Without competition, drug prices soar
Taking on one of the most contentious issues in health care, a trio of Harvard-affiliated doctors says long government-approved market exclusivity periods are the primary reason US drug prices are more than twice as high as those in other countries.
In a “special communication” published Tuesday by the influential Journal of the American Medical Association, the authors conclude that more stringent requirements for US patents and other market protection -- effectively speeding up the rollout of lower-priced generic medicines -- are “the most realistic short-term strategies” to deploy against rising drug prices.
The doctors are seeking to shape the growing debate on how to contain the surging costs of prescription therapies. Many drug industry critics have discussed giving Medicare, the largest US health insurer, the power to negotiate prices with drug makers -- a proposal that has been echoed by presidential candidates Hillary Clinton and Donald Trump. But the JAMA article contends that empowering Medicare is only part of the solution.
It focuses instead on an area that has received little attention in the dialogue over drug prices: how branded drugs enjoying federal market protection drive the bulk of US spending on medicines. The article cites data showing brand-name drugs make up 10 percent of prescriptions filled, but account for 72 percent of drug spending.
“The source of drug companies’ ability to set these prices in the United States is the market exclusivity that government gives to them,” Dr. Aaron S. Kesselheim, an internist and director of the Program on Regulation, Therapeutics, and Law at Boston’s Brigham and Women’s Hospital, said in an interview. “It’s worth examining these exclusivity periods to make sure they’re tailored to provide the right amount of time and not provide excessive protection.”
There are two forms of government protection that give drug companies temporary monopoly status on new brand-name treatments. Patents run for 20 years starting from the time they are filed. Exclusive rights to the data generated during clinical trials of experimental drugs extend for five years to 12 years depending on the type of product, beginning when the Food and Drug Administration approves the drug for sale in the United States. Such data is needed by rival drug developers to create competing versions of the treatments.
Data exclusivity and patents, which are frequently challenged in court by competitors, run concurrently. Lower-priced copies of the branded drugs -- called generics for pills and biosimilars for biologics -- can not be sold until market protections have expired., which can often be a decade or more after the branded treatments first are approved for sale.
Biopharma industry leaders maintain that the US system of patent and data protection is a key reason more medical breakthroughs occur in domestic labs than anywhere else in the world.
“This is a way of making sure not only that people can recoup their investment but that they’ll invest in the sector in the first place,” said Mark Grayson, deputy vice president of public affairs at the Pharmaceutical Research and Manufacturers of America, an industry trade group. “If you make the climate worse for innovation, people will find a different place to go.”
Per capita drug spending in the United States was $858 in 2013, the most recent year for which data are available, more than double the average of $400 for 19 other industrialized countries, according to the JAMA article. Kesselheim and two Brigham and Women’s colleagues -- Dr. Jerry Avorn and Dr. Ameet Sarpatwari -- reviewed more than a decade’s worth of medical and health policy literature in trying to understand the origins and impact of high US drug prices.
Drug prices rose at a relatively modest rate in the early years of this decade, the authors wrote, as patents expired on many widely used medicines, paving the way for generics. That trend has changed in more recent years, as patent expirations slowed and more costly specialty drugs were approved, placing a burden on patients and insurers, they wrote.
“Between 2013 and 2015, net spending on prescription drugs increased approximately 20 percent in the United States, outpacing a forecast 11 percent increase in aggregate health care expenditures,” the Brigham and Women’s doctors wrote. “Prescription medications now comprise an estimated 17 percent of total health care costs, and prescription medication coverage constitutes 19 percent of employer-based insurance benefits.”
Dr. Steven D. Pearson, president of the Boston-based Institute for Clinical and Economic Review, said the JAMA article shows how changes in market protection -- along with moves to generate more data on comparative effectiveness of medicines -- can fuel the kind of competition that will help control prices.
“There’s no one silver bullet,” Pearson said. “Working on the patent side would not fix everything. But it’s part of a set of approaches that could create more competition.”
The article in JAMA could reopen a debate on market exclusivity that was quieted by industry’s successful bid for a dozen years of data exclusivity for biologics, established as part of the Affordable Care Act in 2010, said John Rother, chief executive of the National Coalition on Health Care, which represents 85 consumer groups, health care providers, and insurers.
“We might get a better outcome by focusing on exclusivity periods than on Medicare,” said Rother.
Kesselheim conceded in the interview that drug companies developing novel new therapies deserve some degree of market protection, but he said drugs are currently priced according to what the market will bear rather than on a company’s research outlays.
He said some companies have prolonged market exclusivity through questionable “pay for delay” agreements giving competitors a financial incentive to postpone launching generic drugs. He also criticized a tactic by some drug makers that have extended their market protection by winning new patents on drugs with slightly different doses and formulations.
Kesselheim and his colleagues called for changes in the criteria used by the US Patent and Trademark Office for issuing secondary patents based on “clinically irrelevant” changes to their medicines. They also called for stricter enforcement of existing laws that allow pay-for-delay arrangements to be treated as antitrust violations.
Correction: An earlier version of this story misspelled the name of Dr. Ameet Sarpatwari.