Two Drugs Are Costing Taxpayers an Outrageous $8 Billion a Year

Two Drugs Are Costing Taxpayers an Outrageous $8 Billion a Year

Benis Arapovic |

The federal health care programs for seniors and low-income Americans spent more than $8 billion last year on a single drug to treat victims of the potentially lethal Hepatitis-C virus, according to new government figures.

Medicare, the program for 55 million seniors, spent $7.03 billion in 2015 on Harvoni, the Gilead Sciences’ biologic drug to treat serious liver disease, or seven times the amount it spent the previous year.

Related: Lawsuits Force States to Give Outrageously Expensive Drugs to Medicaid Patients

Meanwhile, the Medicaid program for tens of millions of low-income Americans and children spent an additional $1 billion on Harvoni, according to the new report by the Centers for Medicare and Medicaid Services (CMS).

Gilead’s Harvoni and a similar drug called Sovaldi are both in huge demand by seniors, veterans and others because of their better than 90 percent cure rate in treating life-threatening liver disease. But they are on the leading edge of the government’s runaway prescription drug costs that are alarming government officials and lawmakers.

Harvoni was followed in cost to the government last year by Sanofi SA’s diabetes treatment medicine called Lantus, which consumed $4.4 billion of Medicare spending and cost Medicaid another $1 billion.

Other drugs cost the federal government far less than Harvoni and Lantus yet registered jaw-dropping price increases over the past two years, in line with the industry’s controversial marketing strategy that has driven up the cost of many popular and long-standing drugs.

Related: Budget-Strapped States Are Rationing Hepatitis-C Drug Treatment 

For instance, Medicare spending on the diabetes drug Glumetza more than quadrupled to $153 million between 2014 and 2015, according to the data compiled in a new “Medicare Drug Spending Dashboard” posted on Monday by CMS.

That was driven by a decision by Valeant Pharmaceuticals International to jack up the retail price of Glumetza by 381 percent over a two-year period. Pfizer Inc., meanwhile, boosted the price of the pain reliever Lyrica by 19 percent over that same period.

The Pharmaceutical Research and Manufacturers of America (PhRMA) complained that the new government drug pricing data doesn’t take into account often generous discounts provided by drug makers to agencies and programs and other cost saving measures. The lobbying group said that drug manufacturers also must invest heavily in research and development to make sure doctors and patients have the best available tools for treating serious illness.

However, Obama administration officials yesterday voiced alarm about the industry’s pricing practices and the larger effect they are having on the economy. Last year, for example, spending on prescription drugs totaled $457 billion, or nearly 17 percent of personal health care spending. This is up from $367 billion, or 15.4 percent of personal health care spending in 2012.

Related: How Big Pharma Lobbyists Keep Medicare Drug Prices High

"Because Medicare and Medicaid beneficiaries often live on low- and fixed-incomes, the high and rising cost of certain drugs takes a significant toll on them," Andy Slavitt, CMS' acting administrator, said in a blog post. "And prescription drug costs don't only hit American seniors, people with disabilities, and low-income families; they also have a significant impact on taxpayers."

Indeed, total drug spending by Medicare Part D -- the premier subsidized drug program for seniors – rose 13 percent over the past two years, from $121.5 billion in 2014 to $137.4 billion in 2015, according to the CMS data. While Medicare helps cover the cost of 3,761 different drugs, the top 15 costliest drugs including Harvoni and Lantus account for 24 percent of the entire drug spending program.

A similar pattern has emerged in the Medicaid program, which spent a total of $57 billion on prescription drugs in 2015. The Fiscal Times reported Monday that state Medicaid programs throughout the country have been under pressure from CMS and the courts to ease restrictions on the availability of funding to treat the Hepatitis-C virus.

PhRMA, the leading advocate of the U.S. drug industry, has taken strong issue with the CMS data and said it overlooks many of the steps being taken to reduce costs to consumers and the government.

Related: Clinton Calls for Powerful New Panel to Crack Down on Drug Price-Gouging 

“The new Centers for Medicare & Medicaid Services dashboard paints a misleading picture about actual Medicare prescription drug spending,” said Allyson Funk, senior spokesperson for PhRMA. “The dashboard focuses on a small subset of medicines and ignores the substantial market forces at work to hold down costs.”

After nearly two years of horror stories about runaway drug prices that have alarmed consumers and policy makers and blown a hole in the budgets of federal agencies and programs, Congress almost certainly will begin to address that problem next year.

Drug companies’ stocks surged in the days following Republican Donald Trump’s surprise presidential victory over Democrat Hillary Clinton last week, as many in the industry concluded they had dodged a bullet with the Democrats no longer in control of the White House or Congress.

Related: Two Big Reasons Prescription Drug Prices Are So Much Higher in the US

During the campaign, Clinton joined a chorus of Democrats and some Republicans in denouncing “price gouging” by the drug companies. She vowed to take action if she were elected president, including creating a panel with powers to regulate or counteract sharp rises in drug prices.

Trump’s health plan posted on a website last week by his transition team makes no mention of drug prices. However, he promised during the campaign to allow Medicare to negotiate lower prices with drug manufacturers – something Medicare officials currently are prevented from doing under federal law. And Trump embraced the idea of permitting the re-importation of cheaper drugs from Canada and other countries – and idea that PhRMA considers heresy to their constituents.

Ron Cohen, chair of the Biotechnology Innovation Organization, a Washington lobbying group, told Bloomberg that the industry must work closely with the new Trump administration and GOP-controlled Congress to make sure that “any solutions they devise don’t cut off our collective noses to spit in our face.”