Question

Mandates and a Quid Pro Quo

1) Why did other segments of the healthcare industry seemingly make greater sacrifices because of the Affordable Care Act than prescription drug manufacturers? Please explain as an essay format

2)  Would it have been possible to alter the way drug companies do business as part of the Affordable Care Act? Why or why not? Please Explain as an essay format

Answer 1

1- “Every system is perfectly designed to get the result it gets.” Credited to various individuals, this quote is descriptive of the U.S. health care system and, specifically, the biopharmaceutical sector. The system’s participants from patients to clinicians and health plans to product manufacturers, as well as various intermediaries such as pharmacy benefit managers constitute and interact within a complex enterprise that is projected to consume 20 percent of the nation’s gross domestic product by 2025 The high cost of health care is and has been for some time a burden on individual patients, their families, and society as a whole. People with chronic health conditions are particularly vulnerable because their illnesses or the treatments for their illnesses impede their ability to work, with some patients losing employment altogether. Such individuals frequently incur significant financial debt and deplete the assets they need to pay for treatment, some to the extent that they must resort to bankruptcy. Cancer patients especially face severe financial risks or “financial toxicity” One important factor in this economic reality is the nation’s highly complex system of creating, manufacturing, and supplying prescription drugs products that are critical to improving health, saving lives, and enhancing public welfare. Prescription drug expenditures in the United States are currently about 17 percent of the overall cost of personal health care services Referred to by some as “priceless goods,” prescription medicines are becoming steadily more expensive and have become both a regular topic in the popular press and a major sociopolitical concern. Prescription drug policies at both the federal and the state level are the result of extensive technocratic decision making. However, individual patients and their families relate to the biopharmaceutical sector in a very direct manner, responding to such issues as access, cost, and efficacy on a very personal level. More than half of all people in the United States routinely use prescription drugs, and 15 percent of the population regularly takes five or more drugs.For example, a woman in the initial stage of treatment for one type of breast cancer may take cytotoxic chemotherapy drugs and a monoclonal antibody (a specialty drug) along with anti-nausea drugs and perhaps an antidepressant.Specialty drugs are among the most expensive of all drugs, and in recent years their prices have grown at a double-digit rate. This sharp increase in prices is due in part to the introduction of expensive new drugs (such as those for hepatitis C, multiple sclerosis, and cancer) and in part to rapid price hikes for existing specialty drugs.Determining the “value” of a drug and what constitutes “fair” pricing is a contentious and confounding topic. Various stakeholders have different concepts of the value of a drug and what a fair price for it would be. Within this dynamic, participants in the biopharmaceutical sector can each assert that their ultimate goal is to make safe and effective medicines and provide “value” to patients. However, an inherent conflict exists between the desire of patients (and society) for affordable drugs and the expectations of as well as legal obligations to corporate shareholders and other investors in biopharmaceutical companies for a competitive return on investment.3 In short, patients emphasize value in terms of their direct personal benefit rather than in business or economic terms. Drug manufacturers often attribute the high cost of medications to the complexity of the technology and of the testing required of new products, the high failure rates associated with drugs under development, and national and international regulations intended to ensure that medicines are safe and effective.The current structure of the biopharmaceutical sector often gives rise to conflicting interests and positions. The principal conflict is between two desirable objectives: (1) making drugs affordable from the standpoint of patients and society, and (2) making new drugs available from research and development efforts. Affordability refers to how easy or feasible an individual (or, more broadly, society) finds it to pay for a drug. It is a function of drug prices, insurance coverage, a family’s financial circumstances, and, sometimes, the purpose of the drug.Availability refers to the presence or absence of particular types of drugs in the marketplace. As described above, drugs become available only after a long process of discovery, development, approval, manufacturing, and marketing, and might be unavailable because they have not been discovered and developed or because of a failure in the supply system.The dynamics of the biopharmaceutical supply chain reflect the actions of profit-seeking enterprises operating within an extremely complex array of privileges and constraints set by the government. The nature and significance of these government interventions which include the funding of research, the granting of market exclusivity, the enforcement of strict product requirements and standards, and acting as the ultimate purchaser for large segments of the population mean that the market is distorted in many ways. Simply stated, the typical presumption that market forces will work and work best does not hold well for the biopharmaceutical sector. The nature of these market forces is powerfully shaped by government and other interventions, and is also contingent on specific diseases and their overall impact. In contrast with the market for most household goods, in which consumers are the primary decision makers, consumers wield relatively modest influence over decisions related to medicines. Instead, prescribers largely determine which drugs are to be purchased and in what quantity, and patient cost-sharing arrangements specified by prescription drug insurance plans influence whether patients obtain the medicines prescribed.

2- Yes, It is possible to alter the way drug companies do business as part of the Affordable Care Act.

One approach to the resolving conflict between biopharmaceutical affordability and availability is to let the “free market” determine the best course forward. For most consumer goods, free market maximizes consumer choice and makes decisions based on the economic “votes” of people participating in a particular market. In the United States, market forces are generally considered to be the most economically efficient way of determining what goods are provided and at what price and also the fairest way of determining how limited resources should be allocated. However, relying entirely on free market solutions in the case of prescription drugs is complicated because describing the biopharmaceutical supply chain in the United States as largely driven by competitive market forces would be substantially misleading. The dynamics of the biopharmaceutical supply chain reflect the actions of profit-seeking enterprises operating within an extremely complex array of privileges and constraints set by the government. The nature and significance of these government interventions which include the funding of research, the granting of market exclusivity, the enforcement of strict product requirements and standards, and acting as the ultimate purchaser for large segments of the population mean that the market is distorted in many ways. Simply stated, the typical presumption that market forces will work and work best does not hold well for the biopharmaceutical sector. The nature of these market forces is powerfully shaped by government and other interventions, and is also contingent on specific diseases and their overall impact. In contrast with the market for most household goods, in which consumers are the primary decision makers, consumers wield relatively modest influence over decisions related to medicines. Instead, prescribers largely determine which drugs are to be purchased and in what quantity, and patient cost-sharing arrangements specified by prescription drug insurance plans influence whether patients obtain the medicines prescribed. The answer to this question is hotly contested, with participants in the biopharmaceutical supply chain typically pointing at each other, while claiming that their own activities deliver substantive benefits to patients. Another form of market failure relates to externalities, which occur when an economic activity (such as the purchase or sale of a product) has costs or benefits for others not directly involved in the transaction. Many choices about drug treatments carry societal externalities, both positive and negative. The use of effective vaccines and drugs for infectious diseases, for example, has benefits that are widely diffused across society, as people who might otherwise have been exposed to the disease are protected by others’ use of the pharmaceuticals. Yet, vaccinated patients and their insurers are generally asked to bear the entire cost of the preventive action. Conversely, a person who chooses not to receive vaccines or drug therapies may cause negative externalities, including reduced herd immunity and greater spread of the disease as well as the associated costs to society when resources need to be devoted to subsequent medical interventions that could have been avoided. In certain cases, a treatment can eliminate substantial non-drug medical expenses later in life (e.g., the use of a hepatitis B vaccine), and the financial and emotional benefits of treatments are thus realized by both individuals and society as a whole.