annual salary for the cost of my modest-by-comparison health-insurance premiums. I didn’t know who was paying how much of those prices — honestly, they seemed too absurd to be real. All I knew was that it wasn’t me.
But as I sat in the conference room for my company’s annual benefits presentation last December, I got a cold dose of reality — and became another of the millions of Americans incensed by the skyrocketing prices pharmaceutical companies charge for their products and the byzantine, competition-squelching health-care system that allows those prices to escalate unchecked.
This year, Philly Mag’s parent company, Metro Corp, offered its employees, as it has each of the six years I’ve worked here, two plans through United Healthcare. What’s different this year is that due to the ballooning price of coverage, both Metro Corp plans came with prescription drug benefits that treat medications in the two highest tiers of its “formulary” (that’s insurer-speak for the list of drugs that are covered) on a co-insurance model, meaning I would have to pay “full price” for my medications until I hit my family deductible of $4,000 per year, and then 20 percent of the price afterward until I hit my individual out-of-pocket maximum of $6,650 per year. When all the math was done, it amounted to around $3,180 in additional, unexpected health-care costs over what I paid last year. It’s effectively a $3,180 pay cut — never good, and especially troubling heading into a year when you’re expecting your second daughter. My wife’s work provides good coverage for her but charges through the nose to add family.
I had to do some emergency rebudgeting. I’d need to find out what this drug was going to cost, fast. And, masochist that I am, I wanted to find out why it costs what it does.
What I learned: The pricing methods of drug companies in this country — largely unregulated by an innovation-obsessed, lobbyist-beset government and buttressed by taxpayer-funded research — are a big mystery. Thanks to secret negotiations, the prices that pharmaceutical companies list are different from the prices for your insurance company, which are different from the prices for your pharmacy. America’s health-care system is the most expensive and pointlessly complicated in the world — “a classic example of market failure,” according to Wendell Potter, the Philly-based former Cigna exec turned whistle-blower who’s now the muckraking publisher of Tarbell, an investigative journalism site focused on the health-care industrial complex.
It seems entirely possible that no two people in the country pay the same price for the same drug. And thanks to the bureaucracy that’s sprung up around health care like a boomtown, getting answers to even the most basic questions is increasingly difficult.
As a result, it seems entirely possible that no two people in the country pay the same price for the same drug. And thanks to the bureaucracy that’s sprung up around health care like a boomtown, getting answers to even the most basic questions is increasingly difficult. Ultimately, what I’ve learned is that you might be able to find out how much a drug will cost you, but unless legislators take action, you’ll never know why.
Before we go any further, let’s break down as simply as possible how America’s maddeningly complicated pharmaceutical supply chain “works”:
Fact 1: Pharmaceutical companies develop drugs for which they set a “list price.” The list price is often unfathomably high. Pharma companies say this is a strategy they use in their dealings with pharmacy benefits managers, or PBMs.
Fact 2: PBMs began as middlemen who contracted with insurance companies to manage prescription claims. They’ve since grown into bureaucratic behemoths who design co-pays and formularies and negotiate with pharmaceutical companies as well as pharmacies.
Fact 3: Because pharmaceutical companies ultimately need their products to make it onto an insurer’s formulary, they’re incentivized to give PBMs favorable deals. And because pharmacies need to be in the networks of major insurers, PBMs have a ton of leverage over them as well. This is where things get hairier.
Fact 4: The difference between the list price set by the pharmaceutical company and the price the PBM ultimately negotiates is called the “rebate,” and the PBM may or may not pass all or part of those savings on to the insurer and patients, depending on its contract with the insurer. One result is that drugs may make it onto formularies based on how much money a PBM can make off of them, not necessarily because of superior effectiveness.
Fact 5: Any difference between the money the insurer pays to the PBM and the price the PBM negotiates with pharmacies is called the “spread,” and it’s another opportunity for PBMs to make mystery money.
Fact 6: PBMs don’t have fiduciary responsibility, which is to say they’re not legally required to act in the best financial interest of patients they ultimately serve. According to Ed Weisbart, a retired exec at PBM Express Scripts who now advocates for single-payer health care as chair of the Missouri chapter of Physicians for a National Health Program, “Some PBMs refer to ‘fiduciary’ as the F-word.”
Fact 7: Nobody outside of this system knows what’s happening inside of it. And the fact that we know so little suggests that it’s in the best interests of all involved to keep quiet.
Fact 8: Pharmaceutical companies claim, rightly, that developing drugs is an expensive business, and that for every drug that eventually makes it to market, there are untold failures.
Fact 9: And yet we also know that pharmaceutical companies are some of the most profitable businesses on the planet. And we know that one PBM, owned by a health insurance conglomerate, has been dubbed by Healthcare Finance News a “secret weapon” in that insurer’s efforts to make money.
Fact 10: As a result, everything happens in a black box, and as any NTSB investigator will tell you, nothing good comes out of black boxes. The whole system is a vicious circle of plausible deniability. In the face of criticism, any one entity in the supply chain can, and often will, point to the others and say, essentially, “Not it.”
Here’s how I came to be on MS drugs.
In late 2003, while working an unfulfilling day job, I began taking on freelance work. My goal was to build up a client base and leap into freelancing full-time. I did this extra work mostly in the hours between 9 p.m. and 4 a.m., and as the assignments accumulated, so did my sleep debt.
Then something weird happened. Reading began to make me feel dizzy. I’d randomly experience double vision. Focusing gave me a headache. I couldn’t quite see everything out of my left eye. I’d developed a blind spot about the size and shape of my extended left fist. So I started wearing an eye patch at work and visiting a string of specialists: an optometrist, an ophthalmologist, a neuro-ophthalmologist.
Finally, an MRI and a neurologist revealed the source of my vision problems: two small lesions on my optic nerve. The diagnosis was optic neuritis, but what caused it was the same mechanism at work in multiple sclerosis: Your immune system short-circuits and starts attacking myelin, the substance that insulates your nerves. Optic neuritis isn’t MS, but people with the diagnosis have about a 50/50 chance of developing MS, relapses of which can also present as localized numbness, weakness or pain. In the most common type of the disease, relapsing-remitting MS, patients eventually regain all or at least some of the function lost during early attacks. (My vision returned to normal within a few months.) But the risk of permanent nerve damage due to MS increases with each successive attack. Scientists still don’t know what exactly causes MS, but through trial and error, they’ve been able to develop therapies that have been shown to increase the stretch between relapses. The more time you can put between your diagnosis and that nth debilitating relapse, the better the chances that science will find a cure before you end up in a wheelchair.
I was rushed onto a drug called Avonex. The onboarding process between the pharma company, my doctor, my insurance, and the special mail-order pharmacy that would furnish my monthly supply of temperature-controlled syringes was a frenzy of pre-approvals and document signings the likes of which I wouldn’t experience again until I applied for my first mortgage. Avonex is a once-weekly intra-muscular injection that I had to self-administer. “Intramuscular” means that unlike shallower under-the-skin injections, you basically stab yourself. I’m needle-phobic, so plunging a 23-gauge, 1.25-inch needle into my thigh once a week, alone in my apartment, was a special kind of torture. After each plunge, I felt like I had the flu for the next 24 hours. And because the active ingredient is hell on your liver, drinking was strongly discouraged. I was eventually transitioned to Rebif — a similar drug, taken thrice weekly, subcutaneously. So: smaller needles, less intense but more frequent flu-y symptoms, alcohol still discouraged. About four years in, tired of having to try to sneak naps at work on side-effect days, I got my doctor to switch me to Copaxone, a subcutaneous injectable made by Philly-area company Teva that has no harsh side effects and (huzzah!) doesn’t get in the way of my love of strong manhattans.
I get an MRI every few years and haven’t had a relapse since my initial diagnosis 15 years ago. This means I’m lucky. It also means that either the miracle drugs have worked … or I had “clinically isolated syndrome,” a.k.a. one-and-done MS, which isn’t uncommon. But there’s no test for MS. The only way to know would be to go off the meds — and wait. Every time I bring this up with my doctor, he advises that if I can tolerate the drugs, I should stay on them, because MS is unpredictable: We don’t know why my condition has been stable, and we don’t know what course the MS would take if it resurfaced. And this is the uncomfortable truce MS and I had reached. The meds don’t bother me much, and they didn’t cost me much, so I’ve taken them. Yet I’ve done this knowing that I’m one unfavorable insurance plan away from having some difficult choices to make. Now that patients are being funneled into plans that expose them to more of their costs, that unfavorable plan had arrived.
The first thing I did after my rage-inducing insurance meeting was go to United Healthcare’s website to check the “explanation of benefits” document for my prescription, to see how much it “listed” for. I’d just been switched to a newly approved generic version of Copaxone: glatiramer acetate. That it was generic was a good sign; that it was produced by Mylan, the western Pennsylvania company whose CEO testified before the House in 2016 to explain why her company had ratcheted up the price of its EpiPen, was less so. I found a price of around $4,000 a month and then called Kistler Tiffany Benefits, the brokers of our plan, to see if they could confirm this. They called United Healthcare, then called me back with a nearly identical price: $4,289 a month. The cost was especially shocking because news reports last summer trumpeted that Mylan had cut the price of its generic Copaxone by more than 50 percent, to $1,900 a month. Under our plan (and, for simplicity’s sake, assuming I had no other health-care costs), at $4,289 a month I’d fulfill my deductible in January and, paying 20 percent or $857 a month thereafter, hit my out-of-pocket max of $6,650 in May.
At my Kistler Tiffany rep’s urging, I called Mylan to see if they had an assistance plan and learned that they would cover $9,000 of my prescription costs annually. (This made me wonder: If it’s worth it to Mylan to cover $9,000 of my mediation, how much money are they making on me?) With this “coupon,” I’d fulfill my deductible in April and my out-of-pocket max in July, saving me no money but presumably saving somebody — My employer? My insurer? My PBM? — something.
But then things got stranger. In January, when I refilled my prescription, I was given another price: $1,849.72 a month. I called Kistler Tiffany, who called United Healthcare. I was told that the $4,289 price was accurate in December, but because I was using a coupon, I was now being charged a lower price. Huh? Some more quick math: At $1,849, I would hit my deductible in August and, again presuming no other costs, would finish the year about $750 below my out-of-pocket max. Good news! I guess! But wait! Once I exhausted my $9,000 coupon, would the $1,849 price jump back up to $4,289? I spent about a half-hour on the phone with a couple of representatives from OptumRx (the aforementioned “secret weapon” PBM owned by United Health Group, which owns United Healthcare) and BriovaRx (the specialty pharmacy that’s “proud to be part of the OptumRx family”), trying to sort this out. I was variously told at one point or another that the $4,289 price might have had “something to do with my deductible”; that the price wouldn’t go up to $4,289 once the coupon was exhausted; that there’s no way of knowing that for sure; and that it definitely wouldn’t go up. I asked what the list price of the Mylan generic was (the one I’d read was slashed to $1,900) and was told it would cost $6,600 without insurance. I told the maddeningly nice lady on the phone that none of this made any sense. She said she was sorry that I seemed to be having a frustrating experience with OptumRx. I hung up having received a lot of information, much of it contradictory.
I did, of course, reach out to Teva and Mylan on the off chance that either might shed any light on its pricing. (According to the National Multiple Sclerosis Society, which tracks prices, Copaxone currently lists for $6,300 a month.) A phone call to Teva’s PR rep, Doris Saltkill, was returned with an email suggesting I buy a 2010 book called The Remarkable Story of Copaxone: An Approach to the Treatment of Multiple Sclerosis. (It’s a freaking page-turner.) A list of questions about where Copaxone is manufactured, how it’s priced, and whether the up-front investment has been recouped has thus far not been answered. I’m not holding my breath. Over the course of several calls to Denise Moses, the PR rep at Mylan, I was informed repeatedly that my request had been “passed along.” A similar list of emailed questions has gone unanswered. I’ve since learned that in 2009, Teva sued Mylan over its attempts to produce generic Copaxone, and in the same year, Mylan sued Teva over its attempts to make a generic EpiPen. Both companies were named in a 2016 suit brought by 20 states (still ongoing) alleging price-fixing of two other drugs. While both companies have had their ups and downs — Mylan’s stock price fell in the wake of the EpiPen controversy, and Teva appears to have been hit hard by Mylan’s generic Copaxone — both still reported huge revenue numbers ($11 billion and $19 billion, respectively) in 2018. Given their histories, it’s not surprising they’re not talking. Then again, pharmaceutical companies never seem to talk unless they’re compelled to.
In February, the Senate Finance Committee called executives from seven pharmaceutical companies to testify about the high prices of their drugs, which everyone, right up to the President of the United States, has been railing about. This was hyped as a redux of the famous 1994 Big Tobacco hearings, but it ended up being something much less. There were no gotcha moments in the Big Pharma testimony. With tobacco, the case was pretty simple: Cigarette companies were profiting off of a product they wouldn’t let their own children consume. High prescription costs, as detailed above, are more complicated.
For three hours, representatives from AbbVie, Merck, Johnson & Johnson, Sanofi, AstraZeneca, Bristol-Myers Squibb and Pfizer dodged and weaved as senators sought to make salient points while trying to hack through the thicket that obscures U.S. drug pricing. It was like watching snakes tap-dance. The rhetoric from the witness stand seemed designed to deflect efforts to crack open the black box — to shield the process from regulation or transparency. Perhaps the most salient exchange came when Sanofi CEO Olivier Brandicourt and Louisiana Senator Bill Cassidy debated the price disparities between the U.S. and other developed countries (where prices are regulated by the government and all the companies present still have billions in revenue.) Brandicourt pushed back on the idea of having prices imposed via governmental regulation — to which Cassidy responded that pricing “is imposed now,” but by Big Pharma.
It’s like the numbers are all made up — as if everyone (but you and me) is playing this game with Monopoly money. It’s why it was so confounding that the issue of “value” kept coming up at the hearing. In America, we’re trained to treat value as a market function. But markets require transparency, and there is no transparency here.
I’d gone into this story thinking that the cost of a medication might in some way be determined by, say, the cost to physically produce, distribute and then market the drug, plus some percentage of the cost of developing it, plus, owing to a sense of Hippocratic decency, a modest profit. I’d assumed that once a company’s 20-year window of patent exclusivity was up, said company, having recouped its initial investment and enough extra to seed additional R&D and, of course, reward shareholders, might find some production efficiencies that could lower the price, or at least keep it in line with inflation. After all, once you’ve found a way to treat a sick population, it’s downright greedy to keep sticking it to that population, right?
But what I found is that health care isn’t a commodity. I discovered a stat the pharmaceutical industry uses called a QALY — quality-adjusted life year — that measures the years (adjusted for, yes, quality) that a certain treatment will add to a person’s life. For instance, each healthy year you live until a certain age could be worth one QALY. Once you reach, say, 70, maybe each healthy year is worth .95 QALYs. Health problems further decrease the worth of a year. If you develop cancer, perhaps you only get four more years, and each is worth just .5 QALYs. How much money is it worth to turn those two QALYs into 10? According to the Institute for Clinical and Economic Review, an independent Boston-based nonprofit that analyzes the cost and effectiveness of different modes of health care, $100,000 to $150,000 is a “reasonable value” for a QALY. In a March 2017 study, the organization determined that 15 of the MS treatments on the market at the time ranged from $38,000 to $355,000 per QALY, with an average of $235,179.
Are these the sorts of things drug companies consider when they set prices? “They would probably say those are part of their considerations,” says Reuben Mathew, one of the authors of the U.S. Public Interest Research Group’s recent study “The Real Price of Medications,” which found that rising costs in the U.S. are driven mainly by drug manufacturers choosing to increase prices and not because we’re getting sicker or older. “The simpler answer is that we just don’t know. … And value can get problematic pretty quickly, because it’s essentially a discussion of the value of a human life.”
It all seems fairly insane. And, to me, unethical. So I asked Steven Joffe, chief of the Division of Medical Ethics at Penn’s Perelman School of Medicine, to help me break it down. In his view, putting dollar values on well-being isn’t at its core unethical. “There isn’t an unlimited amount of money to pay for health care,” says Joffe, “and any dollar that is spent on one treatment is money that’s not available for another treatment. If we categorically refuse to attach any kind of dollar value to well-being, then we have no basis for making decisions about how to allocate health-care dollars.”
The trouble, Joffe says, is that without transparency, those decisions are made with distorted data: “How the heck do prices get set? When the drug costs $100,000 a year, where is that money going? How much is going to the manufacturer? How much to the PBM? How much is going within the manufacturer to R&D, and how much is going to profits and marketing and executive salaries?”
And there are other issues. Negotiating power is tilted entirely to the pharma supply chain. Patents and exclusivities keep competitors from the market. Federal regulations prohibit Medicare from negotiating prices. Insurance companies ultimately can’t afford to not cover certain therapies. And people with serious and life-threatening diseases don’t have options. “We’ve got, fundamentally, a system where you have monopoly sellers,” says Joffe, “and buyers who can’t negotiate because they can’t walk away.”
Despite the numerous bills and proposals that legislators have introduced in recent years aimed at fixing runaway costs, it feels like what’s wrong is more fundamental, and that the solution requires foundational change.
“The ultimate fix, and I advocate for this,” says Wendell Potter, the health-care exec turned whistle-blower, “would be for us to move to an improved Medicare for All health-care system in which everyone is enrolled in a plan that is administered by the federal government and is financed publicly. It can be operated much more efficiently, and you spread the risk across the entire population. And Medicare would have the ability to truly negotiate with drug companies, as they do in most other countries.”
For Joffe, the solution is similar, if slightly more nuanced. “It makes no sense for people to have to pay substantial amounts of money for health care they can’t say no to,” he says. “The point of insurance should be that we all pay into a system, and we all get what we need out of the system. I’m not suggesting that it cover every item of discretionary health care. But the stuff you can’t say no to — cancer drugs, insulin, drugs to treat severe depression or schizophrenia — it makes no sense to have to pay substantial amounts of money out-of-pocket.”
What’s most frustrating is that better systems exist. In Canada. In the U.K. In France and Germany. It does feel like we’re at a moment where something has to give. When Republicans and Democrats and Donald Trump and Bernie Sanders all seem to be shouting about the same thing (if not proposing the same solutions), we can’t be far from fundamental change, right?
In the meantime, I’ve got some decisions to make. An extra $3,180 isn’t going to bankrupt me, but it’s also money I would have saved — tucked away for retirement or put into my daughters’ college funds. I’ve since reached out to my doctor to talk about maybe going off the meds. Ever since my initial diagnosis, I’ve been consumed with the idea that I don’t actually “have” MS. I’m not a doctor, but in the core of my being, I think the optic neuritis was just my body telling me I was pushing myself too hard. But, as my wife points out, our equation has changed. It’s great for me and our family that I’ve remained healthy, and that in the morning I get to walk my two-year-old daughter to the preschool she adores without a second thought. Why would I do anything, anything at all, to put that at risk for daughter number two?
Published as “Ouch” in the May 2019 issue of Philadelphia magazine.