"It's an abuse of the
system," said one critic. The "business model ... involves gouging
insurers and health plans, which
ultimately costs consumers."
Nightly News Dec. 29, 2019, 5:41 PM
CST / Updated Dec. 29, 2019, 5:45 PM CST By Didi
Martinez, Brenda Breslauer, Jaime Longoria and Anne Thompson
OMAHA,
Neb. — It's a price tag that
would give anyone sticker shock: $14,213.99 for a 90-day supply of generic acid
reflux medication.
But
when Suzanne Luttig picks up the prescription for the drug, Zegerid, she pays
only $24.
The
catch? Luttig, a full-time professional photographer in Omaha, works an extra
25 hours a week at a bank primarily to help pay for the medication, which she
says she cannot do without.
"Because
I have health insurance with
my employer, I am able to be covered for this medication," said Luttig,
who provided NBC News with a receipt for her pharmacy medication. "I would
not be able to get it if I didn't have insurance."
The
price of her generic version of Zegerid, which is manufactured by Dr. Reddy's
Laboratories, is significantly higher than the sum of the prices of its main
ingredients: omeprazole and sodium bicarbonate. When bought separately, the two
individual drugs would cost about $34 for her three-month supply with a coupon.
Zegerid
is what's known as a combination drug — a medication that combines two or more
existing drugs — into a single pill or product. While they are convenient for
consumers, experts say the price tag of the products contributes to the high
cost of health care in America.
"We're
not talking about transformative new therapies," said Dr. Chana Sacks, an
internist and medical researcher at Massachusetts General Hospital in Boston.
"We're talking about very small tweaks to medicines that we have been
using for these very reasons for years."
Sacks
authored a 2018 study on the subject that found that
brand-name combination drugs cost Medicare $925 million more in 2016 than their
generic components.
In one
example from the study, Merck's Fosamax Plus D had a list price of $39.05 per
pill, while its generic components, Alendronate (used to prevent and treat
certain types of bone loss) and vitamin D3, cost $1.25. And for Bausch Health
Companies Inc., the manufacturer of Zegerid, the list price sits at $86.29 per
pill, versus 47 cents for omeprazole (generic Prilosec) and sodium bicarbonate
(baking soda).
But the
stark difference in pricing goes largely unnoticed as consumers are drawn in by
low copayments, some as little as $10. Meanwhile, physicians may also be
unaware of a drug's cost, Sacks said.
"As
a physician, I often don't know what the medications that I prescribe cost. And
then when a patient goes to pick it up at the pharmacy, they only see what
their copay is," she said.
"I
think the fact that, from the time that a prescriber writes the prescription
till the patient picks it up, nobody knows what the price tag is [is] hugely
problematic."
Luttig
said it wasn't until she was waiting for the insurance coverage from a new job
to kick in that she realized how much her prescription was listed for.
"I
asked the pharmacist, I said, 'Are you kidding me?'" she said. "And
they said, 'No, we're not kidding you.' I went, 'OK. I don't think I'll get
this refilled today.'"
"It's
an abuse of the system," said Devon Herrick, a health economist and former
hospital accountant who examined drug makers who reformulate over-the-counter
drugs into expensive combination drugs.
"Their
business model essentially involves gouging insurers and health plans, which
ultimately costs consumers," he wrote in an analysis.
Herrick's
analysis focused on two drugs made by Horizon Therapeutics, Duexis and Vimovo,
and pointed out ways that companies prevent patients from experiencing
sticker-shock, like offering coupons and working with specialty pharmacies.
Horizon
outlines its strategy in financial filings, in which the company acknowledges
concerns about pharmacists' substitutions of less expensive options.
"We
have faced challenges due to pharmacists increasingly switching a patient's
intended prescription from DUEXIS and VIMOVO to a generic or over-the-counter
brand of their active ingredients," the company wrote in a 2016 filing
with the Securities and Exchange Commission.
The
company's solution? A financial assistance program called HorizonCares, which
works with specific partner pharmacies to dispense the drugs and reduce
patients' out-of-pocket costs.
"Part
of our commercial strategy to increase adoption and access to our medicines in
the face of these incentives to use generic alternatives is to offer physicians
the opportunity to have patients fill prescriptions through independent
pharmacies participating in our HorizonCares patient access program, including
shipment of prescriptions to patients," the 2019 quarterly filing reads.
Herrick
sees it as a way to work around pharmacies that might suggest less expensive
options.
"If
a drug company has to go around the local pharmacy and sign up independent
pharmacies, it's a case of gaming the health care system," Herrick said.
"They try to circumvent the local pharmacy from saying 'that's over the
counter.'"
Programs
like HorizonCares are a way companies can bypass incentives to buy the cheapest
drug and sidestep the competitive process, Herrick said, adding: "It's a
strategy we probably shouldn't tolerate as a society."
Horizon
disputes the characterization. "The reality here is that our co-pay
support programs help address payer attempts to prevent patients from receiving
the medicine their doctor prescribed based on reasons other than clinical
benefit," the company said in an email to NBC News. Horizon also points
out that there is specific language in labeling approved by the Food and Drug
Administration that cautions patients not to substitute other medicines for
their prescribed medications.
NBC
News asked the FDA why it approved a label suggesting that patients not
substitute the two generics for the combo drug and was told to make a request
under the Freedom of Information Act. Two months later, NBC News received the
documents: The FDA acknowledges that "the individual components of Duexis
are readily available over-the-counter." An agency reviewer also notes
that "the potential exists for the formulation to be dosed comitantly in
place of Duexis." But in the end, the reviewer calls the label
"reasonable," citing in part the fact that Duexis uses 26.6 mg of the
stomach protectant famotidine. Over the counter, the commonly available
strengths are 20 mg and 40 mg.
"Is
that really innovation?" asks Sacks. "We're talking a couple of
milligrams of a dose that no doctor that I know thinks is a clinically
significant change. And I just bring it back to — at what cost?"
Sacks
points out that if a patient takes the recommended dose of three pills a day of
Duexis, she could get the same amount of stomach protectant by taking two
over-the-counter meds of 40 mg each.
Matt
Eyles, president and chief executive of the health insurance trade group
America's Health Insurance Plans, said: "Drug prices are out of control,
and millions of hard-working Americans feel the consequences every day. While
new drugs may offer breakthrough cures, repackaging old over-the-counter or
generic medications and charging unaffordable prices is not the kind of innovation
Americans need."
When
Horizon bought Vimovo from another drug maker, AstraZeneca, in 2013, the list
price for the drug was $114, according to GoodRx, a drug-pricing website.
Within weeks, according to a GoodRx analysis, the company raised the list price
to $799. Six years and nine price hikes later, the list price is $2,482.
"I
think we've long uncoupled the cost of R&D [research and development] being
the reason for these price hikes," Sacks said. "I don't think there's
any evidence to show that that's really the link in these prices."
In a
2014 SEC filing shortly after the acquisition, the company laid out its
strategy to raise prices.
"Our
strategy with respect to Vimovo included bringing its pricing in line with
Duexis and thereby significantly increasing the value realized per
prescription," reads the filing.
And the
practice appears to have been effective. Beginning in 2014, the drugs have had
the same periodic increases — a jump of more than 1,600 percent for both drugs
over the years.
"We
look at ... what the market will bear," Horizon President and Chief
Executive Timothy Walbert said in a 2015 interview with CNBC when asked how the
company was able to raise the price on acquired drugs like Vimovo when they are
not changing the drug.
Walbert
also said that the money from the price hikes helps them create access for
patients who can't afford the drug.
Horizon
told NBC News that these drugs, which provide pain relief and a stomach
protectant in a single pill, provide better protection for patients at risk of
gastrointestinal complications than taking the components separately.
In a
statement, Horizon said out-of-pocket costs for 98 percent of all commercially
insured patients are $10 or less. It also said the price it receives per
prescription has been decreasing and was less than $300 in 2018.
But it
adds up. According to SEC filings, from 2011 to 2018, the two drugs have
brought in more than $1.3 billion for the company.
Meanwhile,
for patients who have come to rely on the medications at low personal cost,
there can be a snag down the line.
Mary
Meyer, a medical assistant in the Chicago suburbs, said she was pleasantly surprised
to hear about the possibility of a low copay for her prescription of Duexis.
"I'm
like, that's awesome," Meyer said when she heard from a Horizon
representative that a specialty pharmacy would charge her a copay of only $10
for the drug, which her doctor had prescribed to treat her flare-ups of lower
back and hip pain.
But
when Meyer turned 65 in December 2018 and switched from a commercial plan to
Medicare, she learned that the government plan doesn't accept copayment coupons from
manufacturers. So even after picking up a supplemental Medicare Part D plan to
cover Duexis, she still finds herself unable to afford the $1,300 bill she said
she was quoted for a 90-pill prescription at Walmart.
"Unless
I win the lotto, I'm not paying it," she said.
For
now, she is rationing the pills that are left in her last bottle.
"I
have not picked up a prescription since I have been on Medicare," she
said. "I take it as infrequently as possible."
As
patients grapple with these issues, they can't really turn to the federal
government.
"It's
important to realize that the FDA, when it comes to drug pricing, really
doesn't have a role in our current system," Chana Sacks said. "When
the FDA is considering approval of a drug, cost is not part of the
consideration."
In
fact, the FDA states on its website that it has
"no legal authority to investigate or control the prices."
While
combination drugs go through an FDA approval process that evaluates a drug for
safety and efficacy, critics say the process does not prove that the new drug
is actually superior to its generic components.
Dr.
Enrique Seoane-Vazquez, a professor at Chapman University's School of Pharmacy,
co-authored a 2015 study documenting an increase in the
number of FDA approvals of combination drugs over time. He claims there is a
financial incentive to make the products available.
"The
main reason is the profits the pharmaceuticals [companies] have from this and
the low development costs," he said, adding that returns on investment can
be higher than those for medications needing more research and development to
produce.
Some
physicians say they are unconvinced that there is a therapeutic difference between
many single-pill combinations and their generic alternatives.
"Patients
are paying more for something that is not necessarily more beneficial or
safe," said Dr. Reshma Ramachandran, a family medicine doctor at the
Kaiser Permanente Los Angeles Medical Center and a former research faculty
member at the Johns Hopkins Bloomberg School of Public Health. At NBC News'
request, Ramachandran reviewed the FDA approval packages for several brand name
combination drugs and found no significant therapeutic difference from between
the combination drugs and their generic components.
What's
more, the FDA does not require the companies to prove a new drug is superior to
existing drugs on the market. "My message to the companies is if the drugs
are truly effective, prove it, show they are superior," said Ramachandran,
who also leads the Drug Affordability Action Team at Doctors for America, a
physician advocacy group that lobbies for access to affordable, quality health
care.
"Approving
drugs which fail to show true therapeutic benefit and giving them the
designation of being a 'new drug application' means that our healthcare system
is setting a low bar for which is truly novel," she wrote in an email to
NBC News. "This is incentivizing companies to not invest in true innovation
that will truly help our patients, but instead on low-hanging fruit ... that
they then heavily market to patients and providers."
She
said that is especially true when it comes to Zegerid. Upon reviewing the
approval package for the capsule version of the drug, Ramachandran said she
does not see any added benefits to prescribing it and cannot justify the price
to her patients.
Meanwhile,
the list price for 30 capsules of 40 mg/1100 mg brand name Zegerid has gone
from $101.10 in 2007 to $3,306.82, the GoodRx analysis shows.
When
asked about the drug's price and therapeutic difference from its component
medications, a representative for Bausch Health said it "is unable to
provide a comment at this time."
Dr.
Reddy's Laboratories, the manufacturer of Luttig's generic Zegerid, told NBC
News that it "cannot comment on the prices that consumers pay for drugs at
the pharmacy." The drug company also said medication costs are determined
by "many factors," including a person's prescription drug or medical
plan.
The
maker of brand name Zegerid declined to comment.
The
lack of answers has baffled consumers like Luttig.
"I
don't understand why, when you have Prilosec, which is a reasonable
over-the-counter drug, and baking soda, and you put those two together, why
does it, all of a sudden, become $14,000? I don't get it," she said.
(Since NBC News began reporting this story several months ago, Luttig's insurer
changed what it will cover, now reimbursing half the generic Zegerid it used to
for Luttig's prescription.)
Sacks
warns consumers to be vigilant about drug prices in America.
"In
that absolute moment where you're standing at the pharmacy counter and you can
afford that medication and it's not an issue, I can understand why it seems
like those doesn't affect us," she said.
But she
said: "These higher costs will be reflected in all of our premiums. The
higher costs that we're paying today are going to be reflected tomorrow."
Jaime
Longoria and Didi Martinez reported from New York.
Didi
Martinez is a researcher with the NBC News Investigative Unit.
Brenda
Breslauer is a producer with the NBC News Investigative Unit.
Jaime Longoria
Anne
Thompson is NBC News’ chief environmental affairs correspondent.
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