Breaking the Cycle of Prescription Drug Costs

Profits from monopolies finance lobbying, which supports more monopolies. Examining the roots of the dysfunction, and how we can change it without passing on exorbitant medication costs to the sickest among us

For Michael Taffe, life was looking good as 50 loomed. The former elite-level gymnast was now vice-president of a Boston-area software company. He figured his aches and pains were normal, a once finely tuned body moving through middle age.

But a phone call after one of his regular blood donations brought unexpected news. Tests had found that not only did he have rheumatoid arthritis, but he had lupus and diabetes as well.

That was the first act of the drama that was about to unfold.

Now 62, Taffe's personal medical history reads like an encyclopedia of autoimmune-related diseases. There was the shingles a year ago; Sjögren's syndrome, in which immune cells attack and destroy the exocrine gland that produces tears and saliva; an episodic tremor that makes his left hand jump around on its own; even gout. And there's the loud noise in his ears that started when he woke up one Saturday morning, and hasn't stopped in the nine and a half years since. Doctors at first thought he'd developed multiple sclerosis, then decided instead it was something called central tinnitus, an 'engineered' sound produced by the brain. "I can barely hear people now because this thing in my brain is so loud," he told me.

Somehow he was able to fake it for five years, keeping up the appearance that everything -- "this gigantic load of crap," as he puts it -- was under control. He finally had to give up the high-powered management job and dedicate himself to managing his health.

Today, Taffe receives Social Security disability, works three days a week at a golf course, and wonders how long he'll be able to hold out financially as his savings are eaten away by insurance co-pays on the pharmacopeia of prescriptions he needs in order to remain passably functional.

There's Neurontin and Celebrex for pain; Aleve and Advil; aspirin a couple times a day; Irbesartan, Metopropol, Moexipril, Nifedipine, and Triamterene-HCTZ for blood pressure; Glipizide for diabetes; Vitamin D; Folic acid to help with hair falling out; Evoxac (Cevimeline) for the Sjögren's syndrome. There's Methotrexate (which was developed as one of the oldest cancer drugs and which makes him sick) and the "rescue" drug Lovacin to treat the sickness. Once a month there is the three- to four-hour-long infusion of the biologic drug Remicade.

Already this year, Taffe has drained $12,000 from his 401K to cover the costs his insurance company won't pay.

"Until you have a chronic illness, or illnesses in my case," said Taffe, "you don't really embrace the fact that this isn't just a little problem, but a life-altering event, not only on the medical side but the financial side. Then you go, 'Oh my God!' All those years you worked, your savings, and now it's going to go into this amorphous hole. To what end? I can't believe we're not smarter than that. What are other countries doing that we're not?"

For starters, other countries, at least all the wealthy western ones that consider health insurance coverage a right of citizenship rather than a fringe benefit of employment, are not doing what the United States continues to do, to its economic detriment and the frequent ruin of its citizens: Force people with chronic illness to forage for themselves, as best they can, in a health insurance market stacked against them and a marketplace for prescription medications priced higher than anywhere else in the world.

***

After years of advocating for such rational approaches to public policy as a health care system that isn't priced out of reach for those who most need it, economist Jamie Love, director of Knowledge Ecology International, a non-profit advocacy group that focuses on intellectual property issues affecting access to medications, now has a very personal reason for his work. His wife, diagnosed with cancer, needs a medication that costs $100,000 per year. She will die without it.

Love and his wife work together, sharing his health insurance policy, which costs more than $2,000 per month. But in two years, the 63-year-old Love is supposed to move to Medicare. "She's now at stage four cancer, but could potentially live quite a while," Love told me. "Treatment is astronomically expensive. If I switch to Medicare, she doesn't have any insurance."

Until 2014, when the Affordable Care Act (ACA) bans health insurers' now-routine practice of denying coverage to those with pre-existing conditions, Mrs. Love's best shot at remaining alive is through her husband's extremely expensive private policy with the extremely expensive co-pays on the medication she needs to do that.

Earlier this year, Congressman David B. McKinley, a Republican from West Virginia, introduced legislation that would give patients with similarly chronic, disabling, and life-threatening conditions access to drugs that can mean life or death. The Patients' Access to Critical Treatments Act of 2012 (PACTA) would allow millions of insured Americans to pay the same fixed co-pays for certain vital medications that they already pay for other classes of drugs. The bill would halt the insurance industry's practice of shifting these medications into a fourth 'specialty' tier that requires patients to cover a percentage of their cost rather than the usual fixed co-pay.

Insurers traditionally have charged fixed co-pays for three different tiers of medication: Tier 1, generics; Tier 2, name brands; and Tier 3, off-formulary "non-preferred" brand medications. A new fourth tier, consisting mostly of biologics that are often customized to each patient and don't have generic or inexpensive alternatives, typically requires that patients pay 25 to 33 percent of the medication's cost.

Twenty-five percent of the cost of Michael Taffe's biologic Remicade is upwards of $3,000 per month. Remember, it's only one of the drugs he needs.

"Most people can't afford to have a house payment every month for one of their medications," said James O'Dell, M.D., president of the American College of Rheumatology (ACR) and chief of the rheumatology section at the University of Nebraska Medical College in Omaha. The ACR is one of the medical specialty and patient advocacy organizations that have endorsed PACTA.

O'Dell noted that people who don't have insurance "have all kinds of trouble" trying to access the medical care they need. But for those who are insured, the real problems begin when they find themselves diagnosed with a chronic condition that requires expensive medication to manage. Said O'Dell, "If you have insurance, and you happen to get a disease like rheumatoid arthritis, suddenly you have a $1,500-per-month drug, which is one of many you have to take. You essentially don't have insurance for that drug."

PACTA would prevent that from happening. "This legislation," O'Dell explained, "would not allow that kind of thing by the insurers, so people who have insurance would have access to that drug at whatever tier, two or three." He said that although the co-pay would still likely be $30-50 a month, which could still be substantial for some folks, "it wouldn't be in the thousands."

***

Of course most people buying a health insurance policy aren't anticipating catastrophic medical diagnoses. They may be more concerned about affordable monthly premiums and deductibles than about tiered prescription pricing and co-pays. When a fairly inexpensive prescription decongestant for seasonal allergies is the only medication you need, you probably aren't thinking about the potential ramifications of an insurance policy's prescription cap.

Ask me how I know.

For $225 per month, starting in 2004, I carried an individual BlueCross policy that had reasonable deductibles and covered 80 percent of my in-network medical visits. The doctor I'd been seeing for years was in the preferred provider network. For a healthy 47-year-old, all was well.

But the fine print about the $1,500 annual prescription suddenly morphed into screaming headlines after a phone call from my doctor in 2005, to report the results of the blood tests from my routine annual checkup. "I have bad news on the HIV test," he said.

It was hard enough to manage the anxiety and fear I felt. I'd been around this particular killer for a long time, and the images of dying friends haunting my mind made it hard to think straight. But I really panicked when I realized that, not only did I need to begin right away to take highly toxic medication, but it was going to cost far more each month than my insurance policy's total annual prescription allowance.

Fortunately, I was able to get into a clinical trial which provided my medications and lab work, free, for 96 weeks. After that? Now that I was branded with a huge pre-existing condition, I was locked into the BlueCross policy. Other insurance companies wanted nothing to do with me.

As it turned out, the clinical trial was ending just after I moved away from my longtime home in Washington, D.C., returning to my home state of Connecticut -- and just as the Great Recession was beginning to unfold. My income went south for an extended stay.

I became a client -- a polite way of saying a "charity case" -- of the local AIDS service organization. My health insurance premiums and medications were paid for with federal Ryan White CARE Act funds -- and, now Medicaid, since Connecticut in 2011 got a head start on the Affordable Care Act's mandated expanded Medicaid program.

I am as healthy as one can be with HIV. Modern medicine works its miracles daily in the pills that keep the virus at an undetectable level. But until there is a cure, it's still there and, experts say, still undermining my health in subtle but certain ways.

As surely as the virus is still there, so is the unsettling mixture of shame about taking charity, gratitude that it is available, and irony that at least my particular chronic, potentially fatal, condition qualifies me for the assistance I need. Without this assistance, I certainly couldn't afford the $2,375.46 my medications cost each month, to say nothing of the costs of lab work and doctor's visits.

Until the Affordable Care Act 15 months from now prohibits insurers from denying coverage to people like me, I don't have a lot of choice in my health insurance options. So, like anyone else who values his life, I do what I have to do to survive.

And like every other American with a chronic, but manageable, medical condition who has struggled financially and emotionally over their medical care, I curse the insanity of this country's health care system that considers insurance and pharmaceutical company profits more important than life itself.

***

"Look, the way I look at it is fairly simple: If someone comes up with an illness and we don't have the capability of dealing with it -- a cancer, for example -- that is a tragedy. But when somebody has an illness and gets sick simply because they can't afford a greatly inflated price -- when Atripla is sold for 100 times its cost -- that is a moral issue."

U.S. Senator Bernie Sanders, Independent of Vermont, was explaining to me in a phone interview why he has proposed a $3 billion fund to award large cash prizes to drug companies for developing innovative new HIV drugs in lieu of the long-term (usually 20-year) monopoly patents the government now awards them.

At a May 15 hearing of the subcommittee on Primary Health and Aging; part of the Health, Education, Labor and Pensions Committee that he chairs; Senator Sanders pointed out that Americans are forced to pay the highest prescription drug prices in the world: 85 percent higher than in Canada, and 150 percent higher than in France, Italy, Sweden and Switzerland.

Atripla, the once-daily combination HIV drug Sanders mentioned, costs $25,000 in the U.S. But a generic version, approved by the Food and Drug Administration, costs a mere $200 in the developing world.

In her testimony at Sanders' hearing, Harvard School of Public Health professor Suerie Moon said there has been an "unwritten political bargain" behind the high drug prices in the U.S. and Europe. She explained that, for Americans, this means paying more than anyone else in the world for our medications to reward pharmaceutical companies for their investments in research and development.

But this is "curious," said Nobel Prize-winning Columbia University economist Joseph Stiglitz, former chairman of the President's Council on Economic Advisors. In the current system, he pointed out, "government pays for most research and development." The patents now given on medications developed at taxpayer expense are quite a plum. Said Stiglitz, "The patent system is a prize. It awards temporary monopoly power."

That monopoly power costs American taxpayers a great deal of money. Some pay with their very lives because they are unable to afford the drugs they need to stay alive.

Jamie Love said at the hearing, "We spend easily about $8 billion more per year than we have to for AIDS drugs at the current prices to support the cost of the monopoly -- and we've only gotten approximately one drug a year for the last 25 years." He also noted that the Centers for Disease Control and Prevention (CDC) reports that 64 percent of the estimated 1.2 million HIV-positive people in America who need life-saving medication are not receiving it.

Love told me in a later interview, "Right now we're treating less than 40 percent of people in the U.S. who are HIV-positive. We have wait lists, a crisis in affordability. It's a very expensive lifelong chronic condition and getting worse. It's unsustainable." Put simply, he said, "Why are we not treating more of the people who are HIV-positive? It's because the drugs are so damned expensive."

***

Katie Emmerson calls herself "Lady of Steele," a double play on words in that it was her ex-husband's surname and she's had both hips replaced with steel prostheses, the first at age 22, the second at 24.

Unlike Michael Taffe, whose immune system started to go haywire in his late forties, Emmerson's story began when she was only seven. When her doctor took a cast off of her broken left wrist, he found a large lump. After a second break and another cast, the lump was huge. "The first doctor said it was some kind of cancerous tumor and we should cut her left hand off," recalled the Anaheim, Calif. resident. "My mom said absolutely not." Battles ensued with the family's insurance company to pay for a second opinion.

Finally, Dr. Lawrence Menendez, director of orthopaedic surgery at the University of Southern California's Keck School of Medicine, was able to provide the second opinion. In a nearly seven-hour operation, he removed what turned out to be a cancerous tumor. He explained to Katie's parents that, although he'd gotten all of the cancer, he would have to rebuild her hand because of damage from the tumor. He also said she would have to see a rheumatologist because the tumor had apparently triggered arthritis in the hand. "I thought whew! I didn't have cancer, but have arthritis," said Emmerson. "We didn't know how wild and crazy that would be."

By the time she was in eighth grade, Emmerson had been in and out of the hospital "a bunch of times." She was told she'd exhausted every medication in any combination. "I could stand on my feet, but I couldn't walk," she recalled. "My brother would carry me from room to room. Mom would change my clothes and put my shoes on. I was like a puppet."

About a year later, doctors talked to Emmerson about a new drug called Enbrel, the first of the biologics to treat rheumatoid arthritis, then being studied. She became one of only 50 children nationwide participating in the study.

Enbrel was the "only thing that got me moving again," said Emmerson. She went into remission for eight years, even became a spokesperson for Enbrel, traveling across the country helping its manufacturers Amgen and Pfizer to market their product.

But then she hurt her shoulder when she was 21. A severe arthritis flare ended her remission--and relaunched even more battles with her insurance company. They refused to pay for Enbrel--the lowest price for which, at GetCanadianDrugs.com, is $2,239 per weekly 50 mg dose--and insisted she switch to other drugs: Tumera, Remicaid, Orencia. "Even though my doctors knew I was probably going to have no response," said Emmerson, "they had to follow a certain protocol because of insurance." When her bones were grinding and popping, the insurance company resisted paying for the hip replacements she obviously needed. "They said it was an elective procedure," she said.

Now 28, Emmerson told me, "I almost never get out because I can barely walk."

The real mettle in this Lady of Steele is apparent when she talks about her determination to pay for her medical care without assistance. "No matter how sick I was, I always worked at least part-time," she said. "I worked my butt off, never asked for a handout, paid ridiculous amounts for co-pays."

Although she's been able to get her biologics free, she can't afford the $600 fee to have a nurse infuse them. "Now my drugs are just sitting in my doctor's office, held hostage because I can't afford them," she said, adding, "It's absolutely crazy knowing there are these medications out there that would keep me healthy and let me work."

***

A hard-working young woman determined to pay her own way, but held back by an all-powerful insurance company and a debilitating chronic condition that can be managed only by medications priced out of her reach. A not-as-young but equally independent, productive member of society forced to deplete his life savings to cover his share of outrageously priced prescription drugs he needs to function. People with a life-threatening viral infection that can be effectively managed -- and the risk of transmission to others almost totally eliminated -- who aren't on treatment because the drugs they need cost so much.

These American stories have a common theme: Drug and insurance companies call the shots, the politicians they buy with their tremendous campaign contributions demand nothing in exchange for their souls, and Americans needlessly suffer and die.

As Jamie Love sees it, "Everything is related to campaign finance issues." As long as politicians must raise vast sums of money for their campaigns, there will be favors owed and favors done. OpenSecrets.org reports that in 2012 alone, the pharmaceutical and health products industries will spend $187,101,442 lobbying federal officials. They will also donate an average of about $125,000 to House campaigns and $160,000 to Senate races.

"When you have a monopoly," said Love, "you have lots of extra cash that lets you influence the political system."

Although the Pharmaceutical Research and Manufacturers Association (PhRMA) failed to respond to my queries, they surprised no one by dismissing Sen. Sanders' prize bill when he introduced it. Matt Bennett, a senior vice president at the trade group told industry tracker Pharmalot.com the bill has "many drawbacks," including what he claimed is its failure to reward drugmakers for the "second, third or fourth versions" of drugs that may be more effective for some patients -- drugs Sanders called 'me-too' drugs that contribute to the problem. Of course he didn't mention that drug companies frequently come up with these subsequent versions of their old drugs just before they are due to go off patent as a way of renewing their monopoly.

Sanders is realistic about his bill's slim chances of becoming law. "The pharmaceutical industry is very, very powerful," he told me. "They virtually never lose political fights."

But, said Sanders, the tough economy and government budget deficits offer an opportunity to reexamine the system that is clearly failing many Americans, busting personal budgets, and straining taxpayer-supported programs such as the federal-state AIDS Drug Assistance Program, Medicaid and Medicare.

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The senator said that while his bill focuses on HIV medications, a similar system of awarding generous financial prizes -- we're talking hundreds of millions of dollars, not exactly peanuts -- in lieu of monopoly patents, offers a "new paradigm" for developing life-saving medications.

Love said Sen. Sanders' prize fund would be "transformative," and that a similar approach would make sense not only to lower the prices of HIV drugs, but other now-expensive medications for chronic diseases, too.

***

When the FDA approved AZT (azidothymidine, or zidovudine) in 1987, pharmaceutical giant Burroughs Wellcome set the price at $10,000. At the time, that made it the most expensive drug ever. So the first drug approved to treat HIV infection would be priced out of reach of most of the people who needed it. The AIDS Coalition to Unleash Power (ACT UP) swung into action, publicly denouncing the drug maker and the drug's high cost.

By the end of 1987, Burroughs Wellcome reduced the price of AZT by 20 percent to $8,000. Barron's predicted the company would earn $200 million on AZT in its first year alone. Within four years after its approval, Burroughs already had earned $1 billion on the drug that had been developed at the expense of American taxpayers.

Today, there is ample evidence that the cost of treating HIV can be dramatically reduced simply by allowing the use of generic versions of expensive brand-name medications -- exactly what is being done in the developing world, as Sen. Sanders noted in his May 15 hearing.

"The price of HIV meds in developing countries in the last 10 years has been reduced by 99 percent thanks to generics," said Judit Ruis, U.S. manager for Doctors Without Borders' Access Campaign. "When we first started providing generic HIV meds in 2000," she told me, "the price for first-line drugs was $10,000 per year. Now it's $300. That's roughly a 99 percent price reduction."

Buying FDA-approved generic versions of expensive American-made drugs is one way the President's Emergency Plan for AIDS Relief (PEPFAR) is able to provide antiretroviral treatment for some four million people living with HIV/AIDS in 30 hard-hit developing countries. The irony, of course, is that PEPFAR can provide the generic version of Atripla for $200 in Africa, while other taxpayer-funded programs here at home pay more than $25,000 for the exact same drug.

Gilead Sciences, the pharmaceutical giant that makes Atripla, touts its "co-pay coupon" and patient assistance program to help people with HIV afford its latest highest-ever-price combination drug, Stribild, introduced at $28,500 for a year's supply. Company spokesperson Erin Rau told me in an e-mail the price "reflects a reasonable return" on its product development investment.

AIDS advocates have heard that one before.

Michael Weinstein, president of the Los Angeles-based AIDS Healthcare Foundation, told Business Wire, "Drug pricing today is an elaborate shell game: a company like Gilead brings a drug to market, prices it at a ridiculously high price, but then quickly offers price cuts, rebates and reductions on a case-by-case basis to insurers, federal and state government health officials and others--all under a cloak of secrecy from the public."

But secrecy isn't the only problem. Silence--specifically the silence of advocacy organizations concerned about their own viability and uninterrupted paychecks for their employees--is doing no good for the clients the groups claim to represent. Michael Weinstein told me in an interview, "Now you have a kind of 'AIDS, Inc.', a permanent bureaucracy, and it's being supported by these [pharmaceutical] companies."

What happens when they speak out, challenging the 'benevolent' image of themselves the drug companies wish for themselves? Weinstein recalled AHF's own experience. "We had a grant from Gilead for $2 million a year going back to 2005. As a result of our advocacy it was canceled this year. The money they are sprinkling around can be withdrawn."

Speaking out, however, is what advocates must do. As Senator Sanders told me, change won't come about until there is enough grassroots pressure on Congress to make change. "One of the goals of grassroots efforts is to take on Pharma," he said.

But it's not only up to individuals and patient advocacy groups. New York-based Housing Works CEO Charles King, one of the nation's most independent and outspoken HIV/AIDS advocates, told me changes in prescription drug costs also depend on large public programs -- Medicare and Medicaid in particular -- using their tremendous purchasing power to negotiate better prices. King said Medicare, the federal insurance program for seniors, "is big enough where it could truly negotiate the best price -- and that would provide leverage for other payers to work for the best price."

Making clear that the cost issues related to HIV medications are no different than other prescription drugs for chronic conditions, King pointed out that, whether it's HIV, asthma, diabetes or something else, chronic conditions "have a disproportionate impact on marginalized populations." Those populations, particularly African-Americans and Latinos, also tend to have higher rates of other chronic conditions besides HIV infection.

Not that more affluent people don't develop chronic conditions that require expensive prescription drugs to manage. But when Phil Michelson in TV commercials lauds the way Enbrel helps manage his psoriatic arthritis, the professional golfer, with an estimated net worth of $150 million, doesn't mention co-pays on the $100,000-plus per-year drug. After all, he can simply have his accountant pay them out of petty cash. Most Americans don't have that luxury.