qotd: Generic drug pricing confirms that markets are not working

The CMS Blog
December 21, 2015
Medicare Drug Spending Dashboard
By Andy Slavitt, Acting CMS Administrator and Niall Brennan, CMS Chief
Data Officer

Today, CMS is releasing a new online dashboard to provide information on
Medicare spending on prescription drugs, for both Part B (drugs
administered in doctors' offices and other outpatient settings) and Part
D (drugs patients administer themselves) to provide additional
information and increase transparency.

In today's announcement, the topline findings include:

* The diversity, growth, and impact of drug spending in the Medicare
program – while the high-cost drugs include brand name Hepatitis C and
cancer therapies, some generic drugs are seeing large price increases.

http://blog.cms.gov/2015/12/21/medicare-drug-spending-dashboard/

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Politico Pulse
December 23, 2015
Competition Not Stopping Drug Price Hikes, Medicare Data Shows
By Brianna Ehley

If you think a marketplace monopoly is behind all massive drug price
hikes you might want to take a look at the new CMS drug spending
dashboard. Eight of the 10 drugs that had big cost increases between
2013 and 2014 were made by multiple manufactures. Among them were five
drugs that more than doubled in price during that time. If you expand to
taking a look at the 15 drugs with the largest increases, nearly
two-thirds or 9 of the 15, were made by multiple manufacturers. This
data may throw a wrench in a popular solution proposed by Congress to
deal with exponential drug price hikes — have FDA review faster the
generic applications for drugs with a market monopoly but no patent or
exclusivity protection. Furthermore, only one drug in the top 15 for the
biggest price hikes was listed on the FDA's drug shortage list during
2013-2014, which means we can't blame companies taking advantage of a
limited supply either. Take another look at the drug spending dashboard
released this week and play around with the information yourself:
http://go.cms.gov/1PkbJEk

http://www.politico.com/tipsheets/politico-pulse/2015/12/obamacare-enrollment-climbs-to-93-million-in-septcompetition-not-curbing-drug-price-hikesutah-can-block-federal-grants-to-planned-parenthood-211914

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Comment by Don McCanne

Only Rip Van Winkle would not know that drug prices are totally out of
control, yet the pharmaceutical industry tells us that there is no
problem since the market will price drugs appropriately. But instead of
competition bringing down prices, their concept of market dynamics is to
push up the prices to the maximum that will be tolerated by patients who
are partially insulated by various public and private payers.

If there is an area in pharmaceutical pricing in which competition
should work, that would be the competition between generic products that
are no longer under patent. But looking at the Medicare drug spending
dashboard, it is obvious that the pharmaceutical firms have been able to
push pricing of several generic drugs well above the levels that would
be expected in a well functioning free market.

When the Republicans passed the Part D Medicare drug program, they
prohibited Medicare from negotiating drug prices, instead insisting that
the markets would be more effective in bringing drugs prices down. But
instead the insurance and pharmaceutical industries have been allowed
the freedom to essentially establish their own rules on how markets
work. Their rules allow them to maximize their revenues while patients
are being gouged, either directly or through taxes and higher insurance
premiums. Adam Smith would agree that this corrupted version of markets
is no market at all. They are using their control of essential
medications to extort us. Extortion is not a tool of normal markets -
quite the opposite.

We do not need to recite again the work by Nobel laureate Kenneth Arrow
on why health care markets do not work. We have already proven that our
reliance on markets is not effective by the mere fact that we spend, per
capita, over two and one-half times as much on health care as the
average of other wealthy nations.

We simply need to push the ideologues aside and put into place public
policies that other nations have used to obtain value in their health
care purchasing. The model most suitable for us would be a single payer
national health program - an improved Medicare for all.