Twelve Democratic lawmakers and Senator Bernie Sanders recently wrote a letter to Stephen Ubl, President and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), raising concerns over “troubling price increases for brand name drugs” earlier this year.
The lawmakers refer to two new analyses, including one published by Steve Schondelmeyer of the University of Minnesota PRIME Institute, that point to widespread price increases for brand name drugs in January 2022. The letter notes that “[t]he large, across-the-board price increases of popular, brand name prescription drugs appear to be an example of pharmaceutical companies taking advantage of their abusive market power to expand already-large profits. And the coordinated and timely price increases ring of political opportunism.”
The letter states that the two analyses “suggest rapid price hikes affecting the vast majority of popular brand name drugs, including those used by seniors and people with disabilities in the Medicare program. These analyses reveal that drug manufacturers are using their market power to impose extraordinary price increases, which also have the effect of driving up general inflation.”
The letter from the lawmakers does acknowledge that the list prices – like the Average Wholesale Prices provided by Dr. Schondelmeyer’s analysis – do not actually reflect discounts and rebates that some purchasers are able to obtain for drugs, but concludes that “[a]n increase in baseline prices, even if they are partially offset by rebates, will still result in an increase in net costs for providers, taxpayers, and consumers, who often pay cost sharing based on list prices.”
PhRMA Statement
In a statement to Reuters, Brian Newell, spokesperson for PhRMA, said drug prices rose just 1.3% last year and that the letter put a “myopic focus” on drugmakers that fails to consider others reasons for high healthcare costs. Newell goes on to point to other potential causes of the increases of healthcare costs, including “abusive insurance practices that force patients to pay the full cost of medicines while at the same time middlemen pocket record rebates and discounts from drugmakers.”
PhRMA Response
One week after the lawmakers sent the letter to PhRMA, Mr. Ubl provided a response on behalf of the Association. In the letter, he notes that since 2000, PhRMA member companies have invested nearly $1 trillion in the search for new treatments and cures, including $91.1 billion in 2020, and that biopharmaceutical companies have successfully researched, developed, and delivered multiple vaccines and therapeutics to help halt the spread and mitigate the effects of COVID-19.
Ubl noted that “[a]s a trade association, PhRMA does not permit any discussion about members’ current and future drug pricing strategies and we are not privy to proprietary information about individual companies’ business practices. PhRMA does not have any information about individual company pricing decisions and cannot comment on individual company pricing decisions or offer insight into those decisions.”
Ubl reiterates PhRMA’s desire to lower healthcare costs and make medicine more accessible to all Americans. However, he notes that in order for a productive dialogue to be held, parties need to agree on the true causes of the problem. He states that the two analyses used by the lawmakers in their letter “rely on flawed data that focus primarily on wholesale acquisition costs (WAC) or list prices and fail to account for the many rebates, discounts, and other payments from manufacturers that impact a manufacturer’s net pricing, which leads to fundamentally misleading conclusions about the ‘cost’ of medicines.”
Ubl states that manufacturer rebates and other payments have more than doubled since 2012, reaching $187 billion in 2020, which has resulted an average of 44% decrease in the WAC or list price in 2020.
Ubl includes in his letter a handful of “common-sense reforms” that might actually help improve patient access to medicines, including: cover more medicines from day one, make cost sharing more predictable, make coupons count, and require standardized plans.
Lawmakers Response
On March 16, 2022, the lawmakers fired back a second letter to PhRMA, indicating that the two parties are unlikely to work together to resolve the issue any time soon. In the letter, the lawmakers expressed disappointment in Ubl’s responses and requested a supplemental, more pointed, response to their questions.