The “American (cancer) patients first” plan to reduce drug prices—A critical assessment
Authors: Hagop Kantarjian, Donald W. Light, Vivian Ho
Journal: American Journal of Hematology (2018)

Serious concerns over the rising cost of cancer drugs in the United States1-3 are increasing,4-9 following a decade during which prices rose from an average of less than $10 000/year to more than $170 000/year in 2017.10 Despite the drug industry's wish to be “part of the solution,” the problem continues to worsen.6 Between 1995 and 2013, the launch price of cancer drugs increased by 10%-12% every year.11 According to a March 2018 report, the Average Wholesale Prices of drugs increased at unprecedented rates.12 A study by Gordon and colleagues showed a 25% average annual price increase of drugs already on the market, despite competition.13 Cancer drugs spending doubled since 2013 and is expected to double again by 2022.14 This suggests that health care is different from other industries where traditional free market forces are effective in lowering prices, and that other measures are needed. Because of the current health care reimbursement environment,15, 16 Americans are now additionally burdened with higher insurance premiums, high out-of-pocket costs, high deductibles, and high co-pay prescription expenses.17-20 This strategy is based in part on a 1984 study by the RAND Corporation suggesting that when patients have “skin in the game,” health-care costs are reduced, because they choose the most economical options.21 This may have been true two decades ago, when the costs of care and drugs were more reasonable, and may be true today for primary care and minor medical conditions. But it is a flawed strategy for seriously ill patients who face enormous health-care costs. It is even worse in cancer, where there are fewer choices, fewer generics, and often only one preferred expensive patented drug. Lower costs observed in recent times are not the result of patients choosing wisely, but because they abandon or delay treatment,22-25 which increases mortality.26 Today, cancer patients may pay 20%-30% out-of-pocket for prescription drug costs. The median household income, adjusted for inflation, is only 0.1% higher in 2016 than it was in 2000 ($59 039 vs $58 544).27 The out-of-pocket cost of one cancer drug can easily consume the entire average budget of a family of four. This report is an in-depth assessment which expands on a previous analysis of the Trump Administration plan to reduce drug prices.10 Polls show high drug prices are the number one health-care concern of Americans.28 Effective solutions, outlined in many commentaries and editorials, are summarized in Table 1.4-9 Some of the solutions are worth further discussion. That annual price increases of more than 5%-10% (adjusted for inflation) be justified by additional research discoveries or benefits after the drug launch is already standard practice in other countries,29 but not in the U.S.11-13 Importation of prescription drugs for personal use across international borders may be the only way for patients to afford life-saving drugs.30 “Medical tourism” is common for many medical and surgical conditions. There is strong evidence that international pharmacies and drug importation are safe.31, 32 For example, the price of brand imatinib (used to treat chronic myeloid leukemia) is $146 000/year in the U.S. and $38 000/year in Canada. The price of generic imatinib is $87 000-143 000/year in the U.S., $3 000-8 000/year in Canada, and $400/year in India.30 Following the approval of a drug in many countries (Canada, European Union, Australia, Japan), mechanisms that recommend a fair price based on objective benefits (survival, remission free of cancer, side-effect profile, quality of life, etc.) are part of the pre-market process,33-38 and are one reason why they can negotiate lower prices. Developing treatment guidelines that include price as part of the drug “value” was proposed by cancer societies (American Society of Clinical Oncology [ASCO]; American Society of Hematology [ASH]; American Cancer Society [ACS]; Leukemia Lymphoma Society [LLS]), but not implemented. These organizations may have concerns about losing financial support from drug companies. The close collaborations between the LLS and the industry, detailed in the New York Times, led to the removal of statements from the LLS website designed to attract corporate support.39 The enthusiasm of these organizations to advocate for lower drug prices has waned. The ASCO position statement recommends ranking drugs based on efficacy and side effects, but does not ask to lower prices.40 Consequently, the ASCO document has no tangible effect. Schnipper and colleagues updated the ASCO value framework,41 which was evaluated in three follow-up studies that could not substantiate the benefit of this value framework.42-44 The other societies (ASH, ACS, LLS) had vague (LLS)45 or no positions on the issue (ACS, ASH). This tepid approach is also true for patient advocacy organizations that can be vulnerable to becoming mouthpieces for industry positions. In one study, 83% of 104 such groups received financial support from the pharmaceutical industry; 39% received $1 + million annually.46 Monitoring buyouts of generics manufacturers by large companies (creating de facto monopolies for drugs with few alternatives) is critical, considering the recent outrageous examples of Turing, Valeant and others.7, 47-49 Raising prices annually by 10%-15% or more without any justifications is common practice by drug companies.7, 50 Requiring the Food and Drug Administration (FDA) to develop faster and less expensive approval mechanisms was discussed by Dr. Scott Gottlieb, the current FDA commissioner. He pointed out that there are more than 4 000 generics applications awaiting FDA approval, and that the median time from filing to approval was 4 years, at an average cost of $5 million.51 An update of these figures is important. Many of the suggested solutions were embraced by some 2016 presidential candidates.52 But pledges to voters are hard to fulfill once elected and faced with the United States most powerful industry lobby. Drug companies spent $280 million on lobbying in 2017, more than any other industry.53 In January 2017, President Trump stated that drug companies were “getting away with murder”.54 After meeting with the chief executives of the wealthiest drug companies and representatives from the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry's main lobbying organization, the White House has not acted on campaign promises.55, 56 The administration under President Obama could not address the issue of high cancer drug prices effectively. In May 2018, President Trump announced his administration's plan to lower drug prices and promised, “We will have tougher negotiation, more competition, much lower prices… very soon.” The plan, outlined by the Department of Health and Human Services (HHS), and titled “American Patients First-The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Cost,”57 was accompanied by parallel initiatives from the FDA.58, 59 HHS Secretary Alex Azar identified four challenges: “high list prices for drugs; senior and government programs overpaying for drugs due to lack of the latest negotiation tools; high and rising out-of-pockets costs for consumers; foreign governments free-riding off of American investment in innovation.”57 There is certainly goodwill and determination to address high drug prices. Azar stated that the drug industry's repeated mantra that it must make large profits to pay for research and innovation is a tired point. The biggest problem, he said, is simple: Drug prices are too high.60 The “American Patients First” roadmap and accompanying FDA initiatives will not bend the curve of rising drug prices in the near or long term.61-69 Some of the proposals hint at reducing health-care benefits and cutting safety nets for the poor, and increasing profits in the private market (eg, stopping Medicaid and Affordable Care Act programs from raising prices in the private market; reforming the Medicaid Drug Rebate Program and the 340b Drug Discount Program).The 50 broad points of the blueprint can be distilled to six relevant ones (Table 2). The first is to utilize currently available and effective tools to lower drug prices for older people. But the best strategy to accomplish this—to allow Medicare to negotiate—is off the table. Republican Senator Chuck Grassley, defending the drug industry, said the government does not negotiate drug prices well.70, 71 But the federal Veterans Administration negotiates drug prices effectively, as do foreign governments. Allowing Medicare to negotiate was one of the President's campaign promises. The second key point is to eliminate foreign governments' “free-riding,” and to pressure other countries to pay more for drugs. The drug industry invented the “foreign free-riders” myth in the late 1990s and resurrects it whenever it is under pressure from campaigns denouncing high prices.74 The myth narrative, refuted repeatedly,72-74 is: Other countries do not pay their fair share. Consequently, the drug industry needs to increase the U.S. prices to fund global research. And other countries should pay more for drugs developed from research in the U.S. But in fact, research and development costs do not explain why prices are higher in the U.S.72 European countries spend a fair amount of resources on research.73, 74 And research in the U.S. is supported by federal funding: 85% of basic research discoveries are funded by taxpayers; drug companies spend only 1.3% of revenue on innovation.75 Americans thus pay twice—once to fund research the drug industry profits from, and a second time for unjustified high prices, 3 to 10 times more than other countries.29, 30 To pressure other countries to pay more for drugs is illogical, as we shift the blame for our self-inflicted wounds. The U.S. drug prices (and drug industry profiteering) result from pharmaceutical lobby-driven policies and regulations that prevent the federal government from negotiating effectively. Other nations will not follow our policies and make cancer drugs unaffordable to their citizens. Even if this happens, drug companies would not lower prices in the U.S., but will simply pocket excess profits and reward themselves and their investors. The third key point is to require drug advertisements to include the price. The American drug industry's domestic advertising expenditures in 2017 were $23.3 billion,76 including $6.1 billion in direct-to-consumer campaigns.77 By targeting lay people, this form of marketing creates millions of Molière's “malades imaginaires” and new false markets that increase costs, and can be harmful. It contributed to the current opioid tragedy in the U.S., which in 2017 caused the addiction of 3 million individuals and 70 000 + overdose deaths.78, 79 Advertisements may convince Americans to support pharma strategies that sustain high drug prices, as exemplified by the massive “Go Boldly” campaign, paid for by PhRMA, which delivers the subliminal message that if drug prices are controlled, discoveries that cure Alzheimer's disease and dementia will not happen.5, 6, 9 Requiring drug advertisements to include the price would pressure companies to be more competitive, and would remind patients and the public of the hardships associated with high drug prices. The fourth key point is to prohibit “contract clauses” that prevent pharmacists from telling patients that paying cash for a drug might be cheaper than buying it through insurance. The clauses were required by insurers to increase profits or reduce costs through rebates. Even so, pharmacists often ignore them. The fifth key point is to prevent “pay-for-delay” and other strategies that companies employ to keep generics off the market. This will help lower drug prices by stimulating competition. The FDA statement discusses steps to accomplish this.80, 81 The sixth key point is to examine whether the existing rebate system constitutes an illegal form of kickback. As a background: The price a patient pays for a medication is determined by an intricate process that includes four main players, all with financial interests to protect: drug companies; pharmacy benefit managers (PBMs), third-party administrators of prescription drug programs; insurance companies; and hospital pharmacy outlets and retail pharmacies.10, 57 The drug companies are the most influential contributors to the prices, having created, through lobbying and legislation, a process that gives them complete power to set the launch price of a newly approved drug, and to increase the price of existing drugs at will. The PBMs have developed complex rebate schemes that allow them to profit from both insurers and manufacturers. Insurers pay them to negotiate drug costs and rebates from manufacturers (purportedly to receive a share of the savings). Drug companies may pay them a second time when one of their drugs gets a coveted “formulary” position on an insurance plan, meaning higher sales. Insurers use PBMs to lower their costs, but the savings are not passed on to patients. Insurance companies increase profits by denying care, or by making the patient navigate such a complicated maze of steps to justify coverage and reimbursement that they give up. Wendell Potter, a previous public relations executive at the large insurer CIGNA, detailed the many strategies to deny care.82 Drug companies have tried to shift the blame to PBMs, accusing them of fueling higher prices by the steep fees they charge. Unable to grasp the intricate issues, Americans have given up, thus permitting the “blame-game campaign” to reach its objective—an indefinite delay in any substantive legislation that can realistically lower prices. The playbook fundamentals of such campaigns are detailed in “Deadly Spin” (Ref. 82; pp. 222-224) and in a recently released pharma-oriented guidance.83 Now, to the question of high cancer drug prices in particular. Faced with uncomplicated or temporary medical conditions (eg, infections, hypertension, vascular accidents, etc...), and differential out-of-pocket expenses, patients may choose wisely among several equally effective procedures and drugs, including generics and brand drugs. In cancer, options are limited, and the only choice is often both brand and expensive. Thus, cancer patients must decide whether to be (treated, and hopefully live longer and better), or not to be (treated because of the high cost, and die). In the U.S., the most advanced nation in the world, practicing Darwinian medicine that promotes “survival of the richest” is immoral. Any “American Patients First” roadmap must consider the challenges faced by Americans with cancer. Market forces work well for drug companies, one of the most profitable industries (20% return on investment).84 But they are not working well for patients. Here is why. The 2003 “Medicare Prescription Drug, Improvement, and Modernization Act” (MMA)85, 86 included a “noninterference clause,” influenced by the pharmaceutical lobby as a condition to support the MMA, that prohibits Medicare from negotiating drug prices. In fact, Medicare would be able to negotiate lower drug prices with drug companies as a sole purchaser, vs multiple private insurers acting as buyers. The MMA also included, under Medicare Part D, prescription benefits to Medicare. This then forces Medicare to pay for drugs at prices imposed by manufacturers. Despite the good economic argument that Medicare (acting as a sole buyer) could negotiate lower prices, claims were made that the government does not negotiate effectively and that free-market forces would drive drug prices down to reasonable levels.70, 71 Senator Orrin Hatch (R-UT) said then, “We will not go toward a socialized medicine approach.” Advocates for the legislation assured that competition among private plans would hold drug costs down better than the government could. These advocates ignored the fact that multiple private insurers could still compete to offer coverage under Medicare Part D based on differences in copayments, deductibles, and formularies, but with lower drug costs based on Medicare's negotiating power. Senator Paul Sarbanes (D-MD), opposing the legislation, predicted that the bill would be “an absolute bonanza for the drug companies.” Another opponent, Senator Richard Durbin (D-IL) said that drug companies were “working feverishly…to pass this legislation.”87 A decade later, the opponents of the noninterference clause were correct. Passage of the MMA was a true financial goldmine for drug companies, stimulating a massive increase of drug prices, and of profits, over the next 15 years.88, 89 To learn from history and enact better legislation, a reasonable question is: Why did market forces not work? In contrast to other areas where consumers have a choice of different products associated with different prices and quality (cars, clothing, housing, artwork, watches, restaurants), health care presents only the choice of paying what is demanded to survive, or not. Drug companies have also used multiple highly sophisticated maneuvers to maintain high prices: establishing environments with few competitors; pushing legislation to protect high drug prices; massive advertisement campaigns, etc. Many potentially illegal strategies continue to be investigated by the Federal Trade Commission and penalties imposed. But these do not deter drug companies, as they consider them as part of the cost of doing business. Manufacturers have also funded research to justify high prices. Two recent examples are studies that reported on the cost to develop drugs to market (citing ranges of $1 billion-$2.8 billion),90-92 and on the good “treatment value” of medications in hematologic malignancies.93 Both studies were refuted by independent research indicating that the cost of developing drugs is 10% of what was claimed94, 95 and those prices of hematologic drugs have poor treatment value.96 Even some drug company CEOs believe lowering prices is a better longer-term strategy.97, 98 If market forces failed to lower prices to reasonable levels, what are alternative options? Dr. Rashi Fein, a health economist and “Father of Medicare,” said, “Decent people-and we are decent people- are offended by unnecessary pain and suffering; that is, by pain and suffering for which there is a treatment”.99 George W. Merck, one-time president of Merck & Co. and son of the founding family, said, “We try to remember that medicine is for the patient. We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”100, 101 These two statements are echoed by HHS Secretary Azar, who said “the system has not put American patients first” and “access [to drugs] is meaningless without affordability.”57 Can the “American Patients First” blueprint, as proposed, succeed? Most health-care experts conclude it cannot in its present form.61-69 The blueprint, intended to deliver on campaign promises, has deviated from the promises that could have had the most impact. To effectively reduce drug prices, the plan must include the proposals detailed in Table 1, and address the following: (1) allow Medicare to negotiate; (2) reduce the launch price of newly approved drugs; (3) prohibit unjustified annual increases of prices; and (4) protect patients from high deductibles and excessive out-of-pocket expenses (which lead to abandoning treatment, worsen outcomes and cause deaths).22-26, 102 Historically, drug companies had a fiduciary duty to patients as their primary “consumers.”100, 101 In the past two decades, influenced by investors and Wall Street, they have pursued short-term profits and abandoned the ideas of corporate social responsibility they may have endorsed previously.103 Recently, business models are considering longer-term profits as better strategies. In health care, once drugs are available and affordable to all patients, many of them will live longer and continue to buy the drugs, leading to better long-term profits for manufacturers.98 Drug companies would “do good (to patients) and do well (financially).” The “American Patients First” blueprint asks 150 questions, perhaps seeking additional guidance from health-care experts. We hope this commentary and suggestions might stimulate further discussion and promote effective solutions (Table 1) that modify the roadmap to reduce drug prices. The authors declared no conflicts of interest. All authors (HK, DL, VH) contributed to the manuscript-e.g., literature search, data collection, interpretation, editing, writing, etc.