Using the occasion of EpiPen's reviled 400 percent price hike widely as a rallying cry, Hillary Clinton is once again on the warpath over drug prices.
Last Friday he proposed the creation of a federal task force to monitor drug prices; penalize companies that make sudden and unjustified price changes; and look for alternatives to overpriced treatments.
Fighting price hikes, particularly on those drugs the current owners have not developed, has a populist appeal. And Clinton's plan may well have an effect; it certainly threatens the profits of companies whose model is in part focused on acquiring old drugs and raising their prices, such as Valeant and Mylan. Friday land their shares fell as much as 3.7 and 4.9 percent, respectively. Endo, another pharmaceutical company, fell as much as 5 percent.
But his plan may not have much impact on overall national spending growth. This is mostly focused on expensive new drugs – where Clinton's plan is least likely to succeed.
Spending on prescription drugs is projected to rise to $600 billion within a decade. Clinton's task force could be ideal for something like the heart drug Isuprel, the price of which Valeant has massively increased since its purchase from Marathon Pharmaceuticals. A regulator could fine Valeant or help bring another competitor to market, or both. And who was complaining? It's an old Valeant drug that has nothing to do with research.
But this task theoretically it is specifically targeted to older drugs, those “that have been on the market for a long time”. That means it probably wouldn't impact something like the hepatitis cure that Gilead launched in 2013 and 2014. These drugs were valued high from the start and helped drive the US increase by 13.1 percent of prescription drug spending in 2014, a bigger jump in a year than in a decade.
Nor would it appear to affect the price of a cancer drug, such as Xalkori, which was launched in 2011. Pfizer has since raised the drug's price by more than 25 percent — which is much more gradual than, say, increases typical of Valeant.
Xalkori is a patented new drug that Pfizer helped develop, and it's less politically palatable to fight its price hikes. Bringing such a drug into competition could discourage companies from spending billions on research for new drugs. And extending the power of control over such drugs would lead to widespread price controls, which likely renders a policy ineffective.
Assuming it could outrun the congressional vote and the politically powerful drug lobby, Clinton's plan could be a great start to dealing with egregious outlier price hikes.
But will controlling Big Pharma's pricing issues – including opacity, a bevy of middlemen, and prices set at will by companies, often regardless of value – really impact medicines? Clinton has already announced that this is a partial focus on these issues, but the intention is to try and tackle an even greater uphill struggle than this new and more limited effort.
Max Nisen – Sep 2, 2016 – Bloomberg
