This relationship has an effect on the payment rates that CMS sets. Higher cost pharmaceutical therapies are systematically reimbursed below acquisition cost (i.e., the payment system is biased against full reimbursement for higher cost therapies). Reimbursement compared to acquisition cost for the top IO pharmaceuticals by total expenditures indicates that 9 of the 10 are significantly under reimbursed."
Clinical Trials Report:
Congress established Medicare beneficiaries numbering 40 million with a prescription drug coverage, which has been called a "vast expansion of federal support for and control of expenditures on medicines. Even in its early stages, this program is focusing public attention on prescription drug prices, marketing, utilization, and effectiveness." (Weschler, 2004) Further stated in the Clinical Trials report is that, " the Medicare drug benefit is expected to boost prescription drug use by seniors and provide incentives to develop therapies needed by elderly patients such as arthritis, cardiovascular conditions, and Alzheimer's disease. But it also may squeeze prices and profit margins of pharmaceutical companies that sponsor research. A new payment system for oncology treatments and other therapies administered by physicians may alter incentives for R&D in these areas, while the Medicare outpatient pharmacy benefit will establish model formularies, post negotiated prices, promote treatment protocols, and track adverse events and outcomes more thoroughly -- all likely to shape prescribing practices and new product utilization. These developments will require sponsors to incorporate outcomes measures into studies earlier in the development process, and may cause earlier abandonment of unpromising research."
The fall of 2004 was replete with the pharmaceutical industry experiencing one crisis after another as well as for the federal regulators which together managed to raise questions of serious import and "pre and post approval safety testing of new products." (Weschler, 2004) According to the report congress blamed FDA "oversight, accusing agency officials of trying to squelch staff warnings on drug safety issues and of ignoring signs of trouble at Chiron. One response was to call for full disclosure of all clinical trial results by sponsors and FDA -- including those studies that rail to demonstrate efficacy. Investigations were launched into the possibility of manufacturer ethics in behavior and the following issues were considered by government officials and industry leaders":
The nation's adverse event reporting and post marketing surveillance systems are limited and slow to identify looming safety problems *
Sponsors may need to provide much more safety data to bring to market treatments that patients may use for years
DTC advertising for chronic-use drugs may encourage overmedication and unsafe practices
The U.S. vaccine supply system is antiquated and unreliable and needs a major overhaul to prevent shortages and inequitable access
Perhaps regulators and policymakers should rethink efforts over the past decade to accelerate the drug approval process and streamline research requirements. (Weschler, 2004)
Summary and Conclusion:
It is clear that the costs of pharmaceuticals in the United States is too high evidenced in the studies included in this work concerning participation in prescription medication arbitrate on the part of government municipalities, officials as well as individuals throughout the nation in order to better afford the medications that are needed. It is clear that the regulation of drug costs would greatly benefit the American people in their being able to afford necessary and crucial medications for their healthcare. Congress does unfortunately seem to be under the spell of the pharmaceutical companies and this fact demands that something is done to unwind the tie, which binds the U.S. Congress and the pharmaceutical companies. While the Medicare Modernization Act will benefit those who have spent over $3,600 each year on medications, this will effectively bar many from receiving medication after reaching the $2,200 sub-cap amount from ever purchasing medication enough to reach the next level when the requirement is paying 100% in the interim of the two levels. Therefore, it does not appear that this country can afford the new Medicare Modernization Act. There is a great need for restructuring of the Food and Drug Administration whose safety standards have slipped to the almost non-existent point as well as Medicare needing turned around however, it appears that regulation of pharmaceutical costs would be the biggest accomplishment in turning the problems of the pharma industry around.
Krupin, Stephen (2001) Study: Drug Costs Outpace Inflation. The Palm Beach Post; 6/13/2001; Washington Bureau
Congress approves Medicare drug benefit. (the Year in Review November '03) Chain Drug Review; 4/26/2004 Washington, 2004 Racher Press, Inc.
Pssst...Wanna Buy Some Augmentin" Forbes Magazine (2004) May 23, 2004
The Pharmaceutical Industry: From Bad to Awful (2004) the Economist November 27, 2004.
Braid, M. et al. (2004) Pharmaceutical "Charge Compression" under the Medicare Outpatient Prospective Payment System" Journal of Healthcare Finance Volume: 30 Number: 3
ISSN: 10786767 4/2/4002.
Wechsler, Jill (2004) Reimbursement and Regulation Shape Pharmaceutical Research: The Medicare Drug Benefit and FDA's Critical Path Initiative will Push and Pull New Drug Development - View from Washington Applied Clinical Trials 12/1/2004