Painful prices -- Drug costs are rising quickly
WASHINGTON (AP) -- Patients and insurance companies are facing sticker shock as the nation's bill for prescription drugs rapidly jumps -- one new arthritis medicine just debuted with a $12,000-a-year price tag.
Double-digit increases in drug spending are hitting even those with insurance, as managed-care companies hunt ways to offset pricey prescriptions. One new trend: Patients who pay $5 for a generic drug and $10 for an older brand name are about to be charged $25, $30, even $50 if they want the newest, costliest drugs.
Drugs are a hot issue for Congress, where lawmakers are struggling to find ways for the elderly dependent on Medicare, which does not pay for drugs, to get proper care.
But the tab affects young patients too, and it is stirring a new kind of drug war as insurance companies, politicians and consumers all demand affordable drugs.
Spending for prescription drugs has passed $80 billion annually, increasing by 11 percent to 14 percent every year since 1995.
"That type of cost increase is unsustainable," warns Dr. Nicholas Hanchak of the giant insurer Aetna-U.S. Healthcare.
For some drugs, it is the genetics revolution. New therapies significantly are helping patients, and biotechnology is expected to produce up to half of new drugs in coming years. But genetically engineering drugs or growing them from living organisms takes more time, money and expertise -- even revamped factories -- than old-fashioned chemical drugs.
"There are some real hard decisions yet to be made. We can do more (scientifically) than perhaps we can afford," said David Kreling, a University of Wisconsin pharmacist who is studying drug spending for the Kaiser Family Foundation.
"Look at where the science is. ... This country has to figure a way for most people to gain access to these developments," added Peggy Phillips of Immunex Corp., which created Enbrel for rheumatoid arthritis and defends its $12,000 price tag because it is expensive to make and helps patients who failed alternative therapies.
Increased consumer use is fueling spending. Managed care actually gave more patients access to drugs, which are cheaper than surgery or hospitalization. An aging population uses more medicine, and more new drugs are hitting the market, always pricier because they have no generic competition.
Plus, insurers complain that drug makers' $1.3 billion in flashy advertising is prompting unprecedented consumer demand for new brands that often work no better than older, cheaper drugs.
For other drugs, consumer advocates cry price-gouging. Rep. Tom Allen, D-Maine, found that uninsured senior citizens pay over twice as much for prescriptions than "bulk buyers" such as the Veterans' Administration or HMOs -- or even Canadians. Indeed, seniors in Maine and Minnesota regularly travel to Canada by the busload to fill prescriptions.
Take a month's supply of cholesterol-lowering Zocor. HMOs and the VA pay $43; Canada's retail price is $44; but full retail price for uninsured Americans is $104.
Allen this week proposed legislation to let Medicare patients buy drugs at the government's "bulk buyer" price.
Why, asks the advocacy group Public Citizen, are U.S. prices often twice as high as drugs in Britain and Europe? The average retail price of the antidepressant Prozac abroad is $34 a month, but $72 here; the antipsychotic Clozaril is $111 abroad but $317 here.
Those countries impose price controls, which drug makers here fight strenuously.
Overall, the drug industry is among the world's most profitable. Large companies have profit margins well over 30 percent.
But it also is risky: Four of every five experimental drugs tested in humans fail. It takes new companies years to begin earning profits -- Immunex has not yet.
About 20 percent of pharmaceutical revenue is reinvested toward new medicines, well above the average 4 percent returned to research and development by all other industries, said industry spokesman Jeff Trewhitt. This year, such R&D will hit $24 billion, higher than the entire budget of the National Institutes of Health.
Any legislation curbing prices -- like Allen's -- also would curb vital research, Trewhitt contends. His bottom line: Prices "reflect the cost of new, cutting-edge technology."
So what is next? Expect insurance companies to raise co-payments for new, pricey drugs.
Drug makers are providing some free or subsidized medicine to the uninsured poor. Immunex, for instance, has donated $7 million of Enbrel.
Doctors and insurers will become more choosy about which patients really need super-expensive drugs: Give a generic painkiller that costs pennies-a-pill to most arthritis patients, for example, but let those with ulcers try a new $2.40-a-pill medicine that is supposed to be more stomach-friendly.
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