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UPFRONT: Assessing the Battle Over Drug Prices

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“It is well-known what a middleman is: he is a man who bamboozles one party and plunders the other.” — Benjamin Disraeli

Who is to blame for rising drug prices? In one corner of this ring is pharmaceutical companies that price drugs at stratospheric levels or take a more insidious tactic of steadily raising drug prices over time. For example, the best-selling prescription drug in the world is AbbVie’s Humira (adalimumab), which started at $19,000/year in 2012 and has undergone a 100% increase in price since then, clocking in at $38,000 now. Thankfully, in retina, we have seen prices go down. Obviously, we need companies to make a profit on their drugs to fund research and development. However, a study published in the Journal of the American Medical Association found “no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear.” In countries with a single-payer system, the government directly negotiates prices with pharmaceutical companies. This practice has resulted in much lower drug prices in those countries, but it is currently illegal in the United States.

In the other corner of the ring, we have pharmacy benefit managers (PBM), such as Express Scripts, OptumRx, and CVS Caremark, which manage and negotiate prices of prescription drugs for insurers. PBMs wield tremendous power over pharmaceutical companies, and they make enormous profit. A patient’s copay to their insurer is based on the list price of the drug, not the negotiated discount price. Moreover, PBMs charge the pharmacies to pay back a portion of the drug sale after the sale, in a process called clawback — making money on obtaining and then selling the drug. The amounts for all these transactions are not public, because PBMs require that insurers and pharmaceutical companies sign nondisclosure agreements.

Each side, of course, blames the other. Pharmaceutical companies say they have to raise prices to cover costs. The drug industry trade group PhRMA has accused payers and PBMs of failing to pass on savings to patients. PBMs claim they do pass on the savings and that rising prices are to blame. Neither side is telling the truth. A pharmaceutical CEO recently told me that PBMs pressure them to keep prices high to keep their profits up. In retina circles, I have heard some say that the new anti-VEGF agents on the horizon should be priced higher than current offerings to give practices more money through rebates. I could not disagree more. Starting with our first approved therapies for wet AMD, the prices have always been too high, and we as a community need to work together to bring them down. How to do this, however, has yet to be revealed. RP

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