While State Rep. Peter T. Ginaitt, D-Warwick, seeks to tackle the problem locally using a state program, U.S. Rep. Bob Weygand, D-R.I., and several of his Democratic colleagues are trying to deal with it nationally. Two weeks ago Weygand announced that a study conducted by his office shows that pharmaceutical manufacturers practice “price discrimination” that gives discounts to Health Maintenance Organizations, the federal government, and certain other “favored customers.” According to Weygand’s study, pharmacies get no such price breaks, and senior citizens who lack prescription drug coverage suffer. For example, a typical prescription of Synthroid, a thyroid hormone replacement therapy made by Knoll Pharmaceutical Co. – the Mount Olive, N.J. drug manufacturing unit of BASF Corp. – costs $1.75 for favored customers. But for the average Ocean State senior citizen, the cost would be nearly $27, according to the report.
Weygand, along with U.S. Rep. Tom Allen, D-Maine, would attempt to solve this problem by directing the Health Care Financing Administration, the federal agency that administers Medicare and Medicaid, to act as a buying pool for seniors. The Prescription Drug Fairness for Seniors Act of 1999, Weygand said, would enable people on Medicare to get the same discounts that HMOs and certain government agencies receive, he said.
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”It’s really a marketplace-driven solution,” Weygand said. “There are no price controls, and it’s not a subsidy.”
Weygand’s study seems to square with what pharmacist Richard Backer of East Side Prescription on Hope Street in Providence, sees every day. “Retail pharmacy has always paid more for drugs than any other sector of health care; we’ve always overpaid,” he said.
A companion to Allen’s bill is alive in the Senate, a spokesman for U.S. Sen. Byron Dorgan, D-N.D., said last week.
Drug companies vehemently dispute the merits of Weygand’s study and Allen’s bill. For example, Glenn Majeski, a spokesman for Knoll Pharmaceutical Co. argued that Synthroid is actually the least expensive of the 10 most frequently dispensed branded drugs in the United States. For example, it’s cheaper than Claritin and Prozac, according to Knoll.
Jeff Trewhitt, a spokesman for Pharmaceutical Research and Manufacturers of America, also disputed Weygand’s assertion that the Allen bill does not introduce a price control. The Federal Supply Schedule program requires pharmaceutical manufacturers to give 24 percent drug rebates on drugs they sell to the Veterans Administration hospitals, federal public health clinics, Pentagon military clinics, and the Indian Health Service, an agency within the U.S. Department of Health and Human Services.
The problem, Trewhitt said, is that rebate applies to only about 10 percent of the total U.S. pharmaceutical market. Giving this same discount to all retail pharmacies would hurt drug companies’ profits, and stifle research and development, he said.
Skyrocketing research and development costs are the main reason for hikes in drug prices, he said. In 1985, Pharmaceutical Research and Manufacturers of America member companies spent $4 billion on R&D; in 2000, they will spend $26.4 billion, he said. Drug companies spent $1.5 billion on advertising in 1999 and are projected to spend $1.8 billion in 2000, he said.
Further, drug companies need decisive profits to attract investors, he said, since just 20 percent of drugs that go through clinical trials are approved and make it to market. The drug approval process can take a dozen years or more, and the average price of researching one drug today is $500 million, he said.
Trewhitt called Ginaitt’s bill “a terribly flawed price control bill that does more harm than good.”
Trewhitt further argued that the real problem is that Medicare does not cover outpatient prescription drugs. A better way to solve the problem would be to radically overhaul Medicare and provide direct financial assistance to beneficiaries, with the lowest income seniors getting the most support. Seniors could then use the money to buy into a HMO plan that offers a prescription drug coverage to Medicare patients, he said.
Last year, U.S. Sens. John Breaux, D-La. and Bill Frist, R-Tenn., introduced a bill that would structurally reform Medicare and add drug benefits. It’s a bill PHRMA supports, Trewhitt said.
