(Bloomberg)

The Obama administration’s top health officials said Friday that the nation needs greater clarity about the cost and effectiveness of prescription drugs as part of a strategy to make medicines more affordable without stunting the emergence of new pharmaceuticals.

The current scattered system, in which drugs are priced differently depending on who is paying for them, "end[s] up obscuring" their true cost and, in turn, the impact on which patients have access to them, said Andy Slavitt, who oversees Medicare, Medicaid and insurance exchanges in the Health and Human Services department.  "We must increase the transparency of the information available about drug pricing and value," he said.

Slavitt's remarks were part of a broad, day-long forum that HHS sponsored to discuss rising drug prices, which have become a dominant policy issue, raising the ire of consumers, sparking fights between sectors of the health-care industry and spilling into Congress and presidential campaigns. Recent surveys have shown that making drugs more affordable is the public's leading health-policy concern.

The event, at HHS’s headquarters in Washington, assembled hundreds of researchers, consumer advocates, company executives and pharmacy benefit managers, as well as representatives of the insurance industry and state and federal officials.

Before it began, federal health officials sought to calibrate expectations, saying that the rare gathering would not yield any hint of new administration plans to make prescription drugs more affordable. Instead, the session was intended to foster conversation among important groups that are increasingly rivals over the issue.

Panels at the forum were designed to begin creating a common base of knowledge about drug spending, development and innovative approaches that are being tried to control costs and improve access.

A central theme was the goal of a system in which the government and private insurers would pay for drugs based on research evidence of their effectiveness.

[Specialty drugs now cost more than the median household income]

“For the sake of patients, our health care system, and our economy, we must simultaneously support innovation, access and affordability,” HHS Secretary Sylvia Mathews Burwell said in opening the discussion:

Burwell touted steps the administration already has taken. She contended that the 2010 Affordable Care Act has promoted access to prescription drugs by providing health coverage to 17.5 million American through the law's insurance exchanges and the expansion of Medicaid in about half the states.

She also noted that federal health officials recently sent a notice to Medicaid directors in every state, reminding them that they are obligated to require treatment with the breakthrough drug Sovaldi -- which cures hepatitis C but at a price tag of up to $84,000 per patient. Burwell said that HHS has written to pharmaceutical companies, asking them to provide more information about their pricing and ideas on how to encourage prices that promote access.

Slavitt said that greater transparency was just one prerequisite to making drugs more affordable and available. Another, he said, was heightened focus on drug's value. "How do we create rewards for therapies that reduce disease, keep people in their homes and out of hospitals or other institutions and control chronic diseases while improving outcomes? What’s the best way to pay for targeted therapies when they work for some patients, but not others? How do we think in terms of episodes of effective treatment, rather than just the cost of a pill?"

Slavitt did not suggest answers to the questions he posed. But he noted that HHS's Centers for Medicare and Medicaid Services have created alternative payment models within Medicare that will increasingly reimburse hospitals and doctors based on the quality of the care provided.

Doug M. Long, vice president for industry relations at IMS Health, a company that analyzes trends in drug expenditures, pointed out that the nation spent 12.5 percent more on prescription drugs last year. The U.S. pharmaceutical market has just broken $400 billion, he continued, in part because of especially sharp spending hikes for hepatitis C, diabetes and cancer treatments.

Mark McClellan, a former Food and Drug Administration commissioner who directs the Brookings Institution’s Health Care Innovation and Value Initiative, said the government faces policy choices about how much to emphasize new drug therapies versus patients’ access to needed medicines. McClellan reviewed the array of current approaches to moderate prices and sketched out some cutting-edge possibilities.

For instance, he said, insurers are experimenting with new kinds of drug formularies that charge patients the least for medicine that has been proven to be effective, rather than the traditional method of “tiering” drugs based only on their cost.

In a panel of consumer advocates, Heather Block said that she is taking an oncology drug that costs $9,800 per month. "Why must I worry about insolvency as much as I worry about cancer?" asked the Delaware resident, who has metastatic breast cancer.

Later in the day, Christi Shaw, president of Novartis Pharmaceuticals Corporation, compared the limited treatments available when her mother was diagnosed with breast cancer at 49 with the range of therapies that have kept her sister alive since she was diagnosed with bone marrow cancer at the same age. "So we get to spend another Thanksgiving with her," Shaw said of her sister. "We need to make sure patients can access innovation."

Justin Senior, who oversees Medicaid for the Florida Agency for Health Care Administration, said that the program covers about 4 million Floridians and that its spending on drugs is nearing $2 billion -- fueled largely by an "incredible impact" of big cost increases in specialty drugs.

"The real debate that plays out in the states," Senior said, is the hard trade-offs it creates for their budgets. Florida's spending on drugs for Medicaid recipients is "enough to fund about 20 to 25 elementary schools."

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