Interview: 3 reasons why medications are so expensive in the US | Kiah Williams

0:03This is TED Health, a podcast from the TED Audio Collective, and I'm your host Dr. Shoshana Ungerleider. If you've ever been shocked by the price of a prescription, you're not alone. In the U.S., the price of medications can feel like a mystery, one with sky-high stakes. Take insulin, for example. It costs just a few dollars to make, yet some patients are forced to ration it because of soaring prices. How did we get here? And more importantly, what can we do about it? Today's TED-Ed lesson unpacks the tangled web of drug pricing, exposing the hidden players who drive up costs, and the steps that we can take to push for change.

0:43Because when it comes to staying healthy, access shouldn't be a privilege. Then stick around after the talk for an interview with Dr. Hussein Lalani, an instructor of medicine at Harvard Medical School and an expert in prescription drug pricing and access to affordable medications. But before we dive in, a quick break to hear from our sponsors.

1:10And now for your TED-Ed lesson of the day. After helping develop the first insulin therapy in 1921, Canadian physician Frederick Banting transferred his patent rights to the University of Toronto for$1, stating that insulin belonged to the world, not to him. A century later, insulin medications remain essential in treating diabetes and have relatively low production costs, with a vial generally costing less than$6 to make. But how much it costs a patient to buy varies greatly by country. Those in the U.S. may pay thousands for insulin annually, on average 10 times more than those in many other countries, leading some patients to take less than prescribed.

1:50And this is part of a much larger trend. Let's take a look at the U.S. drug supply chain to understand why. First, there's research and development, which ranges widely in cost, depending on the drug. Expenses incurred by the many drugs that don't make it to market also need to be factored in here. and almost every approved drug has been subsidized by taxes. Before pharmaceutical companies actually release a drug, they set its price. Historically, they haven't been required to justify the pricing they land on. Pharmaceutical companies are also allowed terms of drug patent protection and exclusivity rights that prevent other manufacturers from launching identical drugs for a set period of time.

2:31Once patents expire, competition usually causes prices to drop, so some companies invest heavily to extend their patents. They may make tweaks, like small changes in dosage and modes of delivery, to obtain new patents and sue competitors into delaying the release of similar drugs. The companies responsible for Humira, the best-selling autoimmune drug, for example, have defended its patents and raised its price 27 times since 2003. Without insurance, it can cost over$96 ,000 a year. And as three pharmaceutical companies have dominated the insulin market with similar tactics, average insulin list prices have tripled over the last two decades.

3:11Once a drug is approved, there are two main distribution channels it can take. The retail route includes drugs you pick up at pharmacies. The other consists of drugs administered at hospitals and clinics. This includes many of the more expensive, research-intensive therapies for rare conditions. Each channel involves unique businesses. Most drugs, including insulin, follow the retail channel. It starts with a pharmaceutical company selling the drug to wholesalers, which buy in bulk and sell to pharmacies, which sell to patients. But the U.S. doesn't provide universal health care, so many Americans use health insurance.

3:46When an insured patient picks up their prescription, they often pay a portion, while the pharmacy bills their insurer the rest. Pharmacy benefit managers, or PBMs, which are companies unique to the U.S. market, negotiate on behalf of insurers to get discounts from manufacturers in exchange for insurance coverage. PBMs may pass some of the negotiated discount to insurers, but they may also take a considerable portion. Their role tends to limit patient choice, and they've sometimes covered more expensive, branded drugs instead of cheaper generics because it earns them a greater profit. Without insurance, patients may be expected to foot the bill entirely at non-negotiated rates.

4:26Money flows between the different businesses as fees, rebates, discounts, and co-pay assistance. If it feels hard to follow, that's because it is. And it's tough to know exactly how much money goes where because these transactions lack transparency. But for insulin in 2018, of all that was spent on the medication, manufacturers received about 46%. Wholesalers got about 8%. Pharmacies, 20%. Insurance companies, 10%. and PBMs, 14%. Interestingly, as insulin list prices increased between 2014 and 2018, the amount manufacturers retained decreased, and more than half went to intermediaries. Where the U.S.

5:07has businesses negotiate at various steps, other countries generally have government agencies evaluate a drug's benefit, make bulk purchases, and regulate pricing. The U.S. sees the most drug development and profit of any country, but about one in four Americans reported trouble affording prescriptions in 2019. Many experts have called for measures like increased regulation in drug pricing, patenting, and intermediary profits, along with more national health and research funding. This way, the U.S. could ideally lower prices and encourage more innovative, life-saving drug development. And by making medications affordable, pharmaceutical companies could theoretically maintain profits.

5:45In 2023, one of the largest insulin manufacturers announced it would substantially decrease the drug's list price, and two others followed suit. This should make insulin more affordable, but system-wide changes would have to be instated to make sure patients are getting the medications they need.

6:14This TED-Ed lesson was created by Kia Williams and narrated by Christina Greer. Today, we're learning more about prescription drug pricing with Dr. Hussein Lalani. Dr. Lalani is a primary care physician at Brigham and Women's Hospital and an instructor of medicine at Harvard Medical School. He previously served as a fellow at the Program on Regulation, Therapeutics, and Law, also known as PORTAL, where his research focused on improving access to affordable prescription drugs and uncovering the underlying drivers of high drug prices. In recognition of his work, he was recently named a 40 Under 40 in Minority Health by the National Minority Quality Forum.

6:52The views expressed today are his own and not those of any organization nor the federal government.

7:01Dr. Hussein Lalani, thank you so much for joining me today. Thanks for having me. Excited to join you. Can you please tell us how you got interested in this work? Absolutely. I got interested in prescription drugs back when I was a little kid. My grandmother used to be my primary caretaker. And I remember on Sundays, we would get together at home and have a little party of filling in her prescription medicines into her pillbox. And she had a sorter for morning meds and afternoon meds. And one of my chores was to help her fill in the different medications that she was taking for high blood pressure and to help control her lung disease.

7:47It was something that I, at the time, didn't really notice and fully comprehend what was happening, but I started to develop a familiarity for that process. And later on in life, as she began to get ill from her emphysema and was frequently hospitalized, I spent a lot of time at her bedside eating strawberry jello and doing homework and trying to understand what was happening with the folks in white coats and scrubs who were trying to help her. And since then, I've had a fascination with prescription drugs and the positive impacts they can have on people's lives, but also the struggles and challenges when people cannot afford them or when they experience side effects.

8:31And it's a theme that continued on through medical training when I saw the harms when people are unable to afford their medicines. Well, thank you for sharing that about your grandmother. And I want to talk about some of the real world consequences of high drug prices that you see now in your own practice? Yeah, let me tell you about it. So high drug prices have forced patients to make unimaginable and unfair choices between paying for the cost of their medication and the cost of housing, food, or even caring for their families. I'm reminded of this one story in particular of one of my patients.

9:06We can call her Jane. She struggled from a condition called severe endometriosis. And it's a condition where the tissue that normally grows in the uterus starts to grow outside the uterus, and it can produce significant pain in the pelvic area and heavy menstrual bleeding and even bleeding in between periods. And as you can imagine, it's impossible for anybody to work with these sort of symptoms. And so she would come into the clinic frequently needing help. And we found a brand name drug after many trials that is FDA approved to treat patients with severe endometriosis. It's called oralisa or elegolics.

9:50And the retail price of this drug was about$1 ,200 a month. And here I was thinking, man, we've tried almost every single medication. This potentially might help her. And she had insurance through her job. And when she went to the pharmacy, the cost was over$400. And she couldn't afford that. Many people can't. And so she didn't pick it up. And I just, I saw her suffer the painful attacks that she had over and over again, having to take time off work, ending up in the emergency room. Ultimately, she was let go from her job because she missed too many days. She lost her insurance. She lost her access to medicines.

10:32And she also lost her income until she could find another job. And it's really emblematic of a lot of patients who struggle with high drug costs. Prescription drugs do not work if the cost of the drug hurts more than the illness itself. Oh, I certainly have encountered that in my practice. And I want to talk a little bit about the main drivers of high prescription drug costs. Why are they so expensive? Why is this the case? It's a great question. There are numerous drivers of high drug costs, but I'll lay out a couple of them for you here. So one of them is our patents and market exclusivities.

11:09Patents are temporary government-granted rights that drug companies receive to sell prescription drugs without any direct competition. And it allows drug companies to set the initial price of the drug for a certain period of time. And what we've noticed in the research and the policy over the years is that there is gaming of the patent system to limit competition and to increase the time that companies have to set their own prices. and drug companies use a variety of different strategies to extend patents. And that's very problematic because it limits access to more affordable medications. Another key driver of high drug costs is the lack of a national drug negotiation program.

11:52Most other countries in the world that are high income, they negotiate drug prices for everyone in their country. And in the United States, we don't have that type of program. So for all 340 million Americans, we have a more fragmented form of negotiation in this country. And that limits our ability to use our collective buying power to get the best prices. It is a challenge. One other area that is a key driver of high drug costs are some inefficiencies and lack of transparency in the pharmaceutical supply chain. And so when you look at how drugs get from the drug company to the patient, there are a number of steps along the way.

12:31And there's lots of exchange of money and medications. The medications go from a drug company to the wholesaler, and from the wholesaler to the pharmacy. And on the payment side, the patient may pay a copay at the pharmacy. But there's also insurance companies and pharmacy benefit managers who are making payments on behalf of patients and also managing the pharmacy benefits and negotiating some prices. And so it gets very sticky and confusing. And there is a lot of opacity about how the money flows and moves there. Yeah. So I want to talk a little bit about a drug that's gotten a lot of press recently, a very important medicine, and that's insulin.

13:13What impact have recent changes in insulin pricing had on patients? Yeah, this is a great story of a drug where the price was incredibly high. Out-of-pocket cost was in the hundreds of dollars, sometimes around$300 for patients. And because of the Inflation Reduction Act, capping the price of insulin at$35 a month, and some recent changes that were announced by drug companies through some of their patient assistance programs, the out-of-pocket cost for insulin has come down significantly for some patients. So I've seen one research paper on this topic that's showing increasing fills of insulin at the pharmacy, which is good news.

13:55I'm still waiting to see the actual evidence, but what we're hoping to see and what we're anticipating to see based on prior work is that more patients getting their medications, getting their insulin, less patients struggling and having to visit the emergency room or being hospitalized because of really high blood sugar. And so I think overall, it's a good development. it. I do start to wonder sometimes though, whether the cost can still add up for some patients. I have heard in my clinical practice and from talking with others is that if you take multiple forms of insulin, it's$35 per type. Sometimes if you take a long acting insulin and a short acting insulin, you're probably looking at$70 per month.

14:35And depending on how the prescription is written and the amount of insulin that you need, it might be a little bit more than that. So those are just some things to keep in mind. So do you think that similar shifts in price reduction could happen for other life-saving medicines like insulin? It's interesting that you ask. We are starting to see movement in that direction. And one area where this is happening slowly but surely is for the cost of inhalers. And so several of the major pharmaceutical companies that create inhalers, the three big ones, AstraZeneca, Lohringheimer, Engelmann, and GSK, have implemented voluntary programs to cap out-of-pocket costs for asthma and COPD inhalers at$35 per month.

15:18Not everyone's eligible though. The trick is people with commercial insurance or those with no insurance are folks who will start to see these savings. That along with some new state laws that have recently passed, including here in Massachusetts, where the cost of a diabetes, asthma, and heart disease medication, at least one medication will be capped at$25 per month. I'm really happy for patients with diabetes who are taking insulin and for those who will be positively impacted by some of these new changes. But I know there's many more folks who struggle to afford their medicines. It just sucks that they aren't having to go through this and they didn't have a condition that was chosen for one of these policy or payment reforms.

16:06So this is complicated, right? And I don't expect to like break it all down now. And I certainly even working in medicine don't understand it all. So I guess this question may be tricky to answer. But are there any solutions that exist to address these issues? Yes, there are. My former colleagues at the Program on Regulation Therapeutics and Law or Portal, which is a large academic research center at Brigham and Women's Hospital and Harvard Medical School that leverages data and multidisciplinary thinking on how to address a lot of these issues has done a lot of great work in not only cataloging the issue and researching it intensely, but also proposing policy solutions.

16:48And what I would say as a general statement for all of these solutions, many of these are issues of market failures that require legislation to remedy. For example, in the patent space, there are opportunities and ways in which Congress can take action to prevent some of the gaming that's happening in the patent system. And that includes things like ensuring that we're incentivizing real innovation instead of incremental innovation. Also focusing on some of these deals that occur between brand name drug companies and generic drug companies, which are called pay for delay deals, where a company might pay another company to not bring its product to market so that it doesn't face any competition and it can maintain higher prices.

17:36And there are other instances as well where companies will create one product and then continue to patent that product and what's called patent extension strategies or patent tickets. Well, they will create a wall of patents around their products so nobody can come in and compete with them. And oftentimes that extends far beyond the initial length of that patent, which is around 20 years. Similarly, in the pharmaceutical supply chain, there's also been a lot of interest in increasing transparency around how the money flows between all the different players. I think those are really good starts to addressing some of these drivers, but we do have to get to the root causes to be able to start and lower drug prices.

18:20So I want to bring it back to patients. What options do people have if they aren't able to afford their medications? My colleagues and I at Portal, we published a paper recently in the Journal of American Medical Association, or JAMA, on this exact topic, because we know it is so important. I see the challenges in clinic. I know many of my clinician colleagues across the country also see patients struggling to afford their medicines. The paper is entitled Strategies to Help Patients Navigate High Prescription Drug Costs. In it, we talk about seven different strategies that clinicians can use. So this is doctors, pharmacists, nurse practitioners, physician assistants that they can use and that patients can use when phased with high drug costs.

19:03And six of these seven strategies are ones that are directly patient facing and families facing. And so the first question is, what is your health insurance? Once we have a sense of what your insurance is, that kind of determines what options you have available to you. The second question is, which drug is too expensive? Is it a brand name drug? Is it a generic drug? Because there is a difference there in terms of the strategies and tools that are available to help. Based on this, we can identify one of the strategies that works best. And so I'll give you a quick example. If you have private health insurance from your job, and you're struggling to afford, let's say a brand name medication like Eliquis or Apixaban, a blood thinner used to treat blood clots or atrial fibrillation, the first step for you would be to try something called a copayment card, which is a discount card that drug companies offer to patients with private health insurance and it could lower your out-of-pocket costs.

20:01You can apply for that online, which just takes about two minutes. If you were uninsured or had a form of public health insurance, then you're not eligible for the copayment card. So instead we'd have to look for another option. One of the other strategies is something like a public assistance program, like the extra help program through Medicare, or if you're eligible for Medicaid, signing up for Medicaid. So if you're not, you go to the next step, which is a patient assistance program. And there are lots of requirements for who's eligible for that and some paperwork involved. And so it can be time consuming.

20:36Hopefully that gives you a little bit of a sense for how to approach it for brand name drugs. And there's a different approach for people with generic drugs. And that sort of fills in the other strategies. So for example, if you're struggling to afford a generic drug, And the nice thing about this is it doesn't really matter what your insurance is for generic drugs. There are really two main options, and that is pharmacy coupons. So these are discounts that are offered on drugs purchased at local pharmacies without needing to use your health insurance. Things like GoodRx or SingleCare. And you can look those up online and find the specific pharmacy with the right dose of your medication and your zip code and find a lower cost.

21:18And then the other option is a direct-to-consumer pharmacy. And these are online or in-person pharmacies that sell drugs directly to patients like Costco or Walmart or the Mark Cuban Cost Plus drug company or Amazon. And they also sell drugs directly without health insurance. And so you can try to see if the drug that you need is sold there and purchase it that way. You mentioned direct-to-consumer pharmacies. So for example, like Mark Cuban's Cost Plus drug company. So what role do they play in improving drug affordability? You touched on this a little bit, but how effective are they in helping patients?

21:56Yeah, Mark Cuban and the Cost Plus drug company have taken the US by storm. And you know, it's not actually the first type of direct-to-consumer pharmacy. We've had direct-to-consumer pharmacies for almost 20 years now. And I think collectively, they play a really important role for patients who are struggling to afford a generic medication, and oftentimes that is patients who are uninsured or patients who are underinsured and folks who might have a high deductible health plan. In some of our research on this topic, we found that patients can save on average$10 a month for their prescription. It really depends on their insurance to begin with and the specific drug that they're having trouble accessing.

22:40In one of our research studies recently, we found that patients could have spent less on about one in eight prescription fills for a sample of about 125 drugs. And in some of our other research, we found that there's actually differences between the different direct-to-consumer pharmacies in terms of which generic drugs they cover and who has the lowest cost. So this kind of leads to the effect of shopping around for the lowest price. And that can be time-consuming and and also challenging for patients and also for their clinicians who are having to prescribe or send medications to other pharmacies.

23:16But I think once you find an option that works for you, that's within your budget and price range, they can be a good stable option. What they don't do typically well, though, is provide coverage for brand name drugs. And I think that's a really important distinction. 90 % or so of prescriptions are generic drugs, but they only make up about 20 % of the overall spending that we have in this country on drugs. Brand name drugs are about 10 % of all prescriptions, but 80 % of the total spending. And so most often, when patients have difficulty affording their medications, we're talking about brand name drugs.

23:54Direct to consumer pharmacies are less useful for brand name drugs than they are for generic drugs. So I want to zoom out a little bit and talk about how other countries can balance drug innovation while keeping costs lower for patients. Why is this issue unique to the U.S.? Or is it not? Are there countries facing this as well? Yeah, so as you note, in the U.S., prices for brand name drugs are about four times higher than they are in other countries based on a recent study by the RAND Corporation. And I think this is a false choice here between innovation and drug costs for patients. We can have affordable medicines that save lives and improve the quality of people's lives.

24:38And we don't have to forsake innovation. We just have to have innovation that truly incentivizes innovation. And the reason I say that is because based on a study conducted by some of my colleagues led by Alex Eagleman and Benjamin Rome and Aaron Kesselheim at Portal, they found that of the top 50 drugs that were sold by Medicare in 2020, that more than half the drugs were only marginally better than other drugs that are used to treat a condition. And to me, that says that, you know, we're paying a lot for medicines that are not home runs, but they're like singles. And instead, we should be incentivizing drugs that are truly transformative and then paying for their value.

25:17And I don't think we necessarily have to choose between one or the other. We can do both. We can have both. So if you could weave a magic wand and fix one aspect of the US prescription drug system overnight, what would it be and why? The patent system, hands down. Let's realign the incentives in the patent system to reward transformative innovation in the development of prescription drugs. Let's prevent gaming that's happening there. And let's unlock competition to ensure that our market-based system actually works for patients. And this is a bipartisan issue. There's been widespread interest.

25:58And I think I'm hopeful that it's something that we can achieve. And I'll just give you a quick example. The best-selling drug Humira or adalimumab that's used to treat a number of autoimmune conditions such as rheumatoid arthritis, its initial patent was set to expire in 2016 on the core ingredient of the drug. And the company applied for over 240 patents with about 130 of them or so being granted. 90 % of these patents were filed after Humira was already on the market. And many of the patents were filed just before the expiration of one of the key patents. So between 2016 and 2023, there was an additional$114 billion of revenue and sales that happened when there was only one brand name drug option on the market and no competitors, which we call biosimilars.

26:57And so to me, this is a great example of a failure in the patent system. Addressing that would go a long way in helping us to have both innovative medicines and also affordable medicines for patients. Seems like it. Yeah. So if listeners care about this issue and they want to do something about it in their own lives, what do you recommend? Connect with the excellent team at Patients for Affordable Drugs. It is a national nonprofit organization that elevates the voices of patients in pursuit of lower drug prices for all. You can visit their website at patientsforaffordabledrugs.org and check out their patient stories map where you'll find hundreds of other individuals who are struggling to afford their medications that have come together to build this community.

27:49And you can share your story. if you feel comfortable. Well, Dr. Hussein Lalani, thank you so much for this fascinating conversation. I certainly learned a lot. I think maybe I'm more frustrated now than I was when we started, but this is a good place to start educating everybody about this important issue. So I really appreciate your time. Thanks so much. That was Dr. Hussein Lalani. And that's it for today's episode. Thank you so much for listening. TED Health is a part of the TED Audio Collective, and I'd love to hear your thoughts about this episode. Send me a message on Instagram at ShoshanaMD.

28:29This episode was produced by me, Shoshana Ungerleiter, and Jess Shane. Edited by Alejandra Salazar and fact-checked by Vanessa Garcia-Woodworth. Special thanks to Maria Lages, Farrah Degrunge, Daniela Balarezo, Constanza Gallardo, Tansika Sangmarniwang, and Roxanne Highlash. Thank you.