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Can costs be contained?


There’s a lot of blame to go around when it comes to why drug costs are rising in dermatology. We’ll let the research do the finger pointing.

Prescription drug cost prices in the U.S. are spinning out of control. Researchers reported in JAMA1 that the U.S. has a dubious distinction: Per capita drug spending in America exceeds that in all other countries. 

A big driver, according to these authors, is brand-name drug prices that have risen much more than the consumer price index in recent years. And blame might lie with our very own government and how the U.S. grants government-protected monopolies to drug manufacturers, as well as coverage requirements imposed on government-funded drug benefits.

While brand-name drugs represent only 10% of dispensed prescriptions in the U.S., they account for 72% of drug spending, according to the authors of the JAMA article.

“Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear,” according to the paper’s abstract.

Drilling down to dermatology, another study2 looked at the state and consequences of dermatology drug prices in this country. Bruce Alan Brod, M.D. clinical professor of dermatology, University of Pennsylvania, and the immediate past chair of the AAD’s Drug Pricing and Transparency Taskforce, is one of the authors of the study. He says there’s warranted frustration among dermatologists because they’re finding barriers to their patients getting medications.

“… and those barriers really come down to the costs of the medications,” Dr. Brod says.

What’s making the problem worse is that generics are fast losing status as the savior-an affordable and comparable option.

In fact, there are two especially thorny areas in dermatology where drug prices are soaring. One is in generic drugs; the other, specialty drugs, like biologics.

“[Biologics] are newer on the market and have had a tremendous impact on some of the diseases that we’re treating, but the access to those drugs is limited at times because they’re not always affordable to patients,” Dr. Brod says.

Coveted market exclusivity could be the reason prices of biologics are high and aren’t likely to come down anytime soon. New biologics are protected from competition for 12 years, according to the JAMA article.

There’s a subcategory under the specialty drug heading, where many of the branded smaller molecule drugs-non biologic drugs-have skyrocketed in price, according to Dr. Brod.

The resulting access woes are happening in large part because of the high cost of generic drugs, the high cost of specialty drugs and the ripple effect that has caused insurance companies to set limits and put up barriers, limiting patients’ access needed medications.

Read the first article in this series:

Soaring drug costs leave derms, patients scrambling

Next: It's complicated...the reasons why



It’s complicated

It’s easy to point fingers, but, in this case, there’s no one entity to blame, Dr. Brod says.

When it comes to insurance companies’ roles in driving up drug costs, Dr. Brod says the focus is on the middle men, pharmacy benefit managers, and their roles to negotiate lower drug prices from the pharmaceutical manufacturers, sometimes in exchange of more widespread distribution of individual drugs.

“So, drugs that have a more favorable negotiated rate are placed on formularies where there’s easier access for patients than drugs that don’t have as favorable a negotiated rate, which might be placed in a category where there are limits placed,” Dr. Brod says. “Those limits include three main aspects.”

One, according to Dr. Brod, is that prior authorization is required, which creates more work for dermatologists. The second involves step therapy limits, which mean that to get a certain drug that is not in as much a favorable negotiated position, a patient has to have been on other more preferred drugs. Third, drugs that are placed in the higher tiers, might mean that patients have higher out-of-pocket costs or more of a copay or a coinsurance.

“Coinsurance can be more onerous because it’s an actual percentage of the drug,” Dr. Brod says.

If the way things were set up was based on what’s best for the patient (meaning, evidence) this wouldn’t be so bad. The problem, according to Dr. Brod, is the most accessible drugs are often the least expensive for the payers.

“The negotiated tiering of the drugs are based on fairly economic decisions, which are among pharmacy benefit managers, insurance companies and even employers who are trying to watch their costs,” he says.

Payers’ negotiating power is important because it’s the primary counterweight against excessive pricing, during a drug’s exclusivity, according to the JAMA article. But built-in features of the U.S. marketplace put constraints on public and private payers to negotiate lower prices. One such feature is that Medicare is prohibited by Federal law to leverage its purchasing power to pressure manufacturers to lower costs. Medicaid programs, on the other hand, are generally required by law to cover all FDA-approved drugs, they write.

Biosimilars could help reduce biologic costs by offering an alternative, according to an FDA document for consumers on biosimilars,3 but that has yet to be seen.  Prescribing drugs that cost insurers more, including biologics, often leads to the other access barriers.

Dermatology Times covered a study by dermatologists at George Washington University, Washington, DC, that found biologic drug requirements for prior authorization and, ultimately, denial rates, are rising for psoriasis patients. They found the need for prior authorization increased from 16% of patients prescribed a biologic in 2009 to 75% of those prescribed a biologic in 2014. Prior authorization denial rates rose from none in 2009 to 19% in 2014, according to the study,4  which was presented during the March American Academy of Dermatology annual meeting.

The researchers report that the most common reason insurers deny coverage was failure to try specific therapies before requesting biologics.

Next: More about the role of drug manufacturers




More about the role of drug manufacturers

Market forces and pharmaceutical company reactions to those forces are driving up dermatologic drug costs. Dr. Brod says that reduced competition in the generic market is boosting the costs of those drugs. With fewer manufacturers, the law of supply and demand takes hold.

There are a lot of reasons for the reduced competition, he says, including raw material shortages; increasing mergers and acquisitions among pharma manufacturers; a slow-moving and, sometimes, costly FDA backlog for generic approvals; and an FDA filing process that makes it hard for small generic companies to get drugs into the U.S. market so these companies can compete with bigger manufacturers.

Another factor affecting generic and specialty drugs is that drug costs in general have gone up.

“So, in a sense, some of the generics have gone up because there is a reversion of these prices to a naturally higher level. It gives the manufacturers justification for doing that,” Dr. Brod says.

The high costs of large molecule specialty drugs can be explained, in part, by the expensive and time-consuming research and development that goes into the manufacturing of those drugs. Pharma companies will often recover those costs by driving up specialty drug pricing.

Holly Campbell, senior director of communications, at PhRMA [Pharmaceutical Research and Manufacturers of America], says that claims about rising brand medicine costs are misleading.

Campbell says many factors might cause the list price of a medicine to fluctuate over its lifetime, including competition in the market and the value the medicine provides to patients and the healthcare system. “For example, after a medicine comes to market, we may find out that it is more effective or has broader use than originally anticipated,” she says.

Campbell cites a new report5 from IMS Health, which found net prices for brand medicines increased 2.8% in 2015, down from 5.1% the prior year, as discounts and rebates negotiated by payers rose sharply, according to Campbell.

“Similarly, CVS Health and Express Scripts recently reported actual medicine spending growth in 2015 was less than half from the prior year. This is due to a competitive marketplace for medicines where large, powerful purchasers negotiate aggressively and generic utilization rates are nearly 90%,” Campbell says. “Between 2009 and 2013, more than $105 billion in brand medicines faced generic competition. By 2020, another $93 billion of U.S. brand sales will face similar exposure.”

The IMS Health report, which was produced without industry or government funding, forecasts “U.S. spending on medicines on a net price basis is expected to reach $370-400 billion in 2020, growing at a compound annual growth rate of 4 to 7 percent. This growth will reflect increased spending on innovative medicines, offset by lower spending on brands that will lose market exclusivity over the next five years. While brand price increases are expected to continue in the 10 to 12 percent range on an invoice basis, they will be significantly offset by rebates, discounts and other forms of price concessions. The prospects for additional innovative medicines becoming available for patients through 2020 are very bright,” according to an IMS press release.6

Next: Do derms themselves play a role?


Are dermatologists playing a role?

Whether dermatologists and other physicians play a role in driving up drug costs is a question worth asking.

Physician prescribing choices when comparable, differently-priced alternatives are available are a key contributor to drug spending, the JAMA authors write.

There is research to suggest an association between physicians’ industry ties and prescribing patterns, but the research doesn’t establish what impact this has on patient access or drug costs, in general.

For example, researchers of a recent study7 (which did not look specifically at dermatology) found physicians who received drug company payments of all kinds, including meals, were more likely than physicians who didn’t receive payments to have higher per patient prescribing costs for the drugs studies.

Another recent study8 (which did include dermatologists’ and other specialties’ prescribing patterns as they relate to industry payments) found the receipt of payments was associated with greater prescribing costs per patient and greater proportion of branded medication prescribing.

As reported in the first in this series on drug costs in Dermatology Times, dermatologists’ giving free drug samples seems to alter the prescribing habits away from less expensive generic medications to brand name drugs. The authors of that study suggest the benefits of free samples in dermatology should be weighed against potential negative effects on prescribing behavior and prescription costs.

The bottom line is the reasons for rising drug costs in dermatology are complicated, according to Dr. Brod.

“I think the one group where the blame does not lie is with the patients,” Dr. Brod says.

Next: One patient's story: Jumping through hoops


One patient’s story: Jumping through hoops

Robin, a 55-year-old RN from the West Coast, had to leave nursing after she contracted hepatitis C from a work-related needle stick injury. The ordeal and chronic illness, she says, exacerbated her eczema.

Robin tells Dermatology Times that she has been on numerous drugs to control the skin condition.

“I had failed every single thing: antihistamines, steroids, prednisone-all that no longer work. In August of last year, [my dermatologist] put me on Imuran (azathioprine, Prometheus Laboratories),” she says. “The side effects outweighed the benefits. So, he told me to go off it completely.”

The next hope for atopic dermatitis treatment was Xeljanz (tofacitinib citrate, Pfizer), which would have been used off-label in Robin’s case. But her insurance company denied the treatment.

Her dermatologist wrote an appeal and did a peer-to-peer and independent medical review on Robin’s behalf, she says. And it was still denied.

So, she and her dermatologist appealed to Pfizer’s XelSource, the free drug program for Xeljanz.

Robin says her determination, in part, comes from being a nurse. She knew she had a shot at getting the drug, and getting it for free. She would have tried clinical trials, she says, but the hepatitis C was a knock-out factor for trial participation.

She wrote a detailed letter to Pfizer about her plight. As a result, Robin got six months of Xeljanz for free. Unfortunately, her fight is far from over. Xeljanz is working less effectively at the end of the six months-though it controlled her eczema by about 50% early on, she says.

The next drug on the list to try to keep the eczema at bay is dupilumab, a biologic agent in trials for treatment in adults with moderate to severe atopic dermatitis. Robin says she hopes dupilumab will be cleared for patients like her by early 2017.

Robin says she’s prepared for the next round of appeals, calls, reviews, letters and more.

Her advice to patients: Look for help. Robin says she has turned in some cases to California’s Department of Managed Healthcare. The attorneys there are phenomenal and helpful, she says. Perhaps the most important piece of advice, thought, is to find a good doctor who is willing to write those appeals and do the medical and peer-to-peer reviews, according to this patient.

“I have good people who are willing to fight the good fight,” says Robin.

Disclosures: Dr. Brod is affiliated with the AAD and Ms. Cambell is affiliated with PhRMA.


1.      Kesselheim AS, Avorn J, Sarpatwari A. The High Cost of Prescription Drugs in the United States: Origins and Prospects for Reform. JAMA. 2016;316(8):858-71.

2.      Albrecht J, Lebwohl M, Asgari MM, et al. The state and consequences of dermatology drug prices in the United States. J Am Acad Dermatol. 2016;75(3):603-5.

3.      http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm436399.htm#3

4.      Abdelnabi M, Patel A, Rengifo-pardo M, Ehrlich A. Insurance Coverage of Biologics for Moderate-to-Severe Psoriasis: A Retrospective, Observational 5-Year Chart Review. Am J Clin Dermatol. 2016;17(4):421-4.

5.      http://www.imshealth.com/en/thought-leadership/ims-institute/reports/medicines-use-and-spending-in-the-us-a-review-of-2015-and-outlook-to-2020

6.      http://www.imshealth.com/en/about-us/news/ims-health-study-us-drug-spending-growth-reaches-8.5-percent-in-2015

7.      Fleischman W, Agrawal S, King M, et al. Association between payments from manufacturers of pharmaceuticals to physicians and regional prescribing: cross sectional ecological study. BMJ. 2016;354:i4189.

8.      Perlis RH, Perlis CS. Physician Payments from Industry Are Associated with Greater Medicare Part D Prescribing Costs. PLoS ONE. 2016;11(5):e0155474.

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