A Senate investigation of drug-price spikes at four companies kicked off Wednesday with specialists from all corners of the health-care system testifying that they're powerless to manage the out-of-control prescription costs.
The hearing launches the Special Committee on Aging's investigation into the soaring prices of old drugs, including the recent overnight price hike of Daraprim from $18 to $750. Doctors and policy experts offered a slew of proposed policy solutions, such as expediting applications for generic drugs to increase competition and requiring companies to reveal how much drugs really cost.
But the testimony to the committee in advance of the hearing underlined a stark fact about the current system, too: Doctors, companies that manage prescription drug benefits, hospitals, and health care policy experts alike feel fairly powerless to control high drug prices -- because they are allowed.
For instance, a pediatrician from the University of Alabama at Birmingham testified that an infant needed a treatment that had increased from $54 a month to $3,000 a month, causing the pharmacist to scramble for a solution. A kidney transplant patient in Baltimore began experiencing hallucinations as her medical team tried to obtain a drug once easily available.
"This is a life-threatening infection, your company has restricted access to the drug, and you’re not open on the weekend? Are you kidding me? We’re paying so much for this drug. Why can’t you stay open on the weekend?" said Annie Antar, a clinical fellow in infectious diseases at Johns Hopkins Hospital on the team that treated the Baltimore woman in an interview. "I felt like I was in a third-world country, I felt like I was in a Soviet country. This isn’t how American medical systems work."
There's more than enough public and political outrage to go around on the drug price issue: The investigation comes on the heels of a recent Senate investigation into the pricing of an $84,000 hepatitis C treatment, and at a time when presidential candidates on both sides of the aisle have denounced excessive price-gouging by the pharmaceutical industry.
But Martin Shkreli, the notorious pharmaceutical executive who leads Turing Pharmaceuticals, one of the companies under investigation, said it most simply at a Forbes Healthcare Summit last week. Asked if he could rewind back the past few months, before he became Wall Street's most hated villain, Shkreli said he would have done one thing differently: "I probably would have raised the price higher."
High prices for old drugs are often portrayed as outrageous, maddening and immoral. In prepared remarks for the hearing, Sen. Claire McCaskill (D-Mo.) said that Shkreli's move -- a 5,500 percent increase in a 62-year-old drug -- "shocks the conscience." But as the testimony and Shkreli's frank remarks just a week ago show, they are frustrating largely because they isn't exactly anything wrong with them.
"No one wants to say it, no one's proud of it, but this is a capitalist society, a capitalist system, and capitalist rules, and my investors expect me to maximize profits not to minimize them or go to half, but to 100 percent of the profit curve," Shkreli said at the summit.
A recurrent theme at the hearing, led by Sen. Susan Collins (R-Maine) and McCaskill was that competition had dried up, resulting in a broken system that allowed some older drug prices to spiral out of control in ways that called for government to intervene.
“When competition breaks down - where there is a ‘market failure,’ as may be the case here - the discipline that keeps prices in check and protects consumers can disappear,” Collins said.
Gerard Anderson, director of the Center for Hospital Finance and Management at Johns Hopkins Bloomberg School of Public Health urged greater scrutiny of mergers and acquisitions that reduce competition in the generic industry. He suggested a fast-track review of applications for generic drugs when there is no competition.
He also described possible solutions to the practice of "marketing the spread:" when the sticker price of a drug is set very high, and then undisclosed rebates are negotiated with the pharmacy. That secretive process, he said, leads insurers to overpay for drugs because they're basing what they pay on the sticker price and not on the real price the pharmacy pays. If everyone knew the real price of the drug, transparency could be a powerful tool toward containing spending.
"We have to figure out a way to either have more competition, or to control the prices where there is no competition," Anderson said in an interview.
Mark Merritt, the president of the Pharmaceutical Care Management Association, the trade group that represents pharmacy benefit managers, argued in prepared testimony that price controls or even limits on the amount of costs that patients pay could be harmful. Limiting what patients pay may seem to benefit sick people, he argued, but it actually opens the door for greater price increases as the system continues to shoulder the brunt of the costs, through increased premiums.
Erin Fox, director of the Drug Information Service at University of Utah Health Care described the effect of a single price increase on her institution. The price increases of Nitropress and Isuprel, two heart drugs acquired by Valeant Pharmaceuticals this year, would lead to nearly $2 million more in spending if the hospital continued to use the same amount of each drug as the previous year.
"Our physicians are extraordinarily frustrated by having to make decisions about whether to use these critically important but extremely expensive medications in emergency situations, especially when they have been using these drugs for years," Fox said.
Correction: The Senate committee hearing was held Wednesday. A previous version of this story stated the wrong day.