Time for kickoff

Time for kickoff

As we kick off Labor Day weekend a few thoughts come to mind on the current debate surrounding the rising cost of drugs. This being a Presidential election year it’s not surprising that once again the “high” cost of drugs is drawing attention. The latest drug to come under scrutiny is the EpiPen® whose list price has risen dramatically since 2007. Since this issue has been widely covered and debated it’s not necessary to go into all the gory details.

Yet the EpiPen is not the only drug to come under fire it’s just the most recent. The “rising” cost of insulin has also made headlines. From the beginning of this debate our position has been first let’s define exactly what is meant by cost and second does this “rising” cost adversely impact patient outcomes.

Let’s take a look at cost first. As we have stated before there are all sorts of definitions as to what cost is. There is the “list price” of insulin which drug companies “charge” payors. However, this list price does not take into account discounts and rebates offered by the companies. Since these discounts and rebates are not disclosed by drug companies or payors we really have no idea what the “net” price is. Why aren’t these discounts and rebates disclosed? The standard response is “competitive” reasons or put more simply Lilly (NYSE: LLY) doesn’t want Novo Nordisk (NYSE: NVO) to know what they are doing. Given the secrecy surrounding this information one might just get the impression it is more valuable than the nuclear launch codes.

Next comes a more complex cost dynamic – what does the patient pay out of pocket. Now let’s be clear from the start that uninsured or under-insured patients using insulin are paying a hefty price. But the price they pay is not set by Lilly or Novo but Walgreens, CVS or wherever they fill their insulin prescription. It is also true that Lilly and Novo offer programs that try and help these patients.

Then comes the majority of patients who have decent health insurance. The issue here seems to be co-payments, the patients true out of pocket expense. There is no question that co-payments have been rising over the past few years. But again Lilly and Novo don’t set co-payments payors do and both offer programs that offset all or a portion of this expense.

Why are co-payments rising? Simple payors in attempt to keep the rates they charge reasonable are transferring a greater percentage of the cost to patients through higher co-payments. And just so we are crystal clear here it’s not just co-payments for insulin that have been rising but co-payments in general that have been rising.

The more important question is – is this “rising” cost of insulin adversely impacting patient outcomes. Which is not the same as is the “rising” cost of insulin adversely impacting a patient’s pocketbook. Here the evidence is murky at best as we have yet to find any study that draws a straight line between the “cost” of insulin to patient outcomes. Yes, there lots of speculation, innuendo and pontification but no hard evidence, no facts to back up this claim.

Let’s assume for a moment that the “rising” cost of insulin is adversely impacting outcomes. What’s the solution to this problem? How do we bring down this cost? This being a Presidential election year we don’t have to go to far as the candidates will surely weigh in. Just yesterday in response to the EpiPen situation Democratic nominee Hillary Clinton issued a new plan which among other things would allow government officials to impose penalties for “unjustified” price increases on older treatments without patent protection. The plan also would cap some patients’ monthly and annual out-of-pocket costs for prescription drugs. Extra funding would be on tap for the Food and Drug Administration to help approve generic-drug applications more quickly.

We have yet to see a plan from Republican nominee Donald Trump but honestly can’t wait to hear it as nothing the Donald says is dull. It may not be based on any facts whatsoever but we can guarantee it will be entertaining.

The problem however is no matter who is elected President, they don’t make the laws. They may lay out a plan but it is Congress who must turn this plan into action. Given the hyper partisan nature of Congress where compromise is a dirty word, we don’t see much in the way of anything getting done. Yes, these distinguished politicians will rant and rave. They will paint pharmaceutical companies and the executives that run them as the evil empire lead by Darth Vader. But in the end Congress will do what it does best, talk a very good game but no substantive action.

Now before we conclude and get onto some college football and thank goodness it’s football season again, a word on the evil empire. That word is capitalism. Lilly and Novo are not run for the benefit of society they run for the benefit of their stakeholders. These are not altruistic entities; they are for-profit businesses. Do executives at these companies try and maximize their comp plans? Of course they do just as any working stiff does. Do some of these executives make obscene amounts of money? They sure do. Does this have anything to do with the “rising” cost of insulin or patient outcomes? If it does please show us the evidence, the facts that prove this.

The last time we looked we live in America a democratic capitalistic society and as Winston Churchill once said; “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” So to all those people who pontificate on the evils of capitalism we have a suggestion. Put your money where mouth is. Buy shares in these companies and become an agent of change.

Want government to help with this change then vote, write your elected officials don’t just complain do something. Again we quote Churchill who said; “Democracy is the worst form of government, except for all the others.”

As Momma Kliff used to say “Don’t expect things to change if you aren’t willing to get into the game. It’s easy to sit on the sidelines and complain but this will accomplish nothing. If you aren’t willing to play, then you have no right to complain about the outcome.”

Enjoy the holiday weekend everyone.