Health

HE A LTH • Fall 2019 17 the pumps, the test strips, and glucose monitors, it costs the state $25,000 a year to supply her son with the life- saving medication. That expense is ultimately passed onto the taxpayer. The Massachusetts Health Policy Commission – an independent state agency examining healthcare spending and payment models – said in its 2018 cost trends report Massachusetts drug spending increased more than 4% last year, while total spending across the healthcare system went up by 1.6%. Additionally, according to Alyssa Vangeli, co-director of policy and government relations for Massachusetts advocacy organization Healthcare For All, drug spending in MassHealth has nearly doubled from $1.1 billion to $1.9 billion over the past five years. Proposed changes Gov. Charlie Baker, as well as healthcare advocates across the state, is proposing legislation to curtail prescription drug prices and allow the state more power to negotiate with pharmaceutical companies. "This legislation addresses the drug affordability issues," said Vangeli. "Too many people are skipping medications and don't have access to the drugs they need." A poll from Washington, D.C. public opinion survey firm PerryUndem showed 36% of Massachusetts voters said they or a family member haven't taken medication as prescribed because of high drug prices. This includes taking less or skipping doses, not filling a prescription because of cost, cutting back on other household expenses to pay for medication or sharing medication with someone else. In addition to Baker's proposal, legislation from State Rep. Christine Barber (D-Somerville) and State Sen. Jason Lewis (D-Winchester) focuses on prescription drug costs and affordability. Combined, these efforts are focused on providing cost transparency and allow MassHealth to negotiate with drug companies for lower prices. These proposals look at expanding the role of the HPC, which currently does not have any say in pharmaceutical prices, to allow the organization to set payment limits for overpriced drugs. Understanding where the increases come from Pharmaceutical companies acknowledge drug prices in the state and across the country are too high. "We understand too many patients are struggling to afford their medicines, which is why we support proposals – like ensuring rebates and discounts provided by biopharmaceutical companies to middlemen in the supply chain are shared with patients at the point of sale," said Tiffany Haverly, director of public affairs for PhRMA, a pharmaceutical lobbying firm. "While we're committed to working toward commonsense solutions to expand access to and increase affordability of medicines, we encourage legislators to keep the industry's huge economic impact in mind and reject any proposal that would put those jobs and the investment in innovation they represent at risk," Haverly said. Haverly said the focus of the conversation spends too much time on the list price, or the price a drug manufacturer initially sets for a medication. Instead, the focus should be on the net price – the amount of money a pharmaceutical company receives – which tends to be lower. According to Sanofi, which acquired the Cambridge-based Genzyme in 2011, the list price for its medication Continued on Page 18 Pharmaceutical companies' annual revenue Source: MacroTrends Drug price factors There are a number of different factors that go into determining the cost of a prescription drug, which can include: • RESEARCH AND DEVELOPMENT – R&D can be an expensive endeavor for a drug company. Costs include everything going into bringing a drug to market, including costs of researching drugs that never make it to market. In 2018, Pfizer, which had revenue of more than $53 billion, spent nearly $8 billion on R&D. • MANUFACTURING – The human and infrastructure capital necessary to manufacture drugs. • REGULATION – It can be timely and costly to get a drug approved. • SUPPLY CHAIN – There are hundreds, if not thousands of constituents involved in a drug. • INTERMEDIARIES – Third-party vendors – pharmacy benefit managers, hospitals, physicians – all negotiate and administer the prescription drug. • CUSTOMERS – Negotiations with private or government insurance, rebates, discounts. • MARKETING – According to a study released earlier this year by the Journal of the American Medical Association, pharmaceutical companies spend nearly $30 billion a year on advertising. Last year, Pfizer spent more than $3 billion. • LOBBYING – According to OpenSecrets, the entire pharmaceutical industry spent a record $283 billion on lobbying in 2018. Sources: Biotechnology Innovation Organization (BIO), OpenSecrets, Pfizer, JAMA $10B $20B $30B $40B $50B $60B $70B Merck Pfizer Bristol-Myers Squibb Sanofi '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 $53.6B ANNUAL REVENUE $42.1B $42.3B $22.5B

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