Congress has subpoenaed prominent pharmaceutical executives to explain on Tuesday a jarring explosion in drug prices — and a study by a West Palm Beach dermatologist and his daughter peels back the skin on the kind of increases fueling a backlash.
Prices rose an average of 401 percent, or 36 times faster than inflation, on 19 prescription drugs for skin conditions that a father-daughter research project by Steven and Miranda Rosenberg tracked at four West Palm Beach pharmacies since 2009.
The increase on two drugs made by a company whose CEO is expected to testify Tuesday: Nearly 1,700 percent.
“The outrageous price increases are going to bankrupt the health care system,” said Steven Rosenberg, a West Palm Beach dermatologist who was elected chair of the Florida Board of Medicine in December. He said patients’ reaction to price changes has been “disbelief.”
What began as a database for fellow dermatologists became the basis for a study accepted for the February 2016 issue of the journal JAMA Dermatology and published online first.
It got to the point where his daughter Miranda, a third-year medical student at the University of Pennsylvania’s Perelman School of Medicine, said she was “calling up the pharmacies and asking, ‘Is this right?’ But the prices were correct.”
What puzzled the Rosenbergs were trends that emerged even for drugs that were older, sometimes available for more than a decade in generic form. Their published study does not delve into causes, but in interviews they said they saw no obvious reasons for prices to skyrocket — except perhaps that companies saw nothing standing in the way of a profit windfall.
Two drugs sold by Valeant Pharmaceuticals International to treat skin conditions related to cancer soared nearly 1,700 percent, they found. A tube of Targretin gel, for example, rose to about $30,320 in 2015 from $1,687 in 2009.
The per-ounce cost for that medication climbed to “15 times the price of gold,” Miranda Rosenberg noticed.
It wasn’t just one or two outliers. Averaging costs at Costco, CVS, Sam’s Club and Walgreens, they found steep increases on a whole range of medicines used to treat conditions such as acne, fungal infections or psoriasis.
Valeant interim CEO Howard Schiller is expected to be one of the executives to testify before the U.S. House Committee on Oversight and Government Reform Tuesday.
Another man lawmakers have subpoenaed is Martin Shkreli, known as “Pharma Bro.” The former hedge fund manager who served as Turing Pharmaceuticals CEO until he stepped down last month oversaw a staggering increase in a 62-year-old medication used by AIDS patients — from $13.50 a pill to $750.
Last fall, Shkreli defended the more than 5,000 percent overnight increase in the medication’s price as “not excessive at all.” He characterized it as seeking a reasonable profit that encourages more investment and more spending on research and development.
His lawyers have indicated he may invoke Fifth Amendment rights as he tweeted this week about “whining” House members.
U.S. Rep. Elijah Cummings, D-Maryland, said he pushed for the hearing because Americans are “fed up with watching major drug companies rake in record profits while they continue to struggle to afford their medicines.”
In a statement, Valeant acknowledged it makes five of the 19 drugs tracked in the Rosenbergs’ study.
“Valeant sets prices based on a number of factors, including the cost of the development or acquisition of a drug, the availability of substitutes or generics, and the benefits it offers versus alternative treatments that might be more costly,” the company’s statement said. “When possible, we offer patient assistance programs to mitigate the effects of price adjustments and keep out of pocket costs affordable for patients.”
For consumers, higher costs might whack them at the pharmacy register through co-pays or deductibles if they have an insurance plan. The trend has even forced some patients off medicines they have relied upon for years. Sometimes health plans have taken certain drugs off their approved lists because of cost.
But the full effect may become apparent only later, as insurers increase premiums to absorb the higher costs of drugs they do cover.
Prescription drug prices generally have increased more than 10 percent for three straight years, according to the New York-based health technology company Truveris. Prices rose fastest for branded drugs still on patent and specialty drugs, but even generic drugs rose faster than inflation, researchers found.
“Nobody understands the cost of the drug until you show up at the register,” said A.J. Loiacono, the company’s chief innovation officer. “If somebody asked what milk costs, I might have a general idea. I know I don’t have to bring $100 to the register.”
In the complex and often confusing world of health care, rising drug costs are typically filtered through a maze of insurers, pharmacies and other intermediaries, he said.
For their part, pharmacists are “working with patients to find ways to lower prescriptions costs” through generics, pharmacy discount programs, and other means, said Chris Krese, senior vice president with the National Association of Chain Drug Stores.
Middlemen can play a role, but “substantial industry consolidation” among manufacturers of certain drugs has led to cases of “monopolistic pricing,” said Daniel Hartung, an associate professor in Oregon State University’s College of Pharmacy.
The increasing cost of prescription drugs has been a driving factor in spiraling Florida Medicaid expenses, leading to a 7 percent rate hike for state managed-care plans, Florida’s chief economist Amy Baker told state legislators in September.
Last Wednesday, the Epilepsy Association of Central Florida applauded state bills filed in hopes of protecting Floridians from sharply rising costs of drugs — such as those to control seizures.
The Patient Stability Act (HB 915 / SB 1142) would put the onus on health plans not to raise patients’ out-of-pocket costs or otherwise affect their access to certain drugs in the middle of a coverage year.
“Floridians living with complex and chronic conditions should not have to live in fear that the medications they rely on will be placed out of reach,” said Rep. Debbie Mayfield, R-Vero Beach.
But why are prices shooting up for many drugs whose costs have long been stable? Why are they increasing for many medicines available in generic form, which — at least in the past — has meant a dramatic lowering of costs?
Some companies say they are just trying to keep up with the competition.
Take an anti-fungal generic for Mycolog-II (nystatin-triamcinolone). For a 30-gram tube, the price increased more than 10-fold between 2011 and 2014 — from $9.15 to $103.88, the Rosenbergs’ report found.
Drug giant Novartis, based in Swtitzerland, acquired a manufacturer of that medicine, a spokesman acknowledged in response to a question from The Palm Beach Post.
The firm took a price increase in 2013 “to be competitive with the pricing of other generics in various strengths already in the market,” Novartis spokeswoman Elizabeth Power said.
A group representing drug makers urged consumers to keep the West Palm Beach study in perspective.
“This study appears to focus on the invoice prices for a subset of medicines and ignores the discounts and rebates negotiated by insurers and pharmacy benefit managers,” said Holly Campbell, spokeswoman for the Pharmaceutical Research and Manufacturers of America.
Spending on prescription medicines has maintained a consistent share of overall health spending because of “a competitive marketplace for medicines where generic utilization rates are high, robust competition among brand name medicines takes place and aggressive negotiation occurs to lower price,” she said.
Nationally, it’s unclear what if any changes in government regulation might be coming, but the prices are catching the attention of politicians in both parties.
U.S. Senator and Republican presidential candidate Marco Rubio of Florida has blasted “pure profiteering,” contending part of the problem is government red tape creating high costs and delays for approval for generic versions of brand-name drugs. Competitor Donald Trump also slammed practices he called “disgusting.”
Still, GOP televised debates have featured little discussion of concrete proposals on drug prices.
Democratic presidential candidate Hillary Clinton said her plan would reduce tax breaks for companies who prioritize marketing and profits over research, prohibit them from paying to keep generic competition off the market and and cap out-of-pocket costs for consumers. “If you’re price gouging American families and jacking up costs for no good reason, I’m going to hold you accountable,” she said.
Democratic rival Bernie Sanders says Big Pharma lobbying has insulated the business from cost-bending regulations affecting most of the rest of health care. His plan would lift the ban that stops Medicare from negotiating drug prices and open the door to lower-cost competition from Canada.
“Instead of listening to the demands of the pharmaceutical industry and their 1,400 lobbyists, it is time that Congress started listening to the American people, who overwhelmingly believe that the cost of medication is too expensive,” Sanders said.
Valeant interim CEO Schiller promised this month to be “relentlessly focused on providing easy and affordable access” to its drugs, including a deal with Walgreens to offer discounts on certain products including dermatological drugs.
Doctors in a wide range of specialties are hearing from patients that their medicines are unaffordable, Steven Rosenberg said.
“In most cases, there seems to be no rationale for it other than there are no restrictions on pharmaceutical prices,” he said.
Price hikes on dermatology drugs
Prescription drug 2009 price 2015 price Change
Carac cream, 30g $159.40 $2,864.70 1,697%
Cutivate lotion, 120ml $305 $1,067.25 249%
Derma-Smoothe FS oil, 4oz $45.70 $322.67 606%
Retin-A micro, 0.1%, 50g $178.05 $736.47 414%
Targretin gel,60g tube $1,686.78 $30,320.12 1,698%
Source: JAMA Dermatology study, February 2016, published online November, 2015, by Miranda E. Rosenberg, Steven P. Rosenberg.