Sticker shock waves: Players to respond to drug priciness

Last year it was Sovaldi. This year it has been the PCSK9 inhibitors, Daraprim, and the tangled (and unsavory) relationship of Valeant and Philidor.

Who can say which drugs or what companies are going to leap into headlines and stir up Internet buzz in 2016?

But there’s no question that the high price of pharmaceuticals is going to continue to roil the waters. Spending on prescription drugs is ramping up. Federal government actuaries project that spending on a per-­capita basis will increase to $1,062 next year, a 10.6% increase over the 2014 amount.

Per-capita spending on prescription drugs

Source: CMS, Office of the Actuary, National Health Expenditure Projections, 2012–2022

Specialty drugs have rightfully occupied center stage in the growing concern about drug spending; they are priced very high and the “specialty” is misleading because they are increasingly common. But news reports this fall pointed out that insurers are also seeing price hikes for generics, which have been the bargain-basement heroes of efforts to slow down health care spending.

Newton’s third law will kick into gear in 2016, but the reaction to high drug prices will vary with the player and the turf being protected. The pharmaceutical industry is launching some familiar arguments: even at Tiffany prices, drugs can save money if spending on other types of health care is avoided and high prices support research. The industry is also deflecting blame to payers and their high deductibles—and to a few bad apples in its ranks. Public and private payers will talk and take some action toward basing drug choices on the value delivered. But how is value going to be measured—multiple efforts are underway—and who is going to hold the measuring stick? There will be some flanking actions on the periphery. Changing site of service can save a bundle even if the stated price of drugs doesn’t change.

New medications entering market, worldwide, 1996–2020

Source: IMS Health

PBMs are going to get some scrutiny in 2016, but the major ones—Express Scripts, CVS, and UnitedHealthcare’s Optum Rx—are more likely than not to come out as white hats, wielding market power to push back on high prices.

For every action, there is an equal and opposite reaction, Isaac Newton posited. High drug prices will continue to spur pushback from payers.

Of course, 2016 is a red-letter year for politics, and drug companies and high pharmaceutical prices are big fat piñatas for anyone who wants to take a whack at them. Direct government negotiation of price will be talked about on one side of the aisle, overregulation on the other side. Neither will have much of an effect until 2017 when there will be a new occupant of the White House and more certainty about which way the political winds are blowing.