Putting The Brakes On Prescription Drug Pricing

good2.jpgOne of the most gut-wrenching and sobering moments of my time as a legislator happened to me a few months ago when I visited one of our district’s senior day programs. I sat in with some of my bosses and listened as many talked about how the escalating price of prescription drugs was forcing them to make a Hobson’s choice between paying for their medicines or going without. Now, we all know that prescription drug prices in our country are rising at an unprecedented and unsustainable rate. And, the numbers as to how bad it’s gotten are staggering.

For instance, prescription drug prices increased an average of 12.6 percent in 2014 and 10 percent in 2015. In 2015, 16.7 percent of healthcare spending in the U.S. went to prescription drugs, compared with about 7 percent in the 1990s. This has dramatically hurt the financial bottom line of many American families. One in four Americans who regularly take prescription drugs report that they are paying more for their prescription drugs today than a year ago. Furthermore, many are now paying at least $50 more out-of-pocket for the same prescription they had last year, and the clear majority received no notification in advance that their costs would go up.

As I stated earlier, this has forced many families (both young and old) to choose between filling their prescription or buying food, paying rent or in many instances simply going broke just because they have the misfortune of being sick. And, as we rely on newer, more effective medicines, the price of those medicines will continue to be an even more urgent concern for people and policymakers on both the state and federal levels.

It's long past time to do something about the burden before the pricing squeeze explodes into a crisis. My staff and I are reviewing several alternatives that might lessen the impact of this pricing storm on New Jersey families. Some options we are studying are:

  • Reign in excessive prices for drugs developed by publicly funded research. Drug manufacturers who take taxpayer money would be required to keep their prices in line with what they charge other economically advanced nations. The concept is simple and it is not new. President George H.W. Bush, in the late 80s - early 90s, instituted a “reasonable pricing” rule. However, it was repealed by President Bill Clinton a few years later. I do not oppose reasonable profit for the pharmaceutical companies. The research and development (R&D) investment by those companies is significant and vital to finding future cures. However, I do oppose when some take advantage of the shared investments made by taxpayers towards the development of these life-saving medicines and engage in price gouging. Taxpayers are hit twice in this instance by having contributed towards the R&D and paying more for the end product than any country in the world.

  • Require drug manufacturers and wholesale distributors to justify excessive increases in prices for essential prescription drugs. My goal is to prevent price gouging and add a further layer of protection to the consumer simply by requiring these companies to justify their pricing when there is a significant increase. This will add greater transparency to the process.

  • Establish a three-year Medicaid demonstration project to ensure that we are paying for value. This project would pay for certain drugs based on a prescribed (no pun intended) metric to measure the outcome of the prescription drug on the recipient’s health. This approach goes away from the existing paradigm of paying for prescription drugs based on volume and moves us towards looking at actually seeing if the medicines are helping the recipients. The performance targets would be robust and specifically designed to drive down costs and drive up effectiveness.

To put all of this in context, seven out of ten Americans take at least one prescription drug, and about 50 percent take at least two drugs, according to the renowned Mayo Clinic. This means that either you are taking a prescription drug or we can safely assume that someone close to you does. And because the price of drugs keeps rising, it affects everyone. These initiatives alone won’t fix the problem of the high cost of prescription drugs but, taking in combination with an initiative like allowing Medicare to directly negotiate drug prices, can provide a workable guidepath to reduced costs.  

The richest nation on earth, with some of the best healthcare available, can certainly devise a system that protects the health of its citizens in a fashion that is prudent with our nation’s pocketbook in mind. That’s my take, what’s yours?

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  • Victor Kwon
    commented 2017-10-19 15:17:08 -0400
    Three things to think about before hurting the biopharmaceutical industry (the state’s biggest industry in both employees and tax revenues) in New Jersey:

    1) Please consider how drugs actually lower the cost of overall healthcare. My brother has epilepsy, and in order to prevent seizures, must take a drug called keppra every month. Now this drug is a bit pricey ($80/month co-pay), but it keeps him out of the hospital. The last time he got a seizure, he had to stay in the hospital for two days, and the bill was over $20,000. Because of the innovations in the pharmaceutical space, he doesn’t have to go to the hospital once a month because of a seizure.

    Drug companies aren’t just swimming in profits, they are investing them into the next new breakthrough treatment. Because of R&D, a drug called AZT keeps people from dying a very expensive and painful death from AIDS. New cancer drugs are either helping to cure cancer patients or allowing them to live longer. These are facts that need to be considered.

    2) Drug costs have a lot to do with insurance companies charging extremely high co-pays, and pharmacy benefit managers not opting for the most cost-effective drug when one is prescribed. Both are also keeping discounts and rebates that are supposed to be passed along to the consumer for themselves, because politicians such as you are allowing them to do so.

    Cut the middle man out of this whole equation. Insurance companies are the ones coming up with life-saving cures, pharma companies are. They don’t deserve the lion’s share of the profits.

    3) The FDA needs to allow drug companies to use more real world data instead of running long, ultra-expensive phase III trials of drugs, depending on the class of drugs being considered. Less regulation could dramatically lower the cost of drugs in general.
  • Kevin Perez
    published this page in Troy Talk 2017-10-19 11:41:28 -0400
  • Kevin Perez
    published this page in Troy Talk 2017-10-19 11:13:22 -0400