Prescription drug situation less than ideal for consumers

Jeff Stier of the Consumer Choice Center has mixed opinions.

“Senator Braun’s is an attempt to solve or address the problem of PBMs, pharmacy benefit managers who are not passing along price reductions instituted by the pharmaceuticals along to the consumers, so there is a real problem there,” Stier begins. “I as a freemarketer am never pleased to see legislation that bans behavior between two companies, so if a PBM gets rebates from drug companies, that may be how they operate their business.”

In what Stier describes as his ideal world, the consumer could choose whether to engage with that business model. 

“However, we don’t live in a healthcare environment that’s free market; it’s extremely regulated,” he continues. “It’s kind of like a ball of string with knots in it, and I think this proposal addresses one of the really ugly knots, but I think more needs to be done to untangle it so that we have something that serves consumers, that advances public health, that looks more like a free market.”

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About Jeff Stier

Jeff Stier is a Senior Fellow at the Consumer Choice Center. Mr. Stier has been a frequent guest on CNBC, and has addressed health policy on CNN, Fox News Channel, MSNBC, as well as network newscasts. He is a guest on over 100 radio shows a year, including on NPR and top-rated major market shows in cities including Boston, Philadelphia, and Sacramento, plus syndicated regional broadcasts. Jeff’s op-eds have been published in top outlets including The Wall Street Journal, The Los Angeles Times, The New York Post, Forbes, The Washington Examiner, and National Review Online.

A Patently Reasonable Approach to Addressing Pharmaceutical Prices

We seem to be at an impasse when it comes to getting the prices of prescription drugs under control for patients while at the same time fostering innovation. This need not be the case.

The left and the right have their own ideological approaches, none of which will advance given current political reality. Progress will only come in the form of bipartisan, good-government reforms that make the system more fair and predictable.

Both parties can work together to lower drug prices while protecting innovation. We can achieve this through rational approaches, including more transparency around pharmacy benefit managers; the continued streamlining of approvals for generic biologics (also known as biosimilars); and maintaining the delicate balance between incentivizing innovation while fostering lower prices through the entry of generic drugs to the market.

At the heart of most calls for lower drug prices is some form of government intervention requiring innovators to charge less for the medicine that their investments financed. Like waving a magic wand, some would like the government to simply mandate lower prices. But to think that such a move wouldn’t stifle innovation in the already expensive and risky field of drug research and development would require, well, magical thinking.

The financial driver of pharmaceutical R&D investment is the promise that if the drug receives Food and Drug Administration approval, a manufacturer will be able to market it exclusively for a period of time at the price it chooses, without generic competition. After the patent expires, generic drugs serve to reduce drug prices dramatically.

As Sen. Orrin Hatch’s remarkable career in the Senate came to a close at the end of the year, he introduced legislation, the Hatch-Waxman Integrity Act, which will protect the delicate balance created in his 1984 Hatch-Waxman Act that paved the way for a robust marketplace for generics while still protecting innovation through strong patent rights.

In 2011, when technology patent trolls were wreaking havoc in the tech world, Congress, in an effort to protect true innovators, created a patent adjudication process called inter partes review, where patents could be challenged by the Patent Trial and Appeal Board.

When creating IPR, Congress didn’t intend to upset the Hatch-Waxman apple cart. It intended to create a streamlined process to challenge technology patents, an area not governed by Hatch-Waxman.

But because IPR can also be used by drug patent challengers, the process inadvertently created a form of double jeopardy, allowing pharmaceutical patent challengers to try their hand in two separate venues: both the federal court, as well as in PTAB’s IPR. The use of both adjudication forums not only raises fairness questions, it drives up the cost of branded medicines through unnecessary legal costs and greater uncertainty about the patent life of a drug.

Since 2011, not only have pharmaceutical innovators had to defend their patent in two different venues, a scenario not intended under the delicate balance created by Hatch-Waxman, but the legal standards in each forum differ significantly. For instance, in federal court, there is a presumption that a patent is valid, whereas in IPR, there’s a presumption a patent is not valid.

The Hatch-Waxman Integrity Act introduced recently k wouldn’t synthesize standards between venues, nor would it prevent drug patent challengers from using IPR (as might have been wise to do when IPR was created). However, it would require challengers to pick their legal venue — and stick to it.

The proposal would restore the delicate balance between promoting innovation and fostering generics. As Hatch explained on Dec. 11th, this proposal is necessary to ensure “that newer, alternative procedures for challenging drug patents do not give one side an unintended advantage.”

Tweaks of this type are ideologically neutral and, as such, fail to satisfy partisans on both sides who seek to use the issue for political gain. But if the success of the original Hatch-Waxman Act is any indicator, it is just what the doctor ordered.

Jeff Stier is a senior fellow at the Consumer Choice Center.

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About Jeff Stier

Jeff Stier is a Senior Fellow at the Consumer Choice Center. Mr. Stier has been a frequent guest on CNBC, and has addressed health policy on CNN, Fox News Channel, MSNBC, as well as network newscasts. He is a guest on over 100 radio shows a year, including on NPR and top-rated major market shows in cities including Boston, Philadelphia, and Sacramento, plus syndicated regional broadcasts. Jeff’s op-eds have been published in top outlets including The Wall Street Journal, The Los Angeles Times, The New York Post, Forbes, The Washington Examiner, and National Review Online.

Are ‘middle men’ the culprit?

ONE NEWS NOW: “One of the real hidden costs that we’ve been seeing [in drug prices] is the role that the pharmacy benefit mangers (PBMs) play,” says Jeff Stier, senior fellow at the Consumer Choice Center. “Those are the middle men who negotiate between the drug companies – the companies that innovate, that make the drugs we so badly need – and our insurance companies.”

Having such “go-betweens” may sound like a great thing to have, but following two recent mergers, Stier says all major PBMs are now part of the health insurance industry.

That causes Stier to question whether PBMs are playing a crucial role in containing medical costs for patients. “Or, are they so conflicted – because they take a share of rebates offered by pharmaceutical companies – that they are incentivized to keep prices high?” he wonders.

But to answer that, Stier says, will require more transparency through the entire supply chain to show whether consumers are, in fact, benefiting from negotiations.

“There are changes we can do to find some common ground,” he shares, “and common ground, I think, would be necessary to actually lower the price of drugs without stifling innovation.”

READ MORE

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About Jeff Stier

Jeff Stier is a Senior Fellow at the Consumer Choice Center.

Mr. Stier has been a frequent guest on CNBC, and has addressed health policy on CNN, Fox News Channel, MSNBC, as well as network newscasts. He is a guest on over 100 radio shows a year, including on NPR and top-rated major market shows in cities including Boston, Philadelphia, and Sacramento, plus syndicated regional broadcasts.

Jeff’s op-eds have been published in top outlets including The Wall Street Journal, The Los Angeles Times, The New York Post, Forbes, The Washington Examiner, and National Review Online.

How Europe’s Pharmacy Lobby wants us to keep paying too much for Aspirin

VOCAL EUROPE: The European Union has been successful in opening and liberalizing many industries in the past decades. Among them telecommunication, airlines, and banking. All these liberalization efforts lead to lower prices and more choice for European consumers.

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About Fred Roeder

Fred Roder has been working in the field of grassroots activism for over eight years. He is a Health Economist from Germany and has worked in healthcare reform and market access in North America, Europe, and several former Soviet Republics. One of his passions is to analyze how disruptive industries and technologies allow consumers more choice at a lower cost.

Fred is very interested in consumer choice and regulatory trends in the following industries: FMCG, Sharing Economy, Airlines.

In 2014 he organized a protest in Berlin advocating for competition in the Taxi market.

Fred has traveled to 100 countries and is looking forward to visiting the other half of the world’s countries.

Among many op-eds and media appearances, he has been published in the Frankfurter Allgemeine Zeitung, Wirtschaftswoche, Die Welt, the BBC, SunTV, ABC Portland News, Montreal Gazette, Handelsblatt, Huffington Post Germany, CityAM. L’Agefi, and The Guardian.

Since 2012 he serves as an Associated Researcher at the Montreal Economic Institute.