In the 16 years since I was first diagnosed with prostate cancer, I’d become almost blasé about starting a new round in the progression of drugs prescribed to me as the cancer successively figured out its way around the last one.
I’d suspected that the latest one would be more costly than its predecessors. My oncologist told me the drug would come not from my regular pharmacy but from the University of Rochester Medical Center’s Specialty Pharmacy. Such pharmacies deal only in high-cost medications.
Even so, I was unprepared for the answer a pharmacy tech gave when I asked about its cost.
“Your co-pay,” she said, “is $1,700 a month.”
My first reaction was disbelief. Then I wondered: “If that’s my co-pay, how much does the drug cost?”
Her answer: The full cost of the drug is $11,000 a month.
The drug, which is supposed to keep the increasingly aggressive cancer cells in my prostate from feeding on the testosterone they need to grow and proliferate, is the latest in a series prescribed to me. The drugs I’ve taken so far have held the cancer back, allowing me to stay pretty healthy. But prostate cancer cells are wily. They learn to work their way around drugs and treatments that are supposed to suppress them.
So far, I’ve been through two rounds of a kind of radiation treatment called brachytherapy, which involves the implantation of radioactive “seeds” in one’s prostate. That kept the cancer at bay for more than a decade.
Two rounds of drugs followed. The first round worked for several years. The second began to fail after a couple of months. This new drug is the second-to-last stop in oncologists’ current tool kit before chemotherapy, a treatment I want to avoid.
My second reaction on hearing the price of the new drug was quick to come. It was anger.
The drug’s co-pay alone would come to more than the net amount of my entire monthly Social Security check, an amount that would eat up well more than half of my monthly income. I could tap savings for expenses and still get by without resorting to cat-food casseroles.
But how quickly the drug might deplete my modest nest egg worried me. Also, a single month on the drug would immediately push me into the Medicare donut hole, a coverage gap built into the Medicare Part D prescription drug program that ups your cost for every drug you are taking. I take several.
“I will die before I take this drug,” I told the pharmacy tech. In that moment, I actually believed I would.
My doctor had mentioned that he was prescribing a generic, but under the impression that at the price I was quoted I must have misheard him and had been instead prescribed Zytiga, the brand-name version of drug, I googled it while I was on the phone with the tech. I found that Zytiga is made by a company allied to Johnson & Johnson. Still on the phone, I looked up Johnson & Johnson CEO Alex Gorsky’s most recent pay package.
“Do you know how much Johnson & Johnson’s CEO made last year?” I demanded of the woman. She didn’t. “It was $26 million,” I told her. She seemed surprised.
I regretted the venom I was spewing at a woman entirely innocent of the outrage I thought I was being subjected to; I kept apologizing to her. Even so, I couldn’t stop myself. I ranted on, interspersing angry outbursts with apologies.
I later found out that I had indeed been prescribed abiraterone, a generic version of Zytiga. The pharmacy could not immediately tell me how much more Zytiga would have cost me. My insurance company, Excellus, would quote a price only after a prior-authorization review, a pharmacist told me.
There is, it turns out, a term in the cancer literature that describes the distress, anger and helplessness I felt. That term is financial toxicity. It is a relatively recently coined term, invented to describe an old problem—the ill effects of high out-of-pocket costs on patients facing a life-threatening illness.
Patients’ distress can put doctors and other health care workers in an uncomfortable position. Health care providers are messengers bearing bad news about a situation they had little or nothing to do with creating. But when the news is delivered, who else is in the room to take the heat?
“Doctors are really just trying to connect the right patients with the right drugs,” says Aram Hezel M.D., chief of oncology at UR Medicine’s Wilmot Cancer Institute. “But entering into that discussion is what’s the burden that patients and families are bearing, what’s the cost?
“In oncology, I’m grateful for all these drugs and tools,” he adds. “I know I have patients living now who wouldn’t have been living 20 years ago when I started this. But I do wish that we could collectively agree on a system that would shield or at least mitigate some of the unfair uncertainty that patients and families feel.”
Over the two decades he has practiced oncology, Hezel says, a number of new drugs have come on the market, changing the face of cancer care for the better, turning what was once an almost certain death sentence into a manageable illness.
Hezel recalls one of the first of such drugs, a brand-name leukemia drug called Gleevec. When it was introduced some 20 years ago, says Hezel admiringly, “it took a cancer that would take people’s lives in a matter of many months to several years and made it like a chronic illness.”
Depending on a patient’s specific insurance coverage or lack of it, Gleevec’s costs currently run in the neighborhood of $9,000 a month.
After 20 years, notes Hezel, many such drugs are now produced in less costly form as generics. Gleevec’s generic, Imatinib, costs about $8,000 a month.
While some generics are actually cheap, companies that make generic drugs often reduce the brand-name version’s price by only a small amount.
According to URMC director of pharmacy Curt Haas, a 40-year pharmaceutical industry veteran, competition is the key. Generics get really cheap only when two or more companies market the drug. If only a single company makes a generic, it will invariably charge whatever it thinks the market will bear. Many generic cancer drugs are in such a category, often as a result of an exclusivity agreement struck with a brand-name company that holds a patent.
“Numbers don’t lie and a recent survey conducted by the Association of Oncology Social Work shows that more than one half of cancer patients indicate cancer costs negatively impact their focus on recovery,” begins a 2010 Social Work Today article on the high cost of cancer care.
Sixty-six percent of patients with high out-of-pocket costs suffered depression and anxiety while 29 percent delayed filling expensive prescriptions. Twenty-two percent decided to skip taking a costly drug altogether, the survey found.
Drug prices on the whole have not fallen since 2010. While the rate of prescription drug price hikes has slowed somewhat in recent years, on the whole still it has outpaced inflation and some drugs saw price increases ranging from 33 percent to 60 percent over a five year span between 2015 and 2020, a recent AARP posting notes.
“When I came into this business, pharmaceutical pricing was cost plus a reasonable margin,” says Haas. “We used to go crazy when a drug cost more than $100 a month. The market really changed, though. Now, it’s all about shareholder returns. We went away from pricing pharmaceuticals at what might be a reasonable price—a Main Street formula like what does it cost to make and what’s a reasonable margin to make—to, frankly, what can you get away with.”
What drives drug prices
The pharmaceutical industry consistently cites the high cost of research and development as the main driver of drug prices. Innovative cures like the drugs Hezel mentions would not be possible without the billions of dollars drug makers invest in research and development, the industry insists.
“America’s biopharmaceutical sector is the most R&D-intensive industry in the U.S. economy. In fact, the biopharmaceutical industry invests on average six times more in R&D as a percentage of sales than all other manufacturing industries. The entire biopharmaceutical industry invested an estimated $102 billion in R&D in 2018,” explains the drug makers’ trade group PhRMA in a post.
That investment is indeed impressive. But PhRMA fails to mention that the taxpayer-funded National Institutes of Health pays for a substantial slice of front-end medical research in the form of grants handed out to university research organizations like the UR Medical Center.
In 2020 alone, NIH awarded more than $40 billion in such grants, a Congressional Research Service report shows. Discoveries made in labs of university researchers in many cases form the basis for drugs ultimately developed and marketed by pharmaceutical manufacturers. In the late 2000s, UR spent some $10 million in legal costs trying to claim a piece of the $2 billion or more in sales Pfizer expected to make from Celebrex, a drug that the university contended was based drug patents URMC developed and owned. The university lost.
Why drug prices are so high is a question of particular interest to U.S. patients. According to a recent Rand Corp. report, brand-name pharmaceuticals on average cost U.S. patients 2.56 times what patients in other industrialized countries pay. The study does not delve into the reasons for the disparity or say why other countries can sell drugs more cheaply.
For those outside the industry, which is to say most Americans including many lawmakers, the U.S. drug market is an opaque arena of shifting and often upward moving prices that change according to arcane negotiations among drug manufacturers, insurance plans and middlemen called pharmacy benefit managers.
Ubiquitously known among pharmaceutical and health insurance industry cognoscenti as PBMs, pharmacy benefit managers for most patients are little-known, behind-the-scenes actors to most of the patients whose lives they affect. They are supposed to negotiate prices with manufacturers to secure lower prices for insurance companies and other drug purchasers like pharmacies and thus bring down the cost of health care.
More often than not, says Haas, that’s not the way it works, at least not in the U.S.
In this country, he says, “it’s a crazy market. Pricing of drugs is complex. There are many different prices. There’s ASP, which is average sales price; there’s AWP, average wholesale price; there’s what’s called WAC, which is wholesale acquisition cost.
“Different payers use different reference prices to base their pricing on. Some use an AWP basis minus a certain percentage; others use WAC; some use ASP plus six percent. It’s all over the place. But none of those may have anything to do with what (hospitals, pharmacies and patients) buy the drug for. PBMs negotiate rebates and discounts, but those rebates and discounts don’t always make their way to patients.”
An insurance company might get or share a rebate with the PBM it deals with, after the patient has already paid a co-pay based on the full, pre-rebate price, Haas explains.
Drug manufacturers have complained that discounts PBMs negotiate actually raise drug prices, a recent Commonwealth Fund study of PBMs’ role in the U.S. pharmaceutical market notes.
“There is a lot of debate over whether PBMs should be able to keep the rebates they receive from drug manufacturers, which generally aren’t publicly disclosed,” the study states. “Some believe PBMs should be compelled to ‘pass through’ all or a larger portion of these savings to health insurers and other payers. If PBMs were required to do this, insurers could use the savings to further reduce people’s premiums and cost-sharing payments.”
The Institute for Clinical and Economic Review is a Boston-based independent nonprofit that analyzes effectiveness and value of drugs and other medical services. In addition to crunching numbers, it works directly with drug makers in an effort to incorporate manufacturers’ perspectives in determining what a reasonable markup—one that provides an optimal balance between a company’s profit and a patient’s benefit—should be.
ICER says it has insufficient data to analyze abiraterone’s clinical effectiveness or cost-benefit ratio and so could tell me little about my drug. But its recently completed analysis of Biogen’s just authorized Alzheimer’s drug, Aduhelm, demonstrates the kinds of disparities that can exist in U.S. drug pricing. Biogen is charging $56,000 a year for the drug. ICER’s analysis pegs a reasonable price at somewhere between $3,000 and $8,000 a year.
Other industrialized countries use analyses like ICER’s to set drug prices, Haas notes.
The closest the U.S. has come to instituting government-set drug pricing has been in proposals to let Medicare directly negotiate drug prices with drug companies, a strategy expressly forbidden by the Medicare Part D drug plan enacted during the George W. Bush administration.
Such direct negotiation is currently proposed as part of a bill passed by the House of Representatives but stalled in the Senate due to Republicans’ unanimous disapproval of the idea. The measure could pass if 50 Senate Democrats can agree on terms of President Joe Biden’s Build Back Better agenda. But the Biden plan remains in limbo due to objections to measures including the drug-negotiation plan. Two Democratic senators who have so far bargained the legislation down from its initial more than $3 trillion size to less than half that amount have yet to sign off on a version they will vote for. As of this writing, the plan’s future remains unclear.
In the meantime, PhRMA is running ads claiming that if enacted, the Medicare drug negotiation proposal will let the government prevent seniors from obtaining needed drugs, a claim that a number of observers have tagged as false.
An analysis by the Annenberg Public Policy Center’s FactCheck.org, for example, after exhaustively analyzing the proposal, concludes that PhRMA’s claims do not hold up.
The Annenberg Center project’s lengthy analysis sums its judgment of the ad up by quoting a statement made by Rena Conti, associate professor of markets, public policy and law at Boston University’s Questrom School of Business, who in an Oct. 7 briefing to the Alliance for Health Policy dismissed the PhRMA ad as a case of “scare tactics,” and judged its content to be “not really reflective of any of the bills that we are aware of, or proposals that are on the table.”
The URMC Specialty Pharmacy tech who initially contacted me had checked out a few state and federal programs that provide financial assistance to patients faced with high drug costs. She quickly determined that my wife’s and my household income exceeds their eligibility limits. Some help that would enable me to take the drug would turn up, she assured me.
Not as sure as she, I checked with my oncologist, Colin McHugh M.D., asking if could delay taking abiraterone until I sorted out the financial situation.
“Don’t worry about abiraterone until we can get the price figured out,” he wrote in reply to my query. “It isn’t such an emergency that we don’t have time to figure out how to not make it cost an arm and a leg.”
Meanwhile, a URMC specialty pharmacist who had been assigned to me as a sort of case manager, Shannon Gowen, called me, promising to investigate other financial assistance I might qualify for.
“Sure, go ahead,” I told her.
Still dubious, I started to investigate other alternatives.
Pharmacy Checker.com is an online company that connects U.S. patients with foreign pharmacists in countries like Canada, Australia, the United Kingdom, India and Turkey where drug prices are considerably cheaper. A Canadian pharmacy would provide the generic version of the drug I was prescribed, for example, for a total cost of $1,465 a month.
A Pharmacy Checker.com analysis of 2019 financial statements of five major pharmaceutical manufacturers—Eli Lily, GlaxoSmithKline, Pfizer, Novartis and AbbVie—found that all spent more on marketing than on R&D. One, GlaxoSmithKline, spent nearly three times as much on marketing as on R&D—$5.3 billion on R&D versus $13.2 billion on marketing.
Lobbying federal and state government officials accounts for another big chunk of drug companies’ expenses. An analysis of publicly available data on pharmaceutical and biomedical firms’ lobbying outlays between 1999 and 2018 recently published by JAMA shows the total for the period to be $4.7 billion.
Eight of the top 10 dispensers of cash to elected officials and candidates on JAMA’s list are major drug makers. The top contributor was PhRMA, the drug-company trade group. Rounding out the list was another, similar trade group, the Biotechnology Innovation Organization, whose members include smaller drug-development enterprises as well as major manufacturers.
The URMC Specialty Pharmacy turned out to be far more of a boon than I thought it would be. Gowan, who I’d first spoken to on a Friday, called me the next day. She was working from home on lining up help for me. She had identified a nonprofit that might be able to help someone whose income put government assistance out of reach. The nonprofit didn’t always have help available, but if it did, it might cover at least some of my co-pay,
On Monday, Gowan called again. A nonprofit called the Assistance Fund would accept me. If I agreed to apply, it would pay almost all of my out-of-pocket costs. Instead of $1,700 a month, my monthly bill would come to $11.63.
“Apply for the grant,” I told Gowan. A few weeks later I started taking the drug. The only possible fly in this ointment is that the Assistance Fund provides help on an annual basis. I have to reapply for a 2022 grant in December. Although Gowan believes reauthorization is likely, she cautions that there is no guarantee that I will be reapproved.
URMC set up its specialty pharmacy some years ago, says Haas, because “we wanted to provide a level of care that was patient-centered that was able to address patient needs on these very expensive drugs. We saw repeatedly patients who were receiving what I would consider suboptimal care through the traditional mail-order specialty pharmacies.
“We wanted to develop a program that was much more patient-centered,” Haas explains. “The idea (was) that every patient would have a pharmacist, would have a coordinator that would help them access their drug. When we identified situations where patients could not afford care or had a difficult time affording care, we could also help get people plugged into resources whether those be company-sponsored assistance programs or grant programs or even through our own social work services. Our goal is to make sure that no patient is turned away because of inability to pay.”
Many of the mail-order specialty pharmacies that Haas judges to be subpar are owned by PBMs, which in turn are owned by major pharmacy chains and insurance companies.
The three largest PBMs are CVS Caremark, owned by the CVS drugstore chain; Optum Rx, owned the United Healthcare Group; and Express Scripts, an independent publicly traded company that services many Blue Cross Blue Shield plans including Rochester-based Excellus Blue Cross Blue Shield.
The cost of U.S. health care
While the ending to my story might seem happy, the same cannot necessarily be said for the U.S health care system. The costs I’ve managed to avoid personally are still doing their part to help swell the country’s total health care spending, which far outpaces other industrialized nations’, yet on the whole does not provide good care and access to as many citizens.
While I am, at least so far, avoiding almost all of abiraterone’s $1,700 co-pay, Excellus still has to pay its $9,300 share. The Assistance Fund’s $1,688.37 contribution also adds to the total amount spent and thus to the nation’s total health care bill as does my $11.63 contribution.
While patients like me benefit, Haas maintains, “these programs are not good for the cost of health care. At the end of the day, you’re just overpaying and the cost of these programs is already baked in to drug companies’ cost of doing business.
He adds: “The real reason for these patient assistance programs is to make sure out-of-pocket costs don’t get in the way of expensive drugs. Out-of-pocket costs are all most people look at and the (pharmaceutical) industry figured out that you can get Congress off your back if you just keep out-of-pocket costs down.”
Drug prices themselves are not the only expense the U.S. system piles on. Providing the quality of help I got from the URMC Specialty Pharmacy costs the university an uncalculated amount in extra administrative expense. Pharmacists do not graduate from pharmacy school trained in the skills URMC’s Gowen employed to ease my burden. Exercising those skills takes up uncounted hours that could be spent on direct provision of health care.
Roughly half of the more than 60 pharmacists URMC employs in its specialty pharmacy operation, like Gowen, do double duty as de facto case managers for patients like me who need to take high-cost drugs. The pharmacy department does not tally the hours spent on such work.
Haas says the specialty pharmacists in URMC’s operation spend many hours researching resources like the Assistance Fund and helping patients to access aid. The pharmacist assigned me also spent at least some of her own time, working over a weekend to research the assistance she ultimately lined up for me. Besides locating and identifying the Assistance Fund as a resource that might help me, she actually filled out the initial application that won me the aid.
In 2019, U.S. health care costs accounted for 17 percent of the country’s gross domestic product, roughly double the average percentage of GDP spent by 10 wealthy nations including the U.S., an analysis by the Peter G. Peterson Foundation found. That spending came to $11,000 per person, the highest per-capita amount spent on health care by any wealthy nation. It is more than double what Swedes spend per person on health care. On a per-capita basis, it is twice the $5,500 average spent by the wealthy countries the Peterson Foundation looked at.
Seven countries—Canada, Belgium, Germany, Sweden, Switzerland and the Netherlands—actually spent more per person on health care administration than U.S.’s $937 per-capita outlay. But all racked up lower costs overall.
According to a Commonwealth Fund analysis, the U.S. has the lowest average life expectance of any wealthy nation, 78.6 years. Canadians, who fall in the middle of the pack, can on average expect to live 82 years. Swiss citizens can expect to outlive us by a full six years, enjoying an average lifespan of 83.6 years.
A few weeks after agreeing to take abiraterone, I got personal demonstration of the vagaries of the U.S. prescription-drug market Haas describes. It came in a letter from my health insurer, Excellus.
It seems that in the space of time between my doctor’s prescribing abiraterone and my agreeing to take it, the price of the drug had gone up by 7 cents. While CMS requires that I be notified of the possibility that I could owe Excellus that amount, I might not have to pay it, the letter says. Express Scripts would let me know if would have to pay.
So far, I have heard nothing from the PBM.
Will Astor is Rochester Beacon senior writer.