Drug Spending Dementia Clinton vows to cure Alzheimer’s while imposing price controls.
http://www.wsj.com/articles/drug-spending-dementia-1450915388
Hillary Clinton this week promised to cure Alzheimer’s disease inside of a decade—even as she bemoans the tragedy of the Hepatitis C cures that are on the market today because she feels the prices are too high. That isn’t the only contradiction—or outright falsehood—dominating the political debate over pharmaceuticals.
Also this week the Health and Human Services Department created a “dashboard” that claims to show what Medicare’s drug-benefit program spent on individual drugs over the last five years. “You’ve probably heard about—or seen on your drug store receipt—evidence of the rising cost of prescription drugs,” the White House’s Jeanne Lambrew and Erin Richardson wrote in a blog post. “The tool allows you to sort these drugs in different ways, so you can rank them by total spending, spending per person, or by cost increases.”
But something about this data dump is off. The dashboard lists “total spending” on Medicare drugs at $121.5 billion last year. The Congressional Budget Office reports that actual spending in 2014 was $65 billion. The dashboard says Medicare spent $2.5 billion on Abilify. Bristol-Myers Squibb booked total U.S. revenues of $1.6 billion for that antipsychotic medicine in 2014, and that figure includes private insurance and Medicaid.
You have to read the fine print to learn how HHS is deceptively inflating the numbers, details that somehow went unmentioned in the White House’s agitprop. The data are merely the public list prices of drugs. They don’t include the rebates and various price concessions that pharmacy-benefit managers and other insurers obtain from drug makers as they compete inside the drug program.
These negotiations significantly lower the cost of medications. Wall Street analysts estimate that the discount on Gilead’s Sovaldi—one of the Hep C cures—is now over 50%. HHS is prohibited by law from revealing the size of these discounts for specific medicines, which would undermine competition when two or more drugs are vying to treat the same illness.
But HHS could have generated an honest depiction of government drug spending in context by disclosing actual trends for therapeutic areas and aggregate refunds. The Medicare trustees estimate that “many brand-name prescription drugs carry substantial rebates, often as much as 20% to 30%.” The IMS Institute for Healthcare Informatics notes that “invoice prices” (list prices) for 2014 rose 13.5% on average but net prices only 5.5%, a level that “is notable for being the lowest of the past five years and has occurred even as invoice price increases have accelerated.”
In other words, the HHS drug dashboard is another exercise in phony “transparency” to lobby for pharmaceutical price controls. As President, Mrs. Clinton would be happy to oblige.
By the way, her Alzheimer’s-cure pander couldn’t be more transparent—or disingenuous. There probably isn’t a more difficult scientific challenge littered with more failed experiments. Between 2002 and 2012, 413 clinical drug trial candidates for Alzheimer’s, dementia and other neurodegenerative diseases went bust, and while no study has attempted to add up the costs, they surely reach tens of billions of dollars.
Despite these setbacks, some 93 medicines are in the Alzheimer’s pipeline today. If HHS and Mrs. Clinton succeed in outlawing the profit motive in drug development, they’ll sabotage biotech innovation and beget fewer new drugs.
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