INTELLIGENCE IN ACTION

Disrupting the Drug Cost Trajectory: Dr. Michelle Mello on Making Medications Affordable

February 19, 2019

We’re in a conundrum, says Dr. Michelle Mello.

Prescription drug prices continue to rise, with no end in sight. Americans have complained to their representatives about the rising prices and policymakers are listening. A new Politico-Harvard poll of U.S. adults found that 80 percent of those surveyed said that lowering prescription drug prices should be an “extremely important” priority for the new Congress.

“The scale of the problem, and the fact that the solutions have to be country-wide, makes the problem both imperative and national in scope,” says Dr. Mello, a Professor of Law and a Professor of Health Research and Policy at Stanford University. “This is a problem that, I would venture to say, almost every American has grappled with in one form or another. We know in a given year about one in five Americans report that the problem for them was so serious that they or a family member, actually skipped doses, or reduced their dosages, or didn't fill a prescription … because of concerns about cost. But even those of us who are taking medicines as prescribed are very often feeling the financial pinch of trying to afford them.”

Dr. Mello believes addressing this intractable problem requires a multi-faceted approach. Still, some approaches might be more viable than others. Restricting the vast range of drugs on formularies could help rein in drug costs across the industry. But that’s not American practice. “We don’t say, as the United Kingdom has, that our government payers will not pay for a drug unless it returns a certain amount of value per pound or dollar. That’s pretty antithetical to our system,” explains Dr. Mello. “Because health plans feel the need to assure their subscribers that they're going to get access to good care, there's a lot of pressure for them to cover most or all drugs. And, indeed, Medicare, as the largest buyer of prescription drugs, is very constrained in its ability to exclude drugs. So we have this system in which plans feel the need to cover most drugs at some level for people, and where they have a limited number of levers that they can pull to restrain price. And that gets a pretty predictable result.”

More flexible formulary design, as well as the selective exclusion of some drugs, is just one of several potential solutions that Dr. Mello and other experts put forth in their groundbreaking report, Making Medications Affordable: A National Imperative. The report details how the idiosyncrasies of the American healthcare system, as well as the complex interplay of manufacturers, payers (also known as health plans), pharmacy benefit managers (PBMs) and well-intentioned but no longer effective government regulation, have exacerbated the medication cost problem. And then there’s the frustrating lack of transparency throughout the supply chain and its pricing, too.

Dr. Mello has authored more than 190 articles and chapters on topics from medical errors and patient safety, to clinical trials and big data, to the role of law in public health. She’s a frequent contributor to the New England Journal of Medicine, is a member of the National Academy of Medicine, and has had her research supported by the National Institutes of Health, the Robert Wood Johnson Foundation and the U.S. Agency for International Development.i But in addition to having the brains to grapple with one of the most complex and byzantine systems in the world—American healthcare—and tease out ethical or systemic issues as well as potential solutions, she’s got heart, too. All social science researchers, as she refers to herself, are just trying to solve problems to make people’s lives better—and make our existence here on earth more sustainable. 

“I'm a lawyer by training, so I’ve a certain amount of hunger in me to get on the ground and really understand the problems that people are facing and try to solve them,” says Dr. Mello. “But with research, I'm trying to solve such problems at a fairly high level, rather than one person at a time. That's really kind of what animates me: trying to respond to things that are affecting people's lives negatively and identify interventions that will, even if modestly, make a dent.”

Many of us are looking for the one culprit behind the rising costs of medication. Some are quick to blame the biopharmaceutical industry or PBMs or health insurance plans, but as Dr. Mello and her colleagues write in their report, each of these entities, while not perfect, contribute value to our healthcare system. There isn’t any one place to point or enough transparency to show where policy or regulation could be effective.

“Once a drug is approved for sale, in terms of what happens with its distribution, we have a very light regulatory touch. The American system is idiosyncratic,” says Dr. Mello. “And then there is the fact that we have so many different payers means that there's not one price for a drug; rather there are many prices. You know, if everybody's making their own deal for this drug, there is very little transparency in the supply chain about who's getting what deal and who's making what money off the drug as it gets passed along through the various middlemen. And the government, unlike most industrialized countries, does very little to set and regulate prices.”

Then there’s the complex interconnectedness of our system, which has not only domestic but global scope—and global implications. (Think of this analogy: You pull at one pesky loose thread, but end up unravelling a highly-constructed garment.) As described in the report, if biopharmaceutical companies are subject to more drug pricing controls, they may be, one, de-incentivized from spending the vast research and development sums needed to bring forth potentially lifesaving or life enhancing drugs, and two, likely curb such drugs’ distribution—at reduced cost--to the poorer countries of the world. And it’s not just low income countries who benefit from our lightly regulated pharmaceutical industry. Wealthier countries do, too, as they’ve come to depend on our biopharmaceutical industry to develop, test and manufacture safe drugs, which they can bring to their markets at a lower cost.  

Dr. Mello notes that our for-profit healthcare model has been very successful in bringing a lot of innovation to the healthcare market, but the tradeoff is that not every American gets access to that innovation. Still, she says, there’s no other country stepping in to finance this innovation, which benefits much of the world.

“So, the sort of moral lesson for the United States is that what we do has consequences not just for our own people, but for others around the world. While we may feel okay with the idea that the Germans may end up paying more, we may not be okay with the idea that folks below the equator end up paying more for the drugs that they receive, because the resources just aren’t there,” says Dr. Mello.   

Clearly, given the interdependencies within American healthcare, there are no quick fixes for a system as complicated as ours. But Making Medications Affordable: A National Imperative makes a good case for some interventions. And naturally, some of these recommendations might be hard for industry players, patients or the government to accept. Everyone might have to give a little (or a lot) to properly tackle this extraordinarily difficult problem.

Dr. Mello endorses all of the recommendations in the report, she said, including assuring greater transparency of financial flows and profit margins amongst industry players, applying governmental purchasing power, accelerating the market entry of generics and promoting the adoption of industry codes of conduct, among other interventions. She shared some specifics that were top of mind:

PBMs and manufacturers, which provide incredibly valuable services and goods, need to have enough revenue to continue to innovate, to attract top talent, to run their businesses and grow, she said, but perhaps also to think of themselves as more than ordinary for-profit companies. They’re delivering an essential product that often—literally--makes the difference between life and death. So what’s a fair profit margin that ensures innovation but also access?

And there is a need to give negotiating power to the Centers for Medicare and Medicaid Services (CMS), so that the government can buy drugs at a more affordable price.

“It’s not always about having more law, though,” says Dr. Mello, of the power of regulation. “We can revise existing laws to make them more intelligent, smart and nimble, where we see things have worked a little bit too well, and people have figured out how to take advantage of them, such as the Orphan Drug Act, or the 340B program. Those are obvious targets—and something that even a very ‘red’ policy maker could find appealing.”

Technology also has a role to play, especially what CMS call Real-Time Prescription Benefit Tools, or RTBTs.

“Anything that brings that information, whether directly at the point of care like some of these EHRs do, or through interventions by a [PBM] that guides prescribers and patients toward particular decisions, I think is helpful,” says Dr. Mello. “The challenge is getting physicians … to understand they have the ability to grapple with the complexity of the system. Again, that’s where technology is really crucial, because there is not one price for a drug that a physician can keep in mind; they have to know what the price of the drug is for that particular patient. That's just impossible without real-time information at the point of prescribing.”

Dr. Mello says she’s fortunate not to have any real stories of woe herself; she has yet to experience a health crisis or been unable to afford a prescription.

“But I am a middle-aged person staring down the barrel of the life course toward the grave,” she says, “and, you know, really thinking about the trajectory that people have. We can plan, we can tuck away money, we can well insure, we can do whatever we can to protect ourselves. However, if you have any exposure to the travails of other people, and in my work, I do hear from people who are suffering or struggling, you realize that however much we may shore up protection for ourselves, that there are those in our midst, all around us, who will not be able to do that. At the end of the day, most of us are probably not the sort of people who want to see the suffering that ensues around us. So we have to intervene now, and quickly.”


 i Dr. Mello consults for CVS/Caremark on its value-based formulary program. CVS Health is a partial owner of Surescripts.

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