What Lies Behind the High Cost of Diabetes

| Aug 1, 2000

To the dismay of many Americans with diabetes, the cost of diabetes medications has soared in recent years. This has occurred in large part because relatively new medications such as Avandia, Glucophage and Actos cost a lot more than older diabetes drugs-sometimes up to 10 times more.

According to William Fleming, director of clinical pharmacy programs for national managed health-care provider Humana, diabetes medications consistently rank in the top 10 drugs that contribute to this expensive trend.

"The newer drugs (Avandia, Actos) are eight to 10 times more costly per month of therapy than the older drugs," Fleming explains. "Glucophage, a drug that's been available since the early '90s, is about five to six times more costly. Glucophage has become the top utilized diabetes drug."

Fleming doesn't see a quick end to rising prices anytime soon.

Does Advertising Push Up Drug Prices?

Why do drugs cost so much in the first place? Paul Baum, manager of pharmacy services for a Wisconsin HMO called Group Health Cooperative, asserts that the main culprit for general drug expense is direct-to-consumer marketing.

"It's not that drug prices are increasing," Baum says, "but that so many new drugs are on the market."

Years ago, pharmaceutical companies restricted their advertising to doctors and pharmacists. Today, well-known celebrities routinely promote new drugs in consumer magazines and on television.

"Advertising increases the sales of advertised drugs," Baum concludes. "The government's taken a softer regulatory stance."

Baum believes a one- or two-page print ad or a television spot of 30 or 60 seconds can't possibly do an adequate job of informing patients of possible side effects.

Jeff Trewhit of the Pharmaceutical Research and Manufacturers Association says direct-to-consumer and other advertising can constitute up to one-third of the cost of bringing a new drug to market. However, he adds, research and development remains the dominant cost factors. He says that while some doctors don't like the consumer advertising, many do and believe it benefits their patients.

"Patients want to have some knowledge when they go in to discuss treatment with their doctors," Trewhit explains. "Patients ask better questions when they are knowledgeable about their options. It is advertising, but it is much more than that, too."

Research Costs Account for Over Two-Thirds of a Drug's Price

Trewhit wants consumers to understand that it costs about $500 million to develop just one new drug, and that it often takes 12 to 15 years before the medication makes it to market. Only one in five drugs that makes it to the human clinical study phase actually hit the pharmacy shelves. Sometimes a drug gets to consumers, only to be pulled, as in the recent case of Rezulin. Dead ends like these are costly to the pharmaceutical manufacturer, and that cost does get passed along to the consumer.

Trewhit disagrees with Baum that drug prices have increased due to consumer advertising. He identifies research and development as the main reason why the cost of drugs continue to get higher, since they make up the major portion of the cost "pie."

"Research costs have skyrocketed in the last few years," he says, citing inflation, the sophisticated equipment research now requires, expensive new biotechnical techniques involved in developing new drugs and the rising cost of researchers' salaries and compensation.

Budget cuts endured by the National Institutes of Health (NIH) in recent years also contribute to higher research and development costs. Trewhit says traditionally drug and pharmaceutical companies have partnered closely with the NIH. Innovative applied research done through this government-funded agency plants the seeds for future consumer drugs, which the manufacturers then nurture, develop and market.

"Budget cuts mean less research," Trewhit points out. "(NIH) budgets have been stagnant in recent years. There is a need for a healthy increase in NIH funding."

Until that happens, the drug companies will continue to pick up an increasing tab for basic research that of course gets passed along to consumers through higher prices.

What About Foreign Drugs?

Canada's and Mexico's lower drug costs have been well covered in the media of late. Tapes and photographs of senior citizens traveling en masse by bus across the border to buy prescription drugs at significantly lower prices figure prominently in medical news and have consumers grinding their teeth in anger over high prices in the United States.

Just why are prices lower in some foreign countries?

Trewhit says that in the case of Mexico, costs are lower because Mexicans with diabetes cannot afford the true cost of the drugs.

"The average Mexican salary is about $5,000 per year," he states. "They wouldn't be able to buy the medication."

To keep the market open and reach patients in need of the medication, drug companies sometimes lower prices in developing nations.

Canada's prices are often lower than those in the United States because the Canadian government has set what Trewhit terms "arbitrary price controls" on medications. He believes that this has had a repressive effect on drug research in Canada, negatively impacting its innovation in drug development.

What Managed Care Organizations Do to Keep Down Drug Costs

Before higher drug costs are charged to patients, they often wind their way through health maintenance or managed care organizations. In many ways, an HMO is a consumer's first line of defense in the war against rising drug costs.

National health care groups such as Humana and area organizations such as Wisconsin's Group Health Cooperative (GHC) start by training physicians to be wise drug prescribers. "It has kept our trend lower than the national average to treat diabetes," Humana's Fleming reveals.

Group Health's Baum alerts his doctors to new drug advertising campaigns before they hit the media, informing them of the fine print and whether or not a new drug's claims of efficacy measure up in real life. Like other health groups, GHC assigns a committee of health care providers to create a formulary, or listing of drugs normally stocked in GHC pharmacies. Baum explains that formularies narrow a physician's choices to the top, most effective drugs and alert them to the existence of cost-saving alternatives such as generic drugs. It helps a doctor resist pressure to prescribe a well-advertised but not necessarily better drug.

Some managed care groups, such as the University of Wisconsin (UW) Hospital and Clinics, require that physicians obtain permission to prescribe expensive new drugs. Mary Bruskewitz, clinical assistant professor at the UW's School of Nursing and insulin pump specialist at the UW's Health Diabetes Clinic, explains how it works.

"Glucophage is accepted and requires no prior authorization to prescribe," says Bruskewitz. "Actos and Avandia do. Generally, we have to justify why we are adding this additional drug."

Large health care organizations also purchase drugs from manufacturers in quantity, according to Trewhit. This means they can command big discounts since managed care groups currently account for 60 percent of pharmaceutical companies' business. And their purchasing power will go on growing as HMOs and similar organizations will soon account for 90 percent of drug sales.

Another way HMOs hold the line on drug costs is by prescribing generic drugs whenever possible. While the newest diabetes medications do not have generic equivalents on the market yet, diabetics taking Glucophage can look forward to a price break soon.

"Glucophage is scheduled to lose its patent in mid-2000," Fleming reveals. And that means a generic brand will soon follow.

Can People with Diabetes Do Anything to Curb the High Cost of Medications?

Bruskewitz believes that, despite their higher cost, the newest diabetes drugs are certainly a major improvement in diabetes care.

"Diabetes control has improved with all of these drugs," she says. "The earlier sulfonylureas were not that effective . . . These [newer] drugs have really brought so many people back to their health care providers, and control has improved. So the cost is justified in terms of long-term complications."

Bruskewitz urges patients to learn as much as they can about diabetes and how to manage it through health care providers and education programs. Many managed care facilities offer in-depth diabetes education and encourage patients to use the help of a diabetes care team to change behaviors that effect diabetes.

"Lifestyle changes in type 2 are so important," says Bruskewitz.

Trewhit suggests people with diabetes contact their government representatives and demand that something be done to improve Medicare's prescription drug policy. He believes that costs can be kept low through expanded drug coverage.

"Price controls don't provide coverage," says Trewhit.

Fleming suggests people with diabetes keep on top of current drug trends that might affect their diabetes. Request a generic drug whenever possible. Baum points out that even if HMOs require a small copay or no copay at all, ultimately, high drug costs will be passed along to the patient in the form of bigger copays and/or insurance premiums.

"Be a wise consumer," Fleming pleads.

Finally, Jane Kramer of Bristol-Myers Squibb (the makers of Glucophage) wants people with diabetes to realize that drug companies are not the enemy.

"Bristol-Myers Squibb is deeply committed to advancing the state of diabetes care and treatment through research and development," says Kramer. "Patients who are uninsured and unable to afford their drugs may obtain them at no charge from Bristol-Myers Squibb through their physician. Last year, we filled 735,000 prescriptions for patients who could not afford their medicines."

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Categories: Diabetes, Diabetes, General, Insulin, Insulin Pumps, Type 2 Issues


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