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Health Care Issue Analysis of Rising Drug PricesShannon L. SharrarFerris State UniversityAbstractRising drug prices in the United States is a current and significant health care issue. Drug prices are rising at double-digit rates in both individual drug costs and percentage of health care spending. For the sake of America’s health care industry, it is imperative that a fair price is established on each drug that is feasible for all stakeholders. Key stakeholders include consumers, drug manufacturers, healthcare providers, pharmacies, and insurance companies. Five main political strategies are discussed which include awareness, transparency, collaboration, negotiation, and competition. Additionally, current legislation in the pharmaceutical industry known as the Fair Accountability and Innovative Research (FAIR) Drug Pricing Act of 2016 and the Affordable and Safe Prescription Drug Importation Act are described as well as their implications. Lastly, a detailed description of an interview with a pharmaceutical leader, Jim Horton, is also narrated. This paper encourages the awareness of escalating drug prices and emphasizes the urgency in its need for resolution.Health Care Issue Analysis of Rising Drug PricesDrug prices have been rising for years now and justification for these increases has been debated. Establishing appropriate prices on drugs is difficult. The pharmaceutical industry would like to prosper but the consumer would like access to affordable drugs. This displays one significant difference between pharmaceutical companies and the majority of cooperate America. Pharmaceutical companies manufacture drugs that save lives and the prices of these drugs directly correlates with their obtainability to patients in need. Establishing a price that assures fairness to all is essential. The purpose of this paper is to discuss concerns of rising drug costs for all stakeholders, research proposed legislation with its implications, and offer political strategies to help resolve the issue of drug prices. Rising Drug PricesDrug costs are rising at a catastrophic rate. Many brand name drugs have increased in price by more than 15 percent over the last year alone and a handful of the most popular drugs have doubled in price over the last five years (Schondelmeyer & Purvis, 2016). The Medicare Part D prescription drug program, which is funded by tax money, saw its total drug costs increase from $104 billion to $121 billion between 2013 and 2014 (Baldwin, McCain, & Schakowsky, 2016). Equally as concerning, Americans spent an estimated $425 billion on prescription drugs in 2015 and that number is expected to reach beyond $600 billion a year by 2020 (Baldwin et al, 2016). This exponential drug pricing growth is terrifying. The question now stands as to if these price increases are justified. Currently, there are no law requirements of transparency for drug pricing so the details of drug costs are left to the imagination (Baldwin et al., 2016). One specific example of a drastic drug price increase was the recent Epi-Pen outrage. Ten years ago an Epi-Pen sold for $83 and that same medication recently was priced as high as $600 (Gabrielli, Layon, Bones, & Layon, 2016). Drug companies state that these hikes in price are justified due to expenses from research, manufacturing, advertising, and many other non-specific costs but truth be told information for exact drugs expenditures is limited to the public (Gabrielli et al., 2016). Either justified or not, increasing drug prices have resulted in greater spending for all consumers and taxpayers in the U.S. (Baldwin et al., 2016). Prescription drug prices are a large portion of health care spending and the current U.S. health care system will not be able to continue to support these rising costs (Herman, 2015).Current LegislationThe Fair Accountability and Innovative Research (FAIR) Drug Pricing Act of 2016, also known as S. 3335, requires the reporting of common hospital drug prices that have increased by more than 10 percent over a 12 month period. S. 3335 was introduced on September 15, 2016, and was then referred to the Senate Committee on Health, Education, Labor, and Pensions. The FAIR Drug Pricing Act was created to force transparency for pharmaceutical companies and to lower the rapid increase of prescription drug prices (Baldwin et al., 2016). The U.S. Department of Health and Human Services would be in charge of manufacturer compliance and a civil fine would result if no report is submitted at least 30 days prior to drug increase (S. 3335, 2016). The report would lay out in detail the reasoning behind the need for the price to increase such as research, manufacturing, and development costs (Baldwin et al., 2016). Additionally, the report would have to clearly display net profits that would be made from the drug as well as expenses used to promote it (Baldwin et al., 2016).The Affordable and Safe Prescription Drug Importation Act, also known as H.R. 1245, allows for the importation of drugs from certified foreign sellers in hopes to decrease spending on prescription medication and increase competition. H.R. 1245 was just introduced on February 28, 2017, and was then referred to the House Committee on Energy and Commerce. The Affordable and Safe Prescription Drug Importation Act, if enacted, would approve the importation of qualifying prescription drugs manufactured from Canada and eventually other countries who are members of the Organization for Economic Co-operation and Development (Sanders, Booker & Casey, 20017). Drugs imported would be under close watch by the FDA and would have to be identical to drugs already approved in the U.S. (Sanders et al, 2017). Extreme punishment would result for people importing drugs that may have been altered or do not meet the FDAs standards (Sanders et al, 2017). Implications of LegislationThe FAIR Drug Pricing Act of 2016, if enacted, could help in the proper regulation of drug pricing. The Fair Drug Pricing Act would require detailed reports that give a clear breakdown to drug prices without preventing pharmaceutical manufacturers from increasing drug prices (Baldwin et al., 2016). This means that pharmaceutical industries could still make pricing changes as they feel appropriate but due to the required reports it would in the best interest of the manufacturer to have clear justification for the changes. Required reports could create an increase in competition between manufacturers in hopes to result in more modest drug pricing (Baldwin et al, 2016). Although the implications of the Fair Drug Pricing Act of 2016 could be minimal it would be the first legislative act requiring transparency in the industry. The Affordable and Safe Prescription Drug Importation Act would allow free trade with peer countries who have significantly cheaper drugs which should results in lower drugs prices in the U.S. (Sanders et al, 2017). It has been found that roughly eight percent of Americans have purchased drugs from others countries because of lower costs and that Canadians spends roughly 40 percent less that Americans on prescription drugs (Sanders et al., 2017). Since Canada and the majority of European countries have manufacturing standards equal to or higher than the U.S., there is no reason to no join them in the drug trade (Sanders et al., 2017). The Affordable and Safe Prescription Drug Importation Act would promote honest competition in the U.S. pharmaceutical industry and should, therefore, decrease costs for consumers and insurance programs ultimately saving taxpayer’s money.StakeholdersConsumers are one of two of the most obvious stakeholders when discussing pharmaceutical sales. The pricing and availability of a drug in some cases could mean life or death to a consumer. There is a clear assumed consumer position which is to place an appropriate price on drugs and maintain appropriate supplies of drugs based on demands. Consumers can be affected in two ways. First, they can be affected directly at a personal level related to illness and drug need. Second, they can be affected indirectly by others related to taxes that cover public health care options like Medicare and Medicaid. Drug advancements are meaningless if the consumers cannot afford them. Additionally, consumers should not be underestimated as a stakeholder since they are the public and the voters deciding on the pass or fail of legislation (Gardner, Mason, O'Grady, & Outlaw, 2016).The other most obvious and equally important stakeholder is the drug manufacturer. Without drug manufacturers and consumers there would be no pharmaceutical industry. The position of any manufacturer is also clear which is to maximize the profitability of their products. The profitability of a drug manufacturer directly correlates with the price of the drug being manufactured (Dafny, Ody, & Schmitt, 2016). Manufacturers are definitely feeling the pressure from other stakeholders regarding the pricing of drugs but in cases of monopolies or high demand, this does not matter (Herman, 2015). Manufacturers do indeed have a significant amount of money and time placed in each drug on the market, let alone all the drugs who failed in trials, but unfortunately thanks to recent drug pricing scandals the public has lost trust (Eiser & Field, 2016). Health care providers are also important stakeholders in the pharmaceutical industry. The position of the provider is to be able to prescribe the most effective drug for an illness without concern of cost to the consumer. Drug prices greatly affect the drug recommendation or prescription ordered by providers (Costa-Font, Mcguire, & Varol, 2014). If a medication is not affordable to a consumer, then it would not make sense for a provider to prescribe the medication. Often time providers are forced to choose between a medication that is the best for a specific patient and diagnoses or one that is most feasible for the patient regarding cost and availability (Costa-Font et al., 2014). In addition to drug prices, poor generic drug options and drug shortages affect the provider’s decision making (Berry, 2014).Pharmacies are also stakeholders in the pharmaceutical industry. The position of pharmacies is to be able to obtain and dispense drugs at a fair price that maintains maximum profitability. A pharmacy must purchase medications from the manufacturers and then place a price on the drug to sell to consumers (Eiser & Field, 2016). The price is then negotiated by insurance companies or even the manufacturers through coupon options available (Eiser & Field, 2016). Due to the variability in drug prices, pharmacies are constantly having to adjust drug prices and it can be difficult to explain to the consumer the drastic change in drug prices (J. Horton, personal communication, February 18, 2017). Pharmacies can lose business due to high drug pricing and, eventually, the price of prescription drugs can discourage patients so much that they become non-compliant (Gabrielli et al., 2016).The final stakeholder that will be discussed is insurance programs. For this discussion, insurance programs include parts of the government since Medicaid and Medicare are a form of insurance in addition to independent insurance options. The position of each insurance program would be to cover as much of a medication for a consumer while still also staying profitable. Although there is flexibility in reimbursement, most insurers are starting to feel the significant burden of the rise in drug costs (Herman, 2015). Even Medicaid and Medicare cannot continue to support the drug price increases with a 13 percent increase in prescription drug costs spent in 2014 alone (Jaffe, 2015). Drug prices and availability also forces out-of-pocket health insurance costs to the consumer (Baldwin et al., 2016). In addition to higher premiums and co-pays, limited access to medication creates poor compliance resulting in more ill individuals which ultimately increases insurance costs (Gabrielli et al, 2016). Political StrategiesThe most important political strategy needed is awareness. In order to help resolve the issue of rising drug prices, the vast majority of people must understand the issue and its seriousness. Creating advocates to focus on educating the public is essential (Gardner et al., 2016). There must be multiple advocates to make sure all stakeholders are represented. Educating the public and making sure everyone is aware that the U.S. can’t continue on its current path would place an urgency on possible solutions. And if these prices are indeed justified then this increased awareness could initiate potential resolution that could absorb or decrease drug costs. The next political strategy would be to promote transparency. Transparency would create a competitive and high functioning market for drug pricing. The Center for Medicaid and Medicare (2016) has utilized transparency through things such as dashboards that display up to date information on drug prices. Legislation such as the FAIR Drug pricing act would require by law this much-needed transparency (Baldwin et al., 2016). Many question the actual costs of drugs when there are so many different prices set on drugs such as “list prices, wholesale prices, rebates, markups from hospitals and physicians, different costs when a drug is administered outpatient versus inpatient, formulary tiers, mail order prices, and biosimilar prices” along with many others (Jaffe, 2015, para. 4). Transparency could be the only way to help restore the pharmaceutical industry’s current poor reputation (Kessel, 2014).Collaboration is also a strong political strategy. Collaboration involves forming partnerships through groups such as professional organizations and coalitions (Gardner et al, 2016). Professional organizations create strength in numbers and are common in the healthcare industry (Gardner et al, 2016). Coalitions are a form of collaboration that involves joining varying stakeholders for the purpose of addressing one specific issue (Gardner et al., 2016). A coalition could be a united front to help influence policies addressing rising drug costs. It is also important to note that the timing of a coalition is vital for the group’s success (Gardner et al., 2016). With the recent attention to popular drug pricing increases, such as the Epi-Pen price hike, a coalition would have more influential power. Another political strategy is a negotiation. Although one fixed low-cost drug price would be ideal that is not the existing way that drugs are purchased. Medicaid is currently able to negotiate but Medicare is not (Gabrielli et al, 2016). Negotiation should be available across the board for both private and public insurance options (Herman, 2015) In an extreme case of drug pricing there should be legislation in place that allows the government to intervene and negotiate with pharmaceutical manufacturers (Herman, 2015). Additionally, reimbursement is a wonderful form of negotiation. Programs are available to reimburse or offer drugs at lower costs to qualified individuals (Medicare Payment Advisory Commission [MPAC], 2015). An increase in programs with discount pricing could be beneficial if monitored properly. The final political strategy to be discussed is to encourage competition. The government should be able to accelerate the importation and manufacturing of drugs when price gouging is the result of a monopoly (Gabrielli et al., 2016). Generic drugs should be encouraged since they typically cost at least 80 to 85 percent less than their brand-name option (U.S. Food and Drug Administration [FDA], 2017). Barriers to generic drug entry need to be minimized and tactics from competitors need to stop such as making minor changes to drugs to lengthen a patent and payoffs that delay generic drugs (Costa-Font et al., 2014). The FDA could expedite the approval of generic medication in which there is only one manufacturer (Berry, 2014). The Affordable and Safe Prescription Drug Importation Act would help significantly in promoting an honest and competitive market.InterviewOn February 18, 2017, at 11 am a 45-minute phone interview took place with Jim Horton pharmacist and attorney. Horton considers himself a conservative republican and has been a pharmacist for over 30 years, co-owning three independent pharmacies in Michigan. Additionally, Horton is a Michigan Pharmacy Association board member and has been involved with local government for over 15 years currently holding the title of Isabella County District 4 Commissioner. Horton is very knowledgeable on drug pricing and feels that increasing drug prices are of huge concern. Horton stated this week alone he noticed the price of potassium chloride and digoxin that have been on the market for years go up drastically. He stated that sometimes price increases are forewarned and his pharmacies will be given a notification a couple weeks in advance but often time there is no notification and no reasoning why. Furthermore, he said that he feels price gouging is most commonly seen in brand name drugs which account for roughly 15 percent of his sales. When Horton was asked if he was familiar with the FAIR Drug Pricing Act of 2016 he said he was. Horton did state that he felt that the act was “a whole lot of nothing” since it does nothing to control drug pricing just transparency. However, he did state that he was intrigued by the idea of detailed reports with specifics on costs for making a drug since he has never seen such information before. Unfortunately, the Affordable and Safe Prescription Drug Importation Act was not yet an act at the time when the interview took place.Horton made it very clear that there was one huge issue regarding drug prices and health care spending that he feels should be addressed. Horton was very adamant that a program called the 340B Drug Pricing Program must be terminated. The 340B program is a federally funded program that allows eligible hospitals and other health care facilities to obtain certain drugs at substantially reduced prices from drug manufacturers (MPAC, 2015). Each facility must have a minimum percentage of clientele who are Medicaid and low-income Medicare beneficiaries to become eligible (MPAC, 2015). Horton warned of misuse in the program and the MPAC (2015) agrees with these concerns. First, the Health Resources and Services Administration (HRSA), who manages the program, have done a poor job of defining patients who are qualified for discount drugs so interpretation has varied (MPAC, 2015). Second, the HRSA does not have the authority to track how covered facilities use revenue gained from the program so facilities could use proceeds for any purpose not only for further helping people in need (MPAC, 2015). Additionally, manufacturers have concerns of fraud for this program and would like to know for certain that the discounted drugs are going to patients in need (MPAC, 2015). Horton feels strongly that the 340B program is being abused and is, therefore, causing taxpayers unnecessary money. Horton states that his pharmacy offered the 340B pricing for only 40 days a few years back and it did not take long for him to decide to terminate the plan because the pricing seemed almost illegal and very unethical. Horton stated that although his company could have gained significantly from the 340B program that was not the sort of business he wanted to run and the financial gain was not warranted. Horton stated that the local hospital is projected to gain over $300,000 in profit from the program this year alone and he felt the revenue is not justified and is based purely on greed. It is worth noting that the 340B program is rapidly growing since it was established in 1992, spending an estimated $7 billion on drugs in 2013, so abuse and fraud should be taken very seriously (MPAC, 2015).ConclusionIt is clear that increasing drug prices are of huge concern and has a large impact on rising health care costs. The price of a drug is a significant decision. Even beyond the ethical dilemma of placing a steep price on a drug required for the ill or dying, a steep price also creates a financial dilemma on the U.S. health care system as a whole. If the legislation and political strategies implemented to resolve rapidly increasing drug prices do not help and if the steep prices are indeed justified, then all stakeholders will have to plan accordingly. Somehow the United States must create a pharmaceutical industry that assures for appropriate pricing on drugs that is feasible to all. ReferencesAffordable and Safe Prescription Drug Importation Act, H.R. 1245, 115th Cong. (2017). Retrieved from , T., McCain, J., & Schakowsky, J. (2016). The fair pricing drug act: Drug pricing transparency to address skyrocketing prescription drug prices. Retrieved from Pricing.pdfBerry, A. (2014). Looking for the treatment for drug shortages: Not a simple prescription. Mayo Clinic Proceedings, 89(3), 281–283. doi: for Medicaid and Medicare Services. (2016). Medicaid drug spending dashboard. Retrieved from , J., Mcguire, A., & Varol, N. (2014). Price regulation and relative delays in generic drug adoption. Journal of Health Economics, 38, 1-9. doi: 10.1016/j.jhealeco.2014.04 .004Dafny, L., Ody, C., & Schmitt, M. (2016). Undermining value-based purchasing: Lessons from the pharmaceutical industry. The New England Journal of Medicine, 375(21). doi: 10.1056/nejmp1607378Eiser, A., & Field, R. (2016) Can benefit corporations redeem the pharmaceutical industry. The American Journal of Medicine, 129(7), 651-652. doi: 10.1016/j.amjmed.2016.02.012Fair Accountability and Innovative Research (FAIR) Drug Pricing Act of 2016, S. 3335, 114th Cong. (2016). Retrieved from , A., Layon, N.T., Bones, H.L., & Layon, J. (2016). The tragedy of the commons: Drug shortages and our patients' health. The American Journal of Medicine, 129(12), 1237-1238. doi: 10.1016/j.amjmed.2016.09.007Gardner, D. B., Mason, D. J., O'Grady, E. T., & Outlaw, F. H. (2016). Policy & Politics in Nursing and Health Care (7th ed.). St. Louis, MO: Elsevier.Herman, B. (2015). Insurers, PBMs, continue to fight for bigger, better, drug price discounts. Business Insurance, Retrieved from NEWS03 /150809967/Insurers,-PBMs-continue-to-fight-for-bigger,-better-drug-price-discountsJaffe, S. (2015). USA grapples with high drug costs, The Lancet, 386(10009), 2127 -2128. doi:10.1016/S0140-6736(15)01098-3Kessel, M. (2014). Restoring the pharmaceutical industry’s reputation. Nature Biotechnology, 32(10), 983-990. doi: 10.1038/nbt.3036.Medicare Payment Advisory Commission. (2015). Overview of the 340B Drug Pricing Program. Retrieved from , B., Booker, C., & Casey, B. (2017). The Affordable and Safe Prescription Drug Importation Act. Retrieved from , S. & Purvis, L. (2016). Rx price watch report: Trends in retail prices ofbrand name prescription drugs widely used by older Americans, 2006 to 2015. Retrieved from AARP Public Policy Institute . Food and Drug Administration. (2017). Facts about generic drugs. Retrieved from ................
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