No Level Playing Field in Pharmaceutical Pricing
According to Jeff Trewhitt, spokesman for the most influential lobby in the pharmaceutical industry, seniors make up 12% of the American population, but consume 33% of all the drugs sold.
This may explain why the industry is resisting so strongly legislation that would extend to millions of seniors who don’t have benefits the discounts drug manufacturers already give to big HMOs, hospitals and governmental agencies like the Department of Veterans Affairs.
I began looking into this matter after John Yankowsky, a 65-year-old resident of Hawthorne, contacted me about a rise in the price of the insulin he has taken for his diabetes for 30 years.
Yankowsky is financially strapped. He says he gets monthly Social Security benefits of $845, and works 18 hours a week as a security guard, bringing his overall income to just $1,300 a month.
He calls around frequently to price insulin, and has found that Sav-on is selling it for the least in his area. But in June, the price went up, and he now has to pay $22.69 for a three-week supply.
Fifteen years ago, he remembers it was $11, and when he started buying it, he says it was only $4.
Yankowsky understands ordinary inflation accounts for most of the rise, but this year when the price went up another 10% in two spurts, he began to complain. He called the customer service number on the bottle of the insulin produced by the Eli Lilly company.
He spoke to a Chris Smith, who he says assured him that Lilly--the largest maker of insulin in the United States--”doesn’t make much” on it.
Later, Doyia Chadwick, a Lilly spokeswoman, told me the net wholesale price for a 100-milliliter quantity of its Humulin variety of insulin is presently $19.12. This compares with $17.34 last year and $1.32 in 1940. She said the average annual increase over the past 59 years for insulin was only 1%.
Lobby representative Trewhitt cites a study saying the average pharmaceutical markup from producers for all drugs is 25%.
Sav-on is not getting that markup at its present insulin price. Its margin is 18.7%, while stores selling insulin for $25 or $26 are making more than 30%.
I went with Yankowsky to the Sav-on in Torrance, which he patronizes. There, pharmacy manager Gene Toy observed that for many people without benefits, drug prices “are a concern, a major concern.”
But, he said, “sometimes we have sales.”
Judith Decker, a spokeswoman for Sav-on, confirmed later, “We experienced a wholesale price increase on insulin products produced by Eli Lilly in early June, which did result in a retail price increase to consumers.”
When I first called Lilly, spokeswoman Chadwick mentioned, as did the rep of a smaller insulin producer, Bristol-Myers Squibb, that many drug manufacturers, including their own companies, have patient assistance programs to send drugs to needy people at heavy discounts or even for free.
Doctors have to fill out a form, and there has to be verification of continuing need every few months.
I asked Chadwick what criteria qualified someone, but she refused to tell me. “This is confidential,” she said, although she did give me a toll-free number for doctors to call at Lilly: (800) 545-6962.
Yankowsky said he had checked into the program, but learned his income was too high to qualify.
Trewhitt read me the lobbyist’s summary of Lilly’s program. It said it covered most company products, except controlled substances, and that applicability would be decided on a case-by-case basis, but that no one would get it who had any other drug benefits whatsoever.
Assemblyman Martin Gallegos (D-Baldwin Park) has introduced legislation in Sacramento that would have the state publicize the existence of such programs, which he has found many people who might qualify know nothing about.
As to the overall drug pricing picture, a report released in July by IMS Health, a provider of statistics to the industry, showed only a 4.2% increase for combined brand and generic prescription drug prices in the United States in the last year.
But sales dollar volume rose by a whopping 18.4% in the same period. This was due to new product introductions and increased drug utilization, the report said.
*
In this vein, Chadwick noted that in 1996, Lilly introduced Humalog, a new form of insulin that is faster acting. The wholesale price of this is $27.57, 44% higher than the Humulin Yankowsky buys.
If his doctor should tell Yankowsky that Humalog would be preferable for him, it would entail a sharp further rise in his insulin expense.
Meanwhile, prospects do not appear immediately promising for the legislation by Rep. Tom Allen (D-Maine) and Sen. Ted Kennedy (D-Mass.) that would give Medicare recipients the price discounts granted by the industry to the large HMOs and the government.
Trewhitt explained, “We oppose this because our estimate is that if it passed, the portion of the U.S. pharmaceutical marketplace that is price controlled would increase from 10% to 43%. . . . Price controls do not take into account the . . . cost of research and development. . . .
“We are also convinced that the Allen bill would not help most of the people it is supposed to help,” he added. “If heart medicine was $100 a month, for example, his bill would bring it down to $76 a month. It is tragic but true that most people who cannot afford $100 a month also cannot afford $76.
“So, this bill does not bring prices down enough to help these people and does not address the need for wider drug coverage [by regular insurance and Medicare].”
Allen answers, “This is the most profitable industry in the country, charging the highest prices in the world to Americans who have no prescription drug coverage.
“There is no reason they should charge seniors more than they do the VA, the HMOs and the hospitals. . . . They cannot justify the inequity of their pricing.”
He also noted that many drugs are sold by U.S. manufacturers for far less in Canada and Mexico than in America.
As for Yankowsky, he just hopes the price of insulin will come down.
“I would bet 5 cents that if there were eight or nine producers on the market, there’d be no $22 or $23 insulin,” he says. “Like in gas wars, the price would come down.”
*
Ken Reich can be contacted with your accounts of true consumer adventures at (213) 237-7060 or by e-mail at ken.reich@latimes.com.
