Why do some HIV drugs cost so much? Pharma, insurers, advocacy groups and consumers weigh in
As open enrollment begins November 1, millions of Americans are comparing insurance plans available on the Affordable Care Act insurance marketplace. Prescription copayments and which medications a health plan covers are key considerations for people living with HIV and for those taking regular prescription medications. The cost to the consumer is very different, however, from the price that insurers negotiate with pharmaceutical companies, and the debate around drug pricing has hit national headlines in recent years with cases like EpiPen and Daraprim.
Drug pricing is a complicated issue, with pharmaceutical companies on one side, patient activists on the other, and consumers oftentimes stuck somewhere in the middle.
In February 2017, the HIV and hepatitis activist group Fair Pricing Coalition expressed dismay for the continued price increases of commonly-prescribed HIV medications.
They reported that in January 2017, ViiV increased the wholesale acquisition cost [WAC] of Triumeq, Tivicay and Selzentry by 7.9%; Janssen increased the price on Intelence, Prezcobix and Prezista by 7.9%; Merck increased the price of Isentress by 7.9%; Gilead increased the price on Descovy, Genvoya and Odefsey by 6.9%; and Bristol-Myers Squibb increased the prices of Reyataz, Sustiva and Evotaz by 6%.
“The WAC [wholesale acquisition cost] prices for several antiretrovirals, including Atripla, Reyataz, Truvada, Sustiva, and Viread, are now double or triple their launch prices,” Fair Pricing Coalition reported.
“Any company that says they need large prices for the drugs to justify research and development, I think needs to really carefully look at how much money they’ve already made and whether we now say, enough is enough,” said Andrew Hill, PhD, of St Stephen’s AIDS Trust, at a session on drug pricing at the International AIDS Society conference in July.
Over the last 15 years, from 2002 to 2016, the six leading HIV drug pharmaceutical companies made $200 billion in HIV drug sales—with profits that increased from less than 5 billion in 2002 to nearly 25 billion in 2016.
Pharmaceutical companies invest billions of dollars in research and development, with the hopes of recouping their losses—and making a profit—when a drug finally hits shelves. Yet the challenges of getting a target discovery approved as a new drug are steep: There is a 95% failure rate of investigational drugs going from Phase I clinical trials to FDA approval. For every one drug that gets approved by the FDA, hundreds more fail to prove safe or effective.
“Drug prices must reflect this high cost of research and development, and the prices must cover a company’s total capital costs, which include the numerous failures that accompany every success,” said Pacific Research Institute, a free-market policy agency.
Policies that push down drug prices—by say, instituting price caps—may reduce the profitability of the drug-making sector, and thus stifle innovation, said Margot Sanger-Katz, from the New York Times, in an interview with Kaiser Health News.
Ultimately, she said, it’s all about finding the right balance. “If you push down too much on prices, then probably we’re going to end up with less new stuff. If we have no control at all on drug prices then patients are going to be pushed out of the market and you’re going to have this unsustainable system.”
Transparency is part of the issue. It’s not clear how much pharmaceutical companies actually spend on research and development—as opposed to things like marketing and advertising, said Sarah Karlin-Smith from Politico. “It’s hard to know how much you can push down prices, and how much that would actually lead to a change in the new products we get,” she said.
Pushing down drug pricing in some areas might even have the unintended consequence of causing prices to rise in other areas, said Courtney Mulhern-Pearson, senior director of policy and strategy at San Francisco AIDS Foundation. This was one worry over California State Proposition 61, which was proposed (but did not pass) in 2016. If passed, the law would have prevented the state from buying drugs for health care programs like Medi-Cal at a price higher than that paid by the U.S. Veterans Administration.
“The idea was to reduce drug costs, but it could have had the unintended consequence of drug makers raising the price of drugs for the VA, or to private insurers and consumers. Overall, the proposition might not in fact have saved taxpayers any money,” said Mulhern-Pearson.
The price of a medication set by a pharmaceutical company is called the wholesale acquisition cost (WAC). Private insurance payers do not end up paying the WAC, because they are able to negotiate with pharmaceutical companies to drive down the price they pay for medications.
Because they are able to control the list of drugs provided to consumers on their formulary, they are able to pit one drug against another. “They’re able to say, ‘We will put your drug on our formulary, but only if you lower the price,’” said Mulhern-Pearson.
Unfortunately, government programs like Medicare are not allowed to negotiate drug pricing with pharmaceutical companies. (Read more about the ban, and why it exists, in this blog post from Health Affairs).
Consumers may feel the effects of high-price drugs if their insurance carrier limits access to medications, requires clients to pay costly co-pays each time a medication is refilled, or increases their monthly premiums.
“The cost of new, brand drugs is where the high price comes in,” said Sanger-Katz. “You might get somebody with cancer, who is looking at a 20% copay which is thousands of dollars for one treatment.”
Matt Sharp, a San Francisco resident who has lived with HIV for 30 years, said that he’s had issues related to HIV drug costs over the years. One example he recalled was trying to access an injectable medication through his health insurance company, Kaiser Permanente, an HMO (health maintenance organization) based in California.
“The formulation is difficult to make and there’s a very small market for the drug, so it’s an expensive medication,” he said. “When I asked for the drug the first time, two years ago, Kaiser had not worked out a system or a program to help patients pay for it. So that’s a time when I was basically stuck.”
Tez Anderson, the founder of Let’s Kick ASS (AIDS Survivor Syndrome), shared a similar perspective.
“As a 34-year long-term survivor, I take a lot of medications. Because I’m on Medicare/MediCal, I’m mostly covered but it’s not always easy. There’s the ongoing need to request a “prior authorization” because many of my meds are not on the formulary. They unusually, eventually, come through however there are drugs they do not cover, so I do not take them because I can’t afford to,” he said.
Hill, from St Stephen’s AIDS Trust, said that the price difference between HIV drugs in the U.S. and HIV drugs in countries that manufacture generics can be startling.
The World Health Organization’s preferred first-line regimen for adults—a combination of tenofovir disoproxil fumarate (Viread)/lamivudine (Epivir)/efavirenz (Sustiva)—is priced at $28,204 per year in the U.S. The global lowest price per year, to manufacture a generic version of this medication, is $100.
“You can see the injustice here,” said Hill. “You can see the massive multiples in pricing that you get when the [generic] drug is the same drug that is being sold in the U.S. This is not just true in the U.S., with the same price differentials across Northern Europe and South America. The patents on tenofovir, 3TC (lamivudine) and efavirenz have already expired. The TDF/3TC/EFV tablet should be available in any country for $90 per year.”
The HIV and hepatitis C advocacy group Fair Pricing Coalition take a more moderate stance.
“On one end of the spectrum, you have people who think that HIV and hepatitis C drugs should produce little to no profit—that drugs should cost under $100 a year because that is how much it costs a generic manufacturer in India to make them. And then you have people on the other side of the spectrum—in the business community—who think that pharmaceutical companies should be able to charge whatever they want. The FPC wants innovation to continue, and so realizes that this has to be a factor in drug pricing… Invariably, the price we arrive at as fair is almost always quite a bit lower than what it ends up costing. That said, we are often successful at gaining other types of concessions so that the people who need the drugs have access and aren’t gouged at the pharmacy or in their premiums,” said David Evans from Project Inform.
Fortunately for people living with HIV, strong consumer advocacy groups have been able to negotiate rebate programs, premium assistance programs, and other patient assistance programs that help people pay for the medications they need.
The AIDS Drug Assistance Program (ADAP) helps people living with HIV pay prescription deductibles and copays, and the Office of AIDS Health Insurance Premium Payment Program (OA-HIPP) helps pay for monthly health insurance premiums and out-of-pocket medical care costs. You can find more information on patient assistance and co-pay programs for HIV and hepatitis C medications on the Fair Pricing Coalition website.
Need health insurance? Open enrollment for Marketplace health insurance for 2018 starts November 1, 2017. Find more information at www.heathcare.gov. In California, Covered California is the state’s health insurance marketplace where people can purchase affordable health insurance plans. Visit www.coveredca.com for more information. Read the Covered California Frequently Asked Questions for people living with HIV and hepatitis C and people considering PrEP from the California HIV/AIDS Research Centers.
Read more on BETA about why HIV medications are so expensive—and what we can do about it—from Courtney Mulhern-Pearson and David Evans.