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Sleep apnea: Is the sleep industry part of the problem? A reporter seeks answers
Editor's Note: We periodically publish patient viewpoints on specific issues of interest to our audience.
I woke up in a strange bedroom with 24 electrodes glued all over my body and a plastic mask attached to a hose covering my face.
The lab technician who watched me all night via video feed told me that I had “wicked sleep apnea” and that it was “central sleep apnea” – a type that originates in the brain and fails to tell the muscles to inhale.
As a journalist– and one terrified by the diagnosis – I set out to do my own research. After a few weeks of sleuthing and interviewing experts, I reached two important conclusions.
First, I had moderate apnea, if that, and it could be treated without the elaborate machines, mouthpieces, or other devices that specialists who had consulted on my care were talking about.
Second, I was on a conveyor belt.
It all began with a desire for answers: I had been feeling drowsy during the day, and my wife told me I snored. Both can mean obstructive sleep apnea. With obstructive sleep apnea, the mouth and throat relax when a person is unconscious, sometimes blocking or narrowing the airway. That interrupts breathing, as well as sleep. Without treatment, the resulting disruption in oxygen flow might increase the risk of developing certain cardiovascular diseases.
So I contacted a sleep-treatment center, and doctors gave me an at-home test ($365). Two weeks later, they told me I had “high-moderate” sleep apnea and needed to acquire a continuous positive airway pressure (CPAP) machine, at a cost of about $600.
Though I had hoped to get the equipment and adjust the settings to see what worked best, my doctors said I had to come to the sleep lab for an overnight test ($1,900) to have them “titrate” the optimal CPAP air pressure.
“How do you treat central sleep apnea?” I worriedly asked the technician after that first overnight stay. She said something about an adaptive servo-ventilation machine ($4,000). And one pricey lab sleepover wasn’t enough, she said. I needed to come back for another.
(Most procedures and devices mentioned in this article were covered or would have been covered by insurance – in my case, Medicare, plus a supplemental plan. Unnecessary care is a big reason Americans’ insurance costs – premiums, copays, and deductibles – tend to rise year after year.)
As a journalist who spent years covering the business of health care, I found there was more motivating my expensive testing cascade than concerns about my health.
The American Academy of Sleep Medicine, a nonprofit based near Chicago, decides what is sleep apnea and how to treat it. Working with sleep societies around the world, it publishes the International Classification of Sleep Disorders, relied on by doctors everywhere to diagnose and categorize disease.
But behind that effort lie considerable conflicts of interest. Like so much of U.S. health care, sleep medicine turns out to be a thriving industry. AASM finances its operations in part with payments from CPAP machine manufacturers and other companies that stand to profit from expensive treatments and expansive definitions of apnea and other sleep disorders.
Zoll Itamar, which makes the at-home testing device I used, as well as implantable nerve-stimulation hardware for central sleep apnea, is a $60,000, “platinum” partner in AASM’s Industry Engagement Program. So is Avadel Pharmaceuticals, which is testing a drug to treat narcolepsy, characterized by intense daytime sleepiness.
Other sponsors include the maker of an anti-insomnia drug; another company with a narcolepsy drug; Fisher & Paykel Healthcare, which makes CPAP machines and masks; and Inspire Medical Systems, maker of a heavily advertised surgical implant, costing tens of thousands of dollars, to treat apnea.
Corporate sponsors for Sleep 2022, a convention AASM put on in Charlotte, N.C., with other professional societies, included many of those companies, plus Philips Respironics and ResMed, two of the biggest CPAP machine makers.
In a statement, AASM spokesperson Jennifer Gibson said a conflict-of-interest policy and a noninterference pledge from industry funders protect the integrity of the academy’s work. Industry donations account for about $170,000 of AASM’s annual revenue of about $15 million. Other revenue comes from educational materials and membership and accreditation fees.
Here’s what else I found. Almost everybody breathes irregularly sometime at night, especially during REM sleep, characterized by rapid eye movement and dreams. Blood oxygen levels also fluctuate slightly.
But recent European studies have shown that standards under the International Classification of Sleep Disorders would doom huge portions of the general population to a sleep apnea diagnosis – whether or not people had complaints of daytime tiredness or other sleep problems.
A study in Lausanne, Switzerland, showed that 50% of local men and 23% of the women 40 or older were positive for sleep apnea under such criteria.
Such rates of disease are “extraordinarily high,” “astronomical,” and “implausible,” Dirk Pevernagie, PhD, a scientist at Ghent (Belgium) University Hospital, wrote with colleagues 2 years ago in a comprehensive study in the Journal of Sleep Research.
“Right now, there is no real evidence for the criteria that have been put forward to diagnose obstructive sleep apnea and rate its severity,” he said in an interview.
Likewise, 19% of middle-aged subjects in a 2016 Icelandic study appeared to have moderate to severe “apnea” under one definition in the International Classification of Sleep Disorders even though many reported no drowsiness.
“Most of them were really surprised,” said Erna Sif Arnardóttir, who led the study and is running a large European program to refine detection and treatment of apnea.
Nevertheless, the official AASM journal recommends extremely broad screening for sleep apnea, looking for patients who have what it defines as illness. Everybody 18 and older should be screened every year for apnea if they have diabetes, obesity, untreated high blood pressure, or heart disease – even if they have never complained about sleep problems, the group says.
AASM “continually evaluates the definitions, criteria and recommendations used in the identification of sleep apnea and other sleep disorders,” Ms. Gibson said in the statement. Meanwhile, routine screening by primary care doctors “is a simple way” of gauging whether a high-risk patient may have obstructive sleep apnea, the statement said.
The U.S. Preventive Services Task Force, an authoritative body that reviews the effectiveness of preventive care, takes a conservative view, more like that of the European researchers, concluding there is “insufficient” evidence to support widespread screening among patients with no symptoms.
Many insurers refuse to pay for CPAP machines and other treatments prescribed for people at the outer edges of the AASM’s apnea definition. But AASM is pressuring them to come around.
After all my reporting, I concluded that my apnea is real, though moderate. My alarming reading in the overnight lab – diagnosed quickly as central sleep apnea – was a byproduct of the testing machinery itself. That’s a well-described phenomenon that occurs in 5% to 15% of patients.
And when I looked closely at the results of my at-home diagnostic test, I had an epiphany: My overall score was 26 breathing interruptions and blood-oxygen level declines, on average, per hour – enough to put me in the “high-moderate” category for apnea. But when I looked at the data sorted according to sleeping positions, I saw that I scored much better when I slept on my side: only 10 interruptions in an hour.
So I did a little experiment: I bought a $25 pulse oximeter with a smartphone app that records oxygen dips and breathing interruptions. When I slept on my side, there were hardly any.
Now I sleep on my side. I snore less. I wake up refreshed. I’m not daytime drowsy.
None of my specialists mentioned turning on to my side – known in medical parlance as “positional therapy” – though the intervention is recognized as effective by many researchers. Sleeping on one’s back contributes to snoring and blockages, especially as people age and the muscles in the throat become looser.
“Positional patients ... can sleep in the lateral position and sleep quite well,” said Arie Oksenberg, PhD, a sleep researcher formerly at Loewenstein Hospital in Ra’anana, Israel.
But it’s not easy to find this in the official AASM treatment guidelines, which instead go right to the money-making options like CPAP machines, surgery, central apnea, and mouth appliances.
Dealing with apnea by shifting slightly in bed gets little more than a couple of paragraphs in AASM’s guideline on “other” treatments and a little box on a long and complex decision chart.
A third or more of patients wear CPAPs only a few hours a night or stop using them. It turns out people don’t like machines in their beds.
“Positional therapy is an effective treatment option for some patients,” said Ms. Gibson. But she said there are concerns about whether patients will sleep on their sides long term and whether trying to stay in one position might cause sleep interruptions itself.
It’s true that side-sleeping doesn’t help everybody. And it often takes practice. (Some people tape a tennis ball to their pajamas to keep them off their backs.) Even conservative sleep doctors say CPAP machines are the best solution for many patients.
But there is a largely overlooked alternative.
“Are we missing a simple treatment for most adult sleep apnea patients?” was the name of a 2013 paper that Dr. Oksenberg and a colleague wrote about positional therapy.
In my case, the answer was “yes.”
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.
Editor's Note: We periodically publish patient viewpoints on specific issues of interest to our audience.
I woke up in a strange bedroom with 24 electrodes glued all over my body and a plastic mask attached to a hose covering my face.
The lab technician who watched me all night via video feed told me that I had “wicked sleep apnea” and that it was “central sleep apnea” – a type that originates in the brain and fails to tell the muscles to inhale.
As a journalist– and one terrified by the diagnosis – I set out to do my own research. After a few weeks of sleuthing and interviewing experts, I reached two important conclusions.
First, I had moderate apnea, if that, and it could be treated without the elaborate machines, mouthpieces, or other devices that specialists who had consulted on my care were talking about.
Second, I was on a conveyor belt.
It all began with a desire for answers: I had been feeling drowsy during the day, and my wife told me I snored. Both can mean obstructive sleep apnea. With obstructive sleep apnea, the mouth and throat relax when a person is unconscious, sometimes blocking or narrowing the airway. That interrupts breathing, as well as sleep. Without treatment, the resulting disruption in oxygen flow might increase the risk of developing certain cardiovascular diseases.
So I contacted a sleep-treatment center, and doctors gave me an at-home test ($365). Two weeks later, they told me I had “high-moderate” sleep apnea and needed to acquire a continuous positive airway pressure (CPAP) machine, at a cost of about $600.
Though I had hoped to get the equipment and adjust the settings to see what worked best, my doctors said I had to come to the sleep lab for an overnight test ($1,900) to have them “titrate” the optimal CPAP air pressure.
“How do you treat central sleep apnea?” I worriedly asked the technician after that first overnight stay. She said something about an adaptive servo-ventilation machine ($4,000). And one pricey lab sleepover wasn’t enough, she said. I needed to come back for another.
(Most procedures and devices mentioned in this article were covered or would have been covered by insurance – in my case, Medicare, plus a supplemental plan. Unnecessary care is a big reason Americans’ insurance costs – premiums, copays, and deductibles – tend to rise year after year.)
As a journalist who spent years covering the business of health care, I found there was more motivating my expensive testing cascade than concerns about my health.
The American Academy of Sleep Medicine, a nonprofit based near Chicago, decides what is sleep apnea and how to treat it. Working with sleep societies around the world, it publishes the International Classification of Sleep Disorders, relied on by doctors everywhere to diagnose and categorize disease.
But behind that effort lie considerable conflicts of interest. Like so much of U.S. health care, sleep medicine turns out to be a thriving industry. AASM finances its operations in part with payments from CPAP machine manufacturers and other companies that stand to profit from expensive treatments and expansive definitions of apnea and other sleep disorders.
Zoll Itamar, which makes the at-home testing device I used, as well as implantable nerve-stimulation hardware for central sleep apnea, is a $60,000, “platinum” partner in AASM’s Industry Engagement Program. So is Avadel Pharmaceuticals, which is testing a drug to treat narcolepsy, characterized by intense daytime sleepiness.
Other sponsors include the maker of an anti-insomnia drug; another company with a narcolepsy drug; Fisher & Paykel Healthcare, which makes CPAP machines and masks; and Inspire Medical Systems, maker of a heavily advertised surgical implant, costing tens of thousands of dollars, to treat apnea.
Corporate sponsors for Sleep 2022, a convention AASM put on in Charlotte, N.C., with other professional societies, included many of those companies, plus Philips Respironics and ResMed, two of the biggest CPAP machine makers.
In a statement, AASM spokesperson Jennifer Gibson said a conflict-of-interest policy and a noninterference pledge from industry funders protect the integrity of the academy’s work. Industry donations account for about $170,000 of AASM’s annual revenue of about $15 million. Other revenue comes from educational materials and membership and accreditation fees.
Here’s what else I found. Almost everybody breathes irregularly sometime at night, especially during REM sleep, characterized by rapid eye movement and dreams. Blood oxygen levels also fluctuate slightly.
But recent European studies have shown that standards under the International Classification of Sleep Disorders would doom huge portions of the general population to a sleep apnea diagnosis – whether or not people had complaints of daytime tiredness or other sleep problems.
A study in Lausanne, Switzerland, showed that 50% of local men and 23% of the women 40 or older were positive for sleep apnea under such criteria.
Such rates of disease are “extraordinarily high,” “astronomical,” and “implausible,” Dirk Pevernagie, PhD, a scientist at Ghent (Belgium) University Hospital, wrote with colleagues 2 years ago in a comprehensive study in the Journal of Sleep Research.
“Right now, there is no real evidence for the criteria that have been put forward to diagnose obstructive sleep apnea and rate its severity,” he said in an interview.
Likewise, 19% of middle-aged subjects in a 2016 Icelandic study appeared to have moderate to severe “apnea” under one definition in the International Classification of Sleep Disorders even though many reported no drowsiness.
“Most of them were really surprised,” said Erna Sif Arnardóttir, who led the study and is running a large European program to refine detection and treatment of apnea.
Nevertheless, the official AASM journal recommends extremely broad screening for sleep apnea, looking for patients who have what it defines as illness. Everybody 18 and older should be screened every year for apnea if they have diabetes, obesity, untreated high blood pressure, or heart disease – even if they have never complained about sleep problems, the group says.
AASM “continually evaluates the definitions, criteria and recommendations used in the identification of sleep apnea and other sleep disorders,” Ms. Gibson said in the statement. Meanwhile, routine screening by primary care doctors “is a simple way” of gauging whether a high-risk patient may have obstructive sleep apnea, the statement said.
The U.S. Preventive Services Task Force, an authoritative body that reviews the effectiveness of preventive care, takes a conservative view, more like that of the European researchers, concluding there is “insufficient” evidence to support widespread screening among patients with no symptoms.
Many insurers refuse to pay for CPAP machines and other treatments prescribed for people at the outer edges of the AASM’s apnea definition. But AASM is pressuring them to come around.
After all my reporting, I concluded that my apnea is real, though moderate. My alarming reading in the overnight lab – diagnosed quickly as central sleep apnea – was a byproduct of the testing machinery itself. That’s a well-described phenomenon that occurs in 5% to 15% of patients.
And when I looked closely at the results of my at-home diagnostic test, I had an epiphany: My overall score was 26 breathing interruptions and blood-oxygen level declines, on average, per hour – enough to put me in the “high-moderate” category for apnea. But when I looked at the data sorted according to sleeping positions, I saw that I scored much better when I slept on my side: only 10 interruptions in an hour.
So I did a little experiment: I bought a $25 pulse oximeter with a smartphone app that records oxygen dips and breathing interruptions. When I slept on my side, there were hardly any.
Now I sleep on my side. I snore less. I wake up refreshed. I’m not daytime drowsy.
None of my specialists mentioned turning on to my side – known in medical parlance as “positional therapy” – though the intervention is recognized as effective by many researchers. Sleeping on one’s back contributes to snoring and blockages, especially as people age and the muscles in the throat become looser.
“Positional patients ... can sleep in the lateral position and sleep quite well,” said Arie Oksenberg, PhD, a sleep researcher formerly at Loewenstein Hospital in Ra’anana, Israel.
But it’s not easy to find this in the official AASM treatment guidelines, which instead go right to the money-making options like CPAP machines, surgery, central apnea, and mouth appliances.
Dealing with apnea by shifting slightly in bed gets little more than a couple of paragraphs in AASM’s guideline on “other” treatments and a little box on a long and complex decision chart.
A third or more of patients wear CPAPs only a few hours a night or stop using them. It turns out people don’t like machines in their beds.
“Positional therapy is an effective treatment option for some patients,” said Ms. Gibson. But she said there are concerns about whether patients will sleep on their sides long term and whether trying to stay in one position might cause sleep interruptions itself.
It’s true that side-sleeping doesn’t help everybody. And it often takes practice. (Some people tape a tennis ball to their pajamas to keep them off their backs.) Even conservative sleep doctors say CPAP machines are the best solution for many patients.
But there is a largely overlooked alternative.
“Are we missing a simple treatment for most adult sleep apnea patients?” was the name of a 2013 paper that Dr. Oksenberg and a colleague wrote about positional therapy.
In my case, the answer was “yes.”
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.
Editor's Note: We periodically publish patient viewpoints on specific issues of interest to our audience.
I woke up in a strange bedroom with 24 electrodes glued all over my body and a plastic mask attached to a hose covering my face.
The lab technician who watched me all night via video feed told me that I had “wicked sleep apnea” and that it was “central sleep apnea” – a type that originates in the brain and fails to tell the muscles to inhale.
As a journalist– and one terrified by the diagnosis – I set out to do my own research. After a few weeks of sleuthing and interviewing experts, I reached two important conclusions.
First, I had moderate apnea, if that, and it could be treated without the elaborate machines, mouthpieces, or other devices that specialists who had consulted on my care were talking about.
Second, I was on a conveyor belt.
It all began with a desire for answers: I had been feeling drowsy during the day, and my wife told me I snored. Both can mean obstructive sleep apnea. With obstructive sleep apnea, the mouth and throat relax when a person is unconscious, sometimes blocking or narrowing the airway. That interrupts breathing, as well as sleep. Without treatment, the resulting disruption in oxygen flow might increase the risk of developing certain cardiovascular diseases.
So I contacted a sleep-treatment center, and doctors gave me an at-home test ($365). Two weeks later, they told me I had “high-moderate” sleep apnea and needed to acquire a continuous positive airway pressure (CPAP) machine, at a cost of about $600.
Though I had hoped to get the equipment and adjust the settings to see what worked best, my doctors said I had to come to the sleep lab for an overnight test ($1,900) to have them “titrate” the optimal CPAP air pressure.
“How do you treat central sleep apnea?” I worriedly asked the technician after that first overnight stay. She said something about an adaptive servo-ventilation machine ($4,000). And one pricey lab sleepover wasn’t enough, she said. I needed to come back for another.
(Most procedures and devices mentioned in this article were covered or would have been covered by insurance – in my case, Medicare, plus a supplemental plan. Unnecessary care is a big reason Americans’ insurance costs – premiums, copays, and deductibles – tend to rise year after year.)
As a journalist who spent years covering the business of health care, I found there was more motivating my expensive testing cascade than concerns about my health.
The American Academy of Sleep Medicine, a nonprofit based near Chicago, decides what is sleep apnea and how to treat it. Working with sleep societies around the world, it publishes the International Classification of Sleep Disorders, relied on by doctors everywhere to diagnose and categorize disease.
But behind that effort lie considerable conflicts of interest. Like so much of U.S. health care, sleep medicine turns out to be a thriving industry. AASM finances its operations in part with payments from CPAP machine manufacturers and other companies that stand to profit from expensive treatments and expansive definitions of apnea and other sleep disorders.
Zoll Itamar, which makes the at-home testing device I used, as well as implantable nerve-stimulation hardware for central sleep apnea, is a $60,000, “platinum” partner in AASM’s Industry Engagement Program. So is Avadel Pharmaceuticals, which is testing a drug to treat narcolepsy, characterized by intense daytime sleepiness.
Other sponsors include the maker of an anti-insomnia drug; another company with a narcolepsy drug; Fisher & Paykel Healthcare, which makes CPAP machines and masks; and Inspire Medical Systems, maker of a heavily advertised surgical implant, costing tens of thousands of dollars, to treat apnea.
Corporate sponsors for Sleep 2022, a convention AASM put on in Charlotte, N.C., with other professional societies, included many of those companies, plus Philips Respironics and ResMed, two of the biggest CPAP machine makers.
In a statement, AASM spokesperson Jennifer Gibson said a conflict-of-interest policy and a noninterference pledge from industry funders protect the integrity of the academy’s work. Industry donations account for about $170,000 of AASM’s annual revenue of about $15 million. Other revenue comes from educational materials and membership and accreditation fees.
Here’s what else I found. Almost everybody breathes irregularly sometime at night, especially during REM sleep, characterized by rapid eye movement and dreams. Blood oxygen levels also fluctuate slightly.
But recent European studies have shown that standards under the International Classification of Sleep Disorders would doom huge portions of the general population to a sleep apnea diagnosis – whether or not people had complaints of daytime tiredness or other sleep problems.
A study in Lausanne, Switzerland, showed that 50% of local men and 23% of the women 40 or older were positive for sleep apnea under such criteria.
Such rates of disease are “extraordinarily high,” “astronomical,” and “implausible,” Dirk Pevernagie, PhD, a scientist at Ghent (Belgium) University Hospital, wrote with colleagues 2 years ago in a comprehensive study in the Journal of Sleep Research.
“Right now, there is no real evidence for the criteria that have been put forward to diagnose obstructive sleep apnea and rate its severity,” he said in an interview.
Likewise, 19% of middle-aged subjects in a 2016 Icelandic study appeared to have moderate to severe “apnea” under one definition in the International Classification of Sleep Disorders even though many reported no drowsiness.
“Most of them were really surprised,” said Erna Sif Arnardóttir, who led the study and is running a large European program to refine detection and treatment of apnea.
Nevertheless, the official AASM journal recommends extremely broad screening for sleep apnea, looking for patients who have what it defines as illness. Everybody 18 and older should be screened every year for apnea if they have diabetes, obesity, untreated high blood pressure, or heart disease – even if they have never complained about sleep problems, the group says.
AASM “continually evaluates the definitions, criteria and recommendations used in the identification of sleep apnea and other sleep disorders,” Ms. Gibson said in the statement. Meanwhile, routine screening by primary care doctors “is a simple way” of gauging whether a high-risk patient may have obstructive sleep apnea, the statement said.
The U.S. Preventive Services Task Force, an authoritative body that reviews the effectiveness of preventive care, takes a conservative view, more like that of the European researchers, concluding there is “insufficient” evidence to support widespread screening among patients with no symptoms.
Many insurers refuse to pay for CPAP machines and other treatments prescribed for people at the outer edges of the AASM’s apnea definition. But AASM is pressuring them to come around.
After all my reporting, I concluded that my apnea is real, though moderate. My alarming reading in the overnight lab – diagnosed quickly as central sleep apnea – was a byproduct of the testing machinery itself. That’s a well-described phenomenon that occurs in 5% to 15% of patients.
And when I looked closely at the results of my at-home diagnostic test, I had an epiphany: My overall score was 26 breathing interruptions and blood-oxygen level declines, on average, per hour – enough to put me in the “high-moderate” category for apnea. But when I looked at the data sorted according to sleeping positions, I saw that I scored much better when I slept on my side: only 10 interruptions in an hour.
So I did a little experiment: I bought a $25 pulse oximeter with a smartphone app that records oxygen dips and breathing interruptions. When I slept on my side, there were hardly any.
Now I sleep on my side. I snore less. I wake up refreshed. I’m not daytime drowsy.
None of my specialists mentioned turning on to my side – known in medical parlance as “positional therapy” – though the intervention is recognized as effective by many researchers. Sleeping on one’s back contributes to snoring and blockages, especially as people age and the muscles in the throat become looser.
“Positional patients ... can sleep in the lateral position and sleep quite well,” said Arie Oksenberg, PhD, a sleep researcher formerly at Loewenstein Hospital in Ra’anana, Israel.
But it’s not easy to find this in the official AASM treatment guidelines, which instead go right to the money-making options like CPAP machines, surgery, central apnea, and mouth appliances.
Dealing with apnea by shifting slightly in bed gets little more than a couple of paragraphs in AASM’s guideline on “other” treatments and a little box on a long and complex decision chart.
A third or more of patients wear CPAPs only a few hours a night or stop using them. It turns out people don’t like machines in their beds.
“Positional therapy is an effective treatment option for some patients,” said Ms. Gibson. But she said there are concerns about whether patients will sleep on their sides long term and whether trying to stay in one position might cause sleep interruptions itself.
It’s true that side-sleeping doesn’t help everybody. And it often takes practice. (Some people tape a tennis ball to their pajamas to keep them off their backs.) Even conservative sleep doctors say CPAP machines are the best solution for many patients.
But there is a largely overlooked alternative.
“Are we missing a simple treatment for most adult sleep apnea patients?” was the name of a 2013 paper that Dr. Oksenberg and a colleague wrote about positional therapy.
In my case, the answer was “yes.”
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.
Talk about déjà vu: Senators set to re-enact drug price hearing of 60 years ago
Kenneth Frazier, CEO of pharma giant Merck, is set to face senators Feb. 26 who say drug costs are “sky-high” and “out of control.”
But Frazier doesn’t need new talking points. Sixty years ago, a different panel of senators grilled a different Merck boss about the same problem.
To a striking degree, the subjects likely to surface during the hearing – high drug prices and profits, limited price transparency, aggressive marketing, alleged patent abuse and mediocre, “me-too” drugs – are identical to the issues senators investigated decades ago, historical transcripts show.
Frazier is scheduled to testify before the Senate Finance Committee, led by Sen. Chuck Grassley (R-Iowa), along with the CEOs of AbbVie, AstraZeneca, Bristol-Myers Squibb, Pfizer, and Sanofi and a top executive for Johnson & Johnson.
Hearings led by Sen. Estes Kefauver (D-Tenn.) in 1959 and 1960 were the first significant congressional inquiry into rising drug costs and drug-company profits. While that showdown led to new legal standards for drug safety and effectiveness, cost-control measures never made it to the final bill.
Health policy scholars say the similar hearings show just how much unfinished business remains and how well pharma companies have protected profits and limited regulation over the years.
“Every decade since the Kefauver hearings has seen at least one set of congressional hearings into the increasing prices of prescription drugs,” said Jeremy Greene, MD, PhD, a drug-industry historian at Johns Hopkins University, Baltimore.
“Drug prices, especially at the high end, are only ever higher” since the 1960s, said Scott Podolsky, MD, a health care historian at Harvard Medical School, Boston. “The issues of transparency and profitability certainly have been there from the very first day of Kefauver.”
A Tennessee Democrat known for investigating the Mafia, Sen. Kefauver launched a series of hearings on business in the late 1950s. His Senate antitrust subcommittee began taking testimony on high pharmaceutical prices in late 1959.
“While this country has the best drugs in the world, it would appear from the great number of letters which the subcommittee has received that many of our citizens are experiencing difficulty in being able to purchase them,” Sen. Kefauver said in opening remarks.
The sessions, which lasted off and on until Sept. 1960, were “among the most sensational” hearings of that Congress, a syndicated columnist wrote at the time. Appearing were the bosses of Merck, Pfizer, Schering, Bristol-Myers, Upjohn, Smith Kline, and American Home Products. Senators dug into the prices of antibiotics, corticosteroids and tranquilizers, the wonder drugs of the time.
John Connor, then Merck’s president, said he had “deep sympathy” for people unable to afford medicine. So did Schering’s boss, but he said it wasn’t the industry’s fault.
“Undoubtedly some people find it difficult to pay for needed medication. They will also have difficulty in meeting their rent and food bills,” said Francis Brown, Schering’s president at the time. “It is a matter of inadequate income rather than excessive prices.”
The executives urged Congress to create government programs to help people pay for health care, which it did a few years later. Today Medicare, Medicaid, and subsidies for private health coverage cost taxpayers more than $1 trillion annually.
But drugs are still unaffordable for many. A fourth of Americans in a recent survey by the Kaiser Family Foundation said somebody in their family skipped doses or left prescriptions unfilled because medicine costs too much. (Kaiser Health News is an editorially independent program of the foundation.)
Sixty years ago, as now, policymakers wondered why Americans pay so much more for medicine than people elsewhere.
“I still don’t understand why druggists in London buy this drug for $7.53 and our drugstores have to pay $17.90,” Sen. Kefauver told Connor, the Merck executive.
“We meet different market conditions in different countries,” was Connor’s response. Americans were getting “a reasonable bargain,” he said. “Merck’s Head Defends Drug Prices” was the front-page headline the next day in The New York Times.
Senators accused companies of marking up the cost of drugs by thousands of percent. Then as now, executives defended high profits as necessary to finance research and development, even though they often spent more on ads and marketing than R&D.
“They were advised that whenever the senators mentioned high prices, just mention research and how difficult it is, how expensive it is,” said Donald Light, a health policy professor at Rowan University in New Jersey. “Since 1959, that is the repeated and successful theme of Big Pharma.”
“The few successful products have to pay for the hundreds of research failures,” Alvin Brush, president of American Home Products, told Sen. Kefauver’s committee.
Like those of today, patients of 1960 were baffled about what medicine cost until they got the bill. Such obscurity led to overpayment.
“The consumer, in this field, cannot exercise his normal, economic prerogative of shopping or pricing before a purchase,” the head of a generic-drug manufacturer told the committee. “The normal laws of supply and demand have no application here.”
Drug companies engaged in a “pharmaceutical numbers racket” by promoting different strengths of established drugs as new medicine and charging more, Louis Lasagna, a pharmacology professor from Johns Hopkins University, told the committee.
“Now this is like saying that a dime is more potent than two nickels because you can use one coin instead of two,” he said.
Companies often worked not to develop breakthrough medicine but to take an existing product and “modify the original drug just enough to get a patentable alternative,” said Dr. Frederick Meyers, a pharmacology professor at what later became the University of California-San Francisco.
In contrast to the nonstop consumer TV commercials of today, ads for prescription medicines in 1960 were aimed at doctors and hospitals, appearing in medical journals. Even those were deemed aggressive. A committee staffer dumped out a huge pile of samples, ads, and flyers that a Minnesota doctor said he had received in only one month.
Maybe if the companies spent less on ads, armies of salesmen and “expensive stock options” for executives, Sen. Kefauver suggested, “you could lower the price of drugs, too.”
Senators proposed sweeping solutions.
Sen. Kefauver’s draft bill would have withheld patents for modified drugs unless the new molecule gave a therapeutic response “significantly greater” than the original. It would have promoted competition by allowing anybody to license and sell a patented drug, in return for royalties paid to the patent holder, after three years.
One expert urged the government to publish an official list of patented drugs and their generic equivalents along with prices so everybody could see what they cost.
None of this happened. The industry fought back. Any legislation seemed doomed until the tragedy of thalidomide, a pill taken for morning sickness that produced deformities in babies, prompted lawmakers to act.
But the Kefauver Harris Amendment of 1962, which set requirements for medical trials and laid ground for the modern drug-approval process, did little to control cost.
There was no need to limit drug prices, Austin Smith, president of the Pharmaceutical Manufacturers Association, told the Kefauver committee. Attempts to prove excessive pharma profits were “doomed to failure,” he said. Drug prices were rising more slowly than consumer prices generally, Smith said.
Smith’s counterpart today is Stephen Ubl, who runs what is now known as the Pharmaceutical Research and Manufacturers of America. He takes a similar line, one that is likely to be repeated on Feb. 26. “Drug prices are rapidly decelerating,” Ubl tweeted last month.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Kenneth Frazier, CEO of pharma giant Merck, is set to face senators Feb. 26 who say drug costs are “sky-high” and “out of control.”
But Frazier doesn’t need new talking points. Sixty years ago, a different panel of senators grilled a different Merck boss about the same problem.
To a striking degree, the subjects likely to surface during the hearing – high drug prices and profits, limited price transparency, aggressive marketing, alleged patent abuse and mediocre, “me-too” drugs – are identical to the issues senators investigated decades ago, historical transcripts show.
Frazier is scheduled to testify before the Senate Finance Committee, led by Sen. Chuck Grassley (R-Iowa), along with the CEOs of AbbVie, AstraZeneca, Bristol-Myers Squibb, Pfizer, and Sanofi and a top executive for Johnson & Johnson.
Hearings led by Sen. Estes Kefauver (D-Tenn.) in 1959 and 1960 were the first significant congressional inquiry into rising drug costs and drug-company profits. While that showdown led to new legal standards for drug safety and effectiveness, cost-control measures never made it to the final bill.
Health policy scholars say the similar hearings show just how much unfinished business remains and how well pharma companies have protected profits and limited regulation over the years.
“Every decade since the Kefauver hearings has seen at least one set of congressional hearings into the increasing prices of prescription drugs,” said Jeremy Greene, MD, PhD, a drug-industry historian at Johns Hopkins University, Baltimore.
“Drug prices, especially at the high end, are only ever higher” since the 1960s, said Scott Podolsky, MD, a health care historian at Harvard Medical School, Boston. “The issues of transparency and profitability certainly have been there from the very first day of Kefauver.”
A Tennessee Democrat known for investigating the Mafia, Sen. Kefauver launched a series of hearings on business in the late 1950s. His Senate antitrust subcommittee began taking testimony on high pharmaceutical prices in late 1959.
“While this country has the best drugs in the world, it would appear from the great number of letters which the subcommittee has received that many of our citizens are experiencing difficulty in being able to purchase them,” Sen. Kefauver said in opening remarks.
The sessions, which lasted off and on until Sept. 1960, were “among the most sensational” hearings of that Congress, a syndicated columnist wrote at the time. Appearing were the bosses of Merck, Pfizer, Schering, Bristol-Myers, Upjohn, Smith Kline, and American Home Products. Senators dug into the prices of antibiotics, corticosteroids and tranquilizers, the wonder drugs of the time.
John Connor, then Merck’s president, said he had “deep sympathy” for people unable to afford medicine. So did Schering’s boss, but he said it wasn’t the industry’s fault.
“Undoubtedly some people find it difficult to pay for needed medication. They will also have difficulty in meeting their rent and food bills,” said Francis Brown, Schering’s president at the time. “It is a matter of inadequate income rather than excessive prices.”
The executives urged Congress to create government programs to help people pay for health care, which it did a few years later. Today Medicare, Medicaid, and subsidies for private health coverage cost taxpayers more than $1 trillion annually.
But drugs are still unaffordable for many. A fourth of Americans in a recent survey by the Kaiser Family Foundation said somebody in their family skipped doses or left prescriptions unfilled because medicine costs too much. (Kaiser Health News is an editorially independent program of the foundation.)
Sixty years ago, as now, policymakers wondered why Americans pay so much more for medicine than people elsewhere.
“I still don’t understand why druggists in London buy this drug for $7.53 and our drugstores have to pay $17.90,” Sen. Kefauver told Connor, the Merck executive.
“We meet different market conditions in different countries,” was Connor’s response. Americans were getting “a reasonable bargain,” he said. “Merck’s Head Defends Drug Prices” was the front-page headline the next day in The New York Times.
Senators accused companies of marking up the cost of drugs by thousands of percent. Then as now, executives defended high profits as necessary to finance research and development, even though they often spent more on ads and marketing than R&D.
“They were advised that whenever the senators mentioned high prices, just mention research and how difficult it is, how expensive it is,” said Donald Light, a health policy professor at Rowan University in New Jersey. “Since 1959, that is the repeated and successful theme of Big Pharma.”
“The few successful products have to pay for the hundreds of research failures,” Alvin Brush, president of American Home Products, told Sen. Kefauver’s committee.
Like those of today, patients of 1960 were baffled about what medicine cost until they got the bill. Such obscurity led to overpayment.
“The consumer, in this field, cannot exercise his normal, economic prerogative of shopping or pricing before a purchase,” the head of a generic-drug manufacturer told the committee. “The normal laws of supply and demand have no application here.”
Drug companies engaged in a “pharmaceutical numbers racket” by promoting different strengths of established drugs as new medicine and charging more, Louis Lasagna, a pharmacology professor from Johns Hopkins University, told the committee.
“Now this is like saying that a dime is more potent than two nickels because you can use one coin instead of two,” he said.
Companies often worked not to develop breakthrough medicine but to take an existing product and “modify the original drug just enough to get a patentable alternative,” said Dr. Frederick Meyers, a pharmacology professor at what later became the University of California-San Francisco.
In contrast to the nonstop consumer TV commercials of today, ads for prescription medicines in 1960 were aimed at doctors and hospitals, appearing in medical journals. Even those were deemed aggressive. A committee staffer dumped out a huge pile of samples, ads, and flyers that a Minnesota doctor said he had received in only one month.
Maybe if the companies spent less on ads, armies of salesmen and “expensive stock options” for executives, Sen. Kefauver suggested, “you could lower the price of drugs, too.”
Senators proposed sweeping solutions.
Sen. Kefauver’s draft bill would have withheld patents for modified drugs unless the new molecule gave a therapeutic response “significantly greater” than the original. It would have promoted competition by allowing anybody to license and sell a patented drug, in return for royalties paid to the patent holder, after three years.
One expert urged the government to publish an official list of patented drugs and their generic equivalents along with prices so everybody could see what they cost.
None of this happened. The industry fought back. Any legislation seemed doomed until the tragedy of thalidomide, a pill taken for morning sickness that produced deformities in babies, prompted lawmakers to act.
But the Kefauver Harris Amendment of 1962, which set requirements for medical trials and laid ground for the modern drug-approval process, did little to control cost.
There was no need to limit drug prices, Austin Smith, president of the Pharmaceutical Manufacturers Association, told the Kefauver committee. Attempts to prove excessive pharma profits were “doomed to failure,” he said. Drug prices were rising more slowly than consumer prices generally, Smith said.
Smith’s counterpart today is Stephen Ubl, who runs what is now known as the Pharmaceutical Research and Manufacturers of America. He takes a similar line, one that is likely to be repeated on Feb. 26. “Drug prices are rapidly decelerating,” Ubl tweeted last month.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Kenneth Frazier, CEO of pharma giant Merck, is set to face senators Feb. 26 who say drug costs are “sky-high” and “out of control.”
But Frazier doesn’t need new talking points. Sixty years ago, a different panel of senators grilled a different Merck boss about the same problem.
To a striking degree, the subjects likely to surface during the hearing – high drug prices and profits, limited price transparency, aggressive marketing, alleged patent abuse and mediocre, “me-too” drugs – are identical to the issues senators investigated decades ago, historical transcripts show.
Frazier is scheduled to testify before the Senate Finance Committee, led by Sen. Chuck Grassley (R-Iowa), along with the CEOs of AbbVie, AstraZeneca, Bristol-Myers Squibb, Pfizer, and Sanofi and a top executive for Johnson & Johnson.
Hearings led by Sen. Estes Kefauver (D-Tenn.) in 1959 and 1960 were the first significant congressional inquiry into rising drug costs and drug-company profits. While that showdown led to new legal standards for drug safety and effectiveness, cost-control measures never made it to the final bill.
Health policy scholars say the similar hearings show just how much unfinished business remains and how well pharma companies have protected profits and limited regulation over the years.
“Every decade since the Kefauver hearings has seen at least one set of congressional hearings into the increasing prices of prescription drugs,” said Jeremy Greene, MD, PhD, a drug-industry historian at Johns Hopkins University, Baltimore.
“Drug prices, especially at the high end, are only ever higher” since the 1960s, said Scott Podolsky, MD, a health care historian at Harvard Medical School, Boston. “The issues of transparency and profitability certainly have been there from the very first day of Kefauver.”
A Tennessee Democrat known for investigating the Mafia, Sen. Kefauver launched a series of hearings on business in the late 1950s. His Senate antitrust subcommittee began taking testimony on high pharmaceutical prices in late 1959.
“While this country has the best drugs in the world, it would appear from the great number of letters which the subcommittee has received that many of our citizens are experiencing difficulty in being able to purchase them,” Sen. Kefauver said in opening remarks.
The sessions, which lasted off and on until Sept. 1960, were “among the most sensational” hearings of that Congress, a syndicated columnist wrote at the time. Appearing were the bosses of Merck, Pfizer, Schering, Bristol-Myers, Upjohn, Smith Kline, and American Home Products. Senators dug into the prices of antibiotics, corticosteroids and tranquilizers, the wonder drugs of the time.
John Connor, then Merck’s president, said he had “deep sympathy” for people unable to afford medicine. So did Schering’s boss, but he said it wasn’t the industry’s fault.
“Undoubtedly some people find it difficult to pay for needed medication. They will also have difficulty in meeting their rent and food bills,” said Francis Brown, Schering’s president at the time. “It is a matter of inadequate income rather than excessive prices.”
The executives urged Congress to create government programs to help people pay for health care, which it did a few years later. Today Medicare, Medicaid, and subsidies for private health coverage cost taxpayers more than $1 trillion annually.
But drugs are still unaffordable for many. A fourth of Americans in a recent survey by the Kaiser Family Foundation said somebody in their family skipped doses or left prescriptions unfilled because medicine costs too much. (Kaiser Health News is an editorially independent program of the foundation.)
Sixty years ago, as now, policymakers wondered why Americans pay so much more for medicine than people elsewhere.
“I still don’t understand why druggists in London buy this drug for $7.53 and our drugstores have to pay $17.90,” Sen. Kefauver told Connor, the Merck executive.
“We meet different market conditions in different countries,” was Connor’s response. Americans were getting “a reasonable bargain,” he said. “Merck’s Head Defends Drug Prices” was the front-page headline the next day in The New York Times.
Senators accused companies of marking up the cost of drugs by thousands of percent. Then as now, executives defended high profits as necessary to finance research and development, even though they often spent more on ads and marketing than R&D.
“They were advised that whenever the senators mentioned high prices, just mention research and how difficult it is, how expensive it is,” said Donald Light, a health policy professor at Rowan University in New Jersey. “Since 1959, that is the repeated and successful theme of Big Pharma.”
“The few successful products have to pay for the hundreds of research failures,” Alvin Brush, president of American Home Products, told Sen. Kefauver’s committee.
Like those of today, patients of 1960 were baffled about what medicine cost until they got the bill. Such obscurity led to overpayment.
“The consumer, in this field, cannot exercise his normal, economic prerogative of shopping or pricing before a purchase,” the head of a generic-drug manufacturer told the committee. “The normal laws of supply and demand have no application here.”
Drug companies engaged in a “pharmaceutical numbers racket” by promoting different strengths of established drugs as new medicine and charging more, Louis Lasagna, a pharmacology professor from Johns Hopkins University, told the committee.
“Now this is like saying that a dime is more potent than two nickels because you can use one coin instead of two,” he said.
Companies often worked not to develop breakthrough medicine but to take an existing product and “modify the original drug just enough to get a patentable alternative,” said Dr. Frederick Meyers, a pharmacology professor at what later became the University of California-San Francisco.
In contrast to the nonstop consumer TV commercials of today, ads for prescription medicines in 1960 were aimed at doctors and hospitals, appearing in medical journals. Even those were deemed aggressive. A committee staffer dumped out a huge pile of samples, ads, and flyers that a Minnesota doctor said he had received in only one month.
Maybe if the companies spent less on ads, armies of salesmen and “expensive stock options” for executives, Sen. Kefauver suggested, “you could lower the price of drugs, too.”
Senators proposed sweeping solutions.
Sen. Kefauver’s draft bill would have withheld patents for modified drugs unless the new molecule gave a therapeutic response “significantly greater” than the original. It would have promoted competition by allowing anybody to license and sell a patented drug, in return for royalties paid to the patent holder, after three years.
One expert urged the government to publish an official list of patented drugs and their generic equivalents along with prices so everybody could see what they cost.
None of this happened. The industry fought back. Any legislation seemed doomed until the tragedy of thalidomide, a pill taken for morning sickness that produced deformities in babies, prompted lawmakers to act.
But the Kefauver Harris Amendment of 1962, which set requirements for medical trials and laid ground for the modern drug-approval process, did little to control cost.
There was no need to limit drug prices, Austin Smith, president of the Pharmaceutical Manufacturers Association, told the Kefauver committee. Attempts to prove excessive pharma profits were “doomed to failure,” he said. Drug prices were rising more slowly than consumer prices generally, Smith said.
Smith’s counterpart today is Stephen Ubl, who runs what is now known as the Pharmaceutical Research and Manufacturers of America. He takes a similar line, one that is likely to be repeated on Feb. 26. “Drug prices are rapidly decelerating,” Ubl tweeted last month.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Winners and losers under bold Trump plan to slash drug rebate deals
Few consumers have heard of the secret, business-to-business payments that the Trump administration wants to ban in an attempt to control drug costs.
But the administration’s plan for drug rebates, announced Jan. 31, would end the pharmaceutical business as usual, shift billions in revenue and cause far-reaching, unforeseen change, say health policy authorities.
In pointed language sure to anger middlemen who benefit from the deals, administration officials proposed banning rebates paid by drug companies to ensure coverage for their products under Medicare and Medicaid plans.
“A shadowy system of kickbacks,” was how Health and Human Services Secretary Alex Azar described the current system in a speech on Feb. 1.
The proposal is a regulatory change applying only to Medicare plans for seniors and managed Medicaid plans for low-income people. But private insurers, who often take cues from government programs, might make a similar shift, administration officials said.
Drug rebates are essentially discounts off the list price. Outlawing them would divert $29 billion in rebates now paid to insurers and pharmacy benefit managers into “seniors’ pocketbooks at the pharmacy counter,” Azar said.
The measure already faces fierce opposition from some in the industry and is unlikely to be implemented as presented or by the proposed 2020 effective date, health policy analysts said.
In any event, it’s hardly a pure win for seniors or patients in general. Consumers are unlikely to collect the full benefit of eliminated rebates.
At the same time, the change would produce uncertain ricochets, including higher drug-plan premiums for consumers, that would produce new winners and losers across the economy.
“It is the most significant proposal that the administration has introduced so far” to try to control drug prices, said Rachel Sachs, a law professor at Washington University in St. Louis. “But I’m struck by the uncertainty that the administration has in what the effects would be.”
Chronically ill patients who take lots of expensive medicine
The list price for many brand-name medicines has doubled or tripled in recent years. But virtually the only ones affected by the full increases are the many patients who pay cash or whose out-of-pocket payments are based on the posted price.
By banning rebates, the administration says its intention is to ensure discounts are passed all the way to the patient instead of the middlemen, the so-called pharmacy benefit managers or PBMs. That means consumers using expensive drugs might see their out-of-pocket costs go down.
If rebates were eliminated for commercial insurance, where deductibles and out-of-pocket costs are generally much higher, chronically ill patients could benefit much more.
Drug companies
Ending rebates would give the administration a drug-policy “win” that doesn’t directly threaten pharmaceutical company profits.
“We applaud the administration for taking steps to reform the rebate system” Stephen Ubl, CEO of PhRMA, the main lobby for branded drugs, said after the proposal came out.
The change might also slow the soaring list-price increases that have become a publicity nightmare for the industry. When list prices pop by 5% or 10% each year, drugmakers pay part of the proceeds to insurers and PBMs in the form of rebates to guarantee health-plan coverage.
No one is claiming that eliminating rebates would stop escalating list prices, even if all insurers adopted the practice. But some believe it would remove an important factor.
Pharmacy benefit managers
PBMs reap billions of dollars in rebate revenue in return for putting particular products on lists of covered drugs. The administration is essentially proposing to make those payments illegal, at least for Medicare and Medicaid plans.
PBMs, which claim they control costs by negotiating with drugmakers, might have to go back to their roots – processing pharmacy claims for a fee. After recent industry consolidation into a few enormous companies, on the other hand, they might have the market power to charge very high fees, replacing much of the lost rebate revenue.
PBMs “are concerned” that the move “would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses,” said JC Scott, CEO of the Pharmaceutical Care Management Association, the PBM lobby.
Insurance companies
Insurers, who often receive rebates directly, could also be hurt financially.
“From the start, the focus on rebates has been a distraction from the real issue – the problem is the price” of the drugs, said Matt Eyles, CEO of America’s Health Insurance Plans, a trade group. “We are not middlemen – we are your bargaining power, working hard to negotiate lower prices.”
Patients without chronic conditions and high drug costs
Lower out-of-pocket costs at the pharmacy counter would be financed, at least in part, by higher premiums for Medicare and Medicaid plans paid by consumers and the government. Premiums for Medicare Part D plans could rise from $3.20 to $5.64 per month, according to consultants hired by the Department of Health and Human Services.
“There is likely to be a wide variation in how much savings people see based on the drugs they take and the point-of-sale discounts that are negotiated,” said Elizabeth Carpenter, policy practice director at Avalere, a consultancy.
Consumers who don’t need expensive drugs every month could see insurance costs go up slightly without getting the benefits of lower out-of-pocket expense for purchased drugs.
Other policy changes giving health plans more negotiating power against drugmakers would keep a lid on premium increases, administration officials argue.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Few consumers have heard of the secret, business-to-business payments that the Trump administration wants to ban in an attempt to control drug costs.
But the administration’s plan for drug rebates, announced Jan. 31, would end the pharmaceutical business as usual, shift billions in revenue and cause far-reaching, unforeseen change, say health policy authorities.
In pointed language sure to anger middlemen who benefit from the deals, administration officials proposed banning rebates paid by drug companies to ensure coverage for their products under Medicare and Medicaid plans.
“A shadowy system of kickbacks,” was how Health and Human Services Secretary Alex Azar described the current system in a speech on Feb. 1.
The proposal is a regulatory change applying only to Medicare plans for seniors and managed Medicaid plans for low-income people. But private insurers, who often take cues from government programs, might make a similar shift, administration officials said.
Drug rebates are essentially discounts off the list price. Outlawing them would divert $29 billion in rebates now paid to insurers and pharmacy benefit managers into “seniors’ pocketbooks at the pharmacy counter,” Azar said.
The measure already faces fierce opposition from some in the industry and is unlikely to be implemented as presented or by the proposed 2020 effective date, health policy analysts said.
In any event, it’s hardly a pure win for seniors or patients in general. Consumers are unlikely to collect the full benefit of eliminated rebates.
At the same time, the change would produce uncertain ricochets, including higher drug-plan premiums for consumers, that would produce new winners and losers across the economy.
“It is the most significant proposal that the administration has introduced so far” to try to control drug prices, said Rachel Sachs, a law professor at Washington University in St. Louis. “But I’m struck by the uncertainty that the administration has in what the effects would be.”
Chronically ill patients who take lots of expensive medicine
The list price for many brand-name medicines has doubled or tripled in recent years. But virtually the only ones affected by the full increases are the many patients who pay cash or whose out-of-pocket payments are based on the posted price.
By banning rebates, the administration says its intention is to ensure discounts are passed all the way to the patient instead of the middlemen, the so-called pharmacy benefit managers or PBMs. That means consumers using expensive drugs might see their out-of-pocket costs go down.
If rebates were eliminated for commercial insurance, where deductibles and out-of-pocket costs are generally much higher, chronically ill patients could benefit much more.
Drug companies
Ending rebates would give the administration a drug-policy “win” that doesn’t directly threaten pharmaceutical company profits.
“We applaud the administration for taking steps to reform the rebate system” Stephen Ubl, CEO of PhRMA, the main lobby for branded drugs, said after the proposal came out.
The change might also slow the soaring list-price increases that have become a publicity nightmare for the industry. When list prices pop by 5% or 10% each year, drugmakers pay part of the proceeds to insurers and PBMs in the form of rebates to guarantee health-plan coverage.
No one is claiming that eliminating rebates would stop escalating list prices, even if all insurers adopted the practice. But some believe it would remove an important factor.
Pharmacy benefit managers
PBMs reap billions of dollars in rebate revenue in return for putting particular products on lists of covered drugs. The administration is essentially proposing to make those payments illegal, at least for Medicare and Medicaid plans.
PBMs, which claim they control costs by negotiating with drugmakers, might have to go back to their roots – processing pharmacy claims for a fee. After recent industry consolidation into a few enormous companies, on the other hand, they might have the market power to charge very high fees, replacing much of the lost rebate revenue.
PBMs “are concerned” that the move “would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses,” said JC Scott, CEO of the Pharmaceutical Care Management Association, the PBM lobby.
Insurance companies
Insurers, who often receive rebates directly, could also be hurt financially.
“From the start, the focus on rebates has been a distraction from the real issue – the problem is the price” of the drugs, said Matt Eyles, CEO of America’s Health Insurance Plans, a trade group. “We are not middlemen – we are your bargaining power, working hard to negotiate lower prices.”
Patients without chronic conditions and high drug costs
Lower out-of-pocket costs at the pharmacy counter would be financed, at least in part, by higher premiums for Medicare and Medicaid plans paid by consumers and the government. Premiums for Medicare Part D plans could rise from $3.20 to $5.64 per month, according to consultants hired by the Department of Health and Human Services.
“There is likely to be a wide variation in how much savings people see based on the drugs they take and the point-of-sale discounts that are negotiated,” said Elizabeth Carpenter, policy practice director at Avalere, a consultancy.
Consumers who don’t need expensive drugs every month could see insurance costs go up slightly without getting the benefits of lower out-of-pocket expense for purchased drugs.
Other policy changes giving health plans more negotiating power against drugmakers would keep a lid on premium increases, administration officials argue.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Few consumers have heard of the secret, business-to-business payments that the Trump administration wants to ban in an attempt to control drug costs.
But the administration’s plan for drug rebates, announced Jan. 31, would end the pharmaceutical business as usual, shift billions in revenue and cause far-reaching, unforeseen change, say health policy authorities.
In pointed language sure to anger middlemen who benefit from the deals, administration officials proposed banning rebates paid by drug companies to ensure coverage for their products under Medicare and Medicaid plans.
“A shadowy system of kickbacks,” was how Health and Human Services Secretary Alex Azar described the current system in a speech on Feb. 1.
The proposal is a regulatory change applying only to Medicare plans for seniors and managed Medicaid plans for low-income people. But private insurers, who often take cues from government programs, might make a similar shift, administration officials said.
Drug rebates are essentially discounts off the list price. Outlawing them would divert $29 billion in rebates now paid to insurers and pharmacy benefit managers into “seniors’ pocketbooks at the pharmacy counter,” Azar said.
The measure already faces fierce opposition from some in the industry and is unlikely to be implemented as presented or by the proposed 2020 effective date, health policy analysts said.
In any event, it’s hardly a pure win for seniors or patients in general. Consumers are unlikely to collect the full benefit of eliminated rebates.
At the same time, the change would produce uncertain ricochets, including higher drug-plan premiums for consumers, that would produce new winners and losers across the economy.
“It is the most significant proposal that the administration has introduced so far” to try to control drug prices, said Rachel Sachs, a law professor at Washington University in St. Louis. “But I’m struck by the uncertainty that the administration has in what the effects would be.”
Chronically ill patients who take lots of expensive medicine
The list price for many brand-name medicines has doubled or tripled in recent years. But virtually the only ones affected by the full increases are the many patients who pay cash or whose out-of-pocket payments are based on the posted price.
By banning rebates, the administration says its intention is to ensure discounts are passed all the way to the patient instead of the middlemen, the so-called pharmacy benefit managers or PBMs. That means consumers using expensive drugs might see their out-of-pocket costs go down.
If rebates were eliminated for commercial insurance, where deductibles and out-of-pocket costs are generally much higher, chronically ill patients could benefit much more.
Drug companies
Ending rebates would give the administration a drug-policy “win” that doesn’t directly threaten pharmaceutical company profits.
“We applaud the administration for taking steps to reform the rebate system” Stephen Ubl, CEO of PhRMA, the main lobby for branded drugs, said after the proposal came out.
The change might also slow the soaring list-price increases that have become a publicity nightmare for the industry. When list prices pop by 5% or 10% each year, drugmakers pay part of the proceeds to insurers and PBMs in the form of rebates to guarantee health-plan coverage.
No one is claiming that eliminating rebates would stop escalating list prices, even if all insurers adopted the practice. But some believe it would remove an important factor.
Pharmacy benefit managers
PBMs reap billions of dollars in rebate revenue in return for putting particular products on lists of covered drugs. The administration is essentially proposing to make those payments illegal, at least for Medicare and Medicaid plans.
PBMs, which claim they control costs by negotiating with drugmakers, might have to go back to their roots – processing pharmacy claims for a fee. After recent industry consolidation into a few enormous companies, on the other hand, they might have the market power to charge very high fees, replacing much of the lost rebate revenue.
PBMs “are concerned” that the move “would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses,” said JC Scott, CEO of the Pharmaceutical Care Management Association, the PBM lobby.
Insurance companies
Insurers, who often receive rebates directly, could also be hurt financially.
“From the start, the focus on rebates has been a distraction from the real issue – the problem is the price” of the drugs, said Matt Eyles, CEO of America’s Health Insurance Plans, a trade group. “We are not middlemen – we are your bargaining power, working hard to negotiate lower prices.”
Patients without chronic conditions and high drug costs
Lower out-of-pocket costs at the pharmacy counter would be financed, at least in part, by higher premiums for Medicare and Medicaid plans paid by consumers and the government. Premiums for Medicare Part D plans could rise from $3.20 to $5.64 per month, according to consultants hired by the Department of Health and Human Services.
“There is likely to be a wide variation in how much savings people see based on the drugs they take and the point-of-sale discounts that are negotiated,” said Elizabeth Carpenter, policy practice director at Avalere, a consultancy.
Consumers who don’t need expensive drugs every month could see insurance costs go up slightly without getting the benefits of lower out-of-pocket expense for purchased drugs.
Other policy changes giving health plans more negotiating power against drugmakers would keep a lid on premium increases, administration officials argue.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.