Yesterday, Democratic Presidential candidate Hillary Clinton proposed a new plan to address pharmaceutical “price gouging.” Her proposal, unveiled in Iowa and outlined in a factsheet, outlines a list of measures she believes will lower prescription drug costs for Americans.
Clinton’s plan contains a range of potentially far-reaching proposals, including:
- Ending the business expense deduction for direct-to-consumer drug company advertising.
- Requiring drug companies “that benefit from taxpayers’ support to invest in research.” Clinton added that drug companies “should not be allowed to reap excessive profits or spend unreasonable amounts on marketing if they want to receive support that is designed to encourage life-saving and health-improving treatments.”
- Capping monthly and annual out-of-pocket costs for prescription drugs. Specifically, her plan “will require health insurance plans to place a monthly limit of $250 on covered out-of-pocket prescription drug costs for individuals to provide financial relief for patients with chronic or serious health conditions.”
- Decreasing market exclusivity for biologic drugs from 12 years to 7 years. “Lowering the biologic exclusivity period…will spur greater competition and save up to $5 billion for the federal government over 10 years,” she wrote.
- Prohibiting “pay for delay arrangements” that keep generic competition off the market.
- Allowing Americans to import drugs from other counties.
- Allowing Medicare to negotiate drug and biologic prices and demanding higher rebates for prescription drugs for low-income individuals.
Clinton’s announcement follows a similar policy, announced earlier this month by Senator Bernie Sanders, who is also seeking the Democratic Presidential nomination. Sanders’ proposal is entitled the “Prescription Drug Affordability Act of 2015.” His Press Release announcing the Act is available here. His main provisions would allow Medicare to negotiate pharmaceutical prices, allow consumers to import cheaper drugs from Canada, ban pay-for-delay schemes, and add additional penalties for companies who settle with the government. Unlike Clinton’s proposal, Sanders does not address direct-to-consumer advertising, nor does he seek to reduce market exclusivity for biologics or provide out-of-pocket expense caps. Further, Sanders would require companies to disclose the costs related to particular products and prices they charge in other countries, a measure that has been introduced, unsuccessfully, in several states.
While drug pricing has been a newsworthy topic over the last year, the past few days have been especially brutal for the pharmaceutical industry's reputation. On September 20, the New York Times wrote an article entitled "Drug Goes From $13.50 a Tablet to $750, Overnight." The drug Daraprim is used to treat toxoplasmosis, an infection caused by a parasite, and was acquired by Turing Pharmaceuticals, a start-up run by a former hedge fund manager, noted the article. "Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars," the article stated. A media frenzy ensued (see for example, Fierce Pharma), capped by Hillary Clinton's announcement to move forward on an official drug pricing policy.
The company's chief executive, Martin Shkreli, defended his company's decision: "the drug was unprofitable at the former price, so any company selling it would be losing money. And at this price it's a reasonable profit. Not excessive at all," he stated in a CBS News interview. "This is a disease where there hasn't been one pharmaceutical company focused on it for 70 years. We're now a company that is dedicated to the treatment and cure of toxoplasmosis. And with these new profits we can spend all of that upside on these patients who sorely need a new drug, in my opinion," he added.
Shkreli has now pedaled back on the price after initially defending the company's decision and weathering an onslaught of criticism (see CNBC). However, the widespread coverage and backlash has already been enough to cause serious discussion about drug cost measures among Democratic presidential candidates in this election cycle. In fact, Bernie Sanders wrote a letter to Shkreli calling him to provide more information on the price hike. (See Sanders' September 21 letter).
Pharmaceutical industry trade group, PhRMA, responded unfavorably to Clinton’s plan. “The sweeping proposals outlined in Secretary Clinton’s plan to regulate prescription drug prices would restrict patients’ access to medicines, result in fewer new treatments for patients, cost countless jobs across the country and could end our nation’s standing as the world leader in biomedical innovation,” stated PhRMA President and CEO John Castellani.
PhRMA outlined a number of specific provisions in Clinton’s announcement that could be particularly damaging to getting groundbreaking treatments to patients in need.
Drug pricing and related cost-cutting proposals will likely be a major story in the election year, and it will be an important one to follow. While Turing Pharmaceuticals' huge price hike and high profile media fallout appeared to be handed to Presidential hopeful Hillary Clinton on a silver platter, it will be interesting to see whether other pharmaceutical companies garner similar scrutiny.