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Pharmaceutical advances, including specialty drugs, have generated hope and positive outcomes for many patients, but also raise concerns due to the rising costs associated with them. This topic was the theme for Vital Signs Health Care Forum Series events in Pittsburgh and in Harrisburg.

Co-sponsored by the Post-Gazette and Highmark Inc., the Health Care Forum Series brought together experts with diverse viewpoints to explore topics and answer questions in a free, public venue. Medical and health care experts participating in the series, and here at Highmark Health, have extended these conversations further by sharing insights on the Highmark Health blog.

Walid GelladDr. Walid Gellad is a practicing physician working with the Veterans Administration (VA), a professor at the University of Pittsburgh School of Medicine, and co-director of the university’s Center for Pharmaceutical Policy & Prescribing (CP3). Issues around developing, pricing, accessing and assessing pharmaceutical drugs can be divisive, but Dr. Gellad’s diverse roles enable him to understand and help bridge the gaps between multiple perspectives. Enjoy his interview below.

Don Bertschman (DB): What background or motivations led you to your current work with the Center for Pharmaceutical Policy & Prescribing?

Walid Gellad (WG): I’m an internist, and much of what internists do is prescribe medications. I’ve been frustrated when prescription drug access or cost becomes a problem, and I’ve had a firsthand account of how much waste and inefficiency there is around prescribing, but also how much potential there is for improvement. My work with the center, which brings together doctors, nurses, pharmacists, researchers and other professions, is another way of trying to make the system work better for people.

DB: At the Pittsburgh forum event, I often felt like you were the “reasonable centrist,” considering multiple perspectives and weighing in as a balance. Is that a role you adopt consciously, and a natural extension of the center’s multidisciplinary approach?

WG: I like the term “reasonable centrist.” What I have decided in health care is that the good guys and bad guys are the same guys. The pharmaceutical industry, doctors, hospitals and insurers all do good things that improve health, but they also all do bad things in some cases that waste money or potentially hurt people. If you vilify one part and don’t recognize the good that each group does, inevitably people get defensive. I think we have to accept that everyone has both good and bad, and the goal should be to get people to do more of the good and less of the bad. I don’t know if that’s more successful than being a loud voice for one side or another, but that’s the tack I try to take.

DB: Thinking about prescription drug costs, does everyone just need to improve the “bad things” in their corner of the U.S. health care system, or are broader systemic changes needed?

WG: If something drastic were done to reduce drug prices in the U.S., it would impact new drug development — but it’s an open question of how much. Maybe it would only reduce new drug development a little and the money saved could go back into the National Institutes of Health (NIH), which stimulates development. Maybe what is saved by not paying high prices for prescription drugs goes into giving people higher salaries or better benefits, and that could improve health.

If I had a way to magically decrease prices, I would. I believe we can continue developing important cures even if the prices that support drug development are somewhat lower. But then we come to the reality of how to do that. We may have to change laws or do things that we don’t particularly like to do in this country, like price controls.

In the past, we’ve been very successful, specifically with drug prices, with market forces and regulation aligning. That’s what created the prescription benefit management (PBM) industry, which helped get generics to where they are today. We had incentives to have cheaper drugs, and at the same time we had states passing laws that required generic substitution when possible.

But most increases in prices now are due to specialty drugs and biologics, and we don’t have a good mechanism for getting cheap versions of those. It’s hard to see what the market solution is that’s similar to what happened in the past.

One thing consumers and the public will have to decide is how willing they are to accept limitations on the drugs they can get. We can do a lot with competition and decrease prices by pitting one drug against another, as Express Scripts did with hepatitis C, when they chose to not cover Harvoni, and have everyone be on Viekira. That’s a limitation on choice, but it will save money. 

DB: You mentioned at the forum that before you prescribe certain drugs for your VA patients, you have to “make the case” for those medications. In our interview with Sarah Marchè, vice president of pharmacy markets at Highmark, we talked about requiring preauthorization, which is the same principle. That’s one way that there’s already a gatekeeper, and cost check, in the existing system, but is that enough?

WG: Insurers clearly have an incentive to reduce cost without harming quality. With the VA, it works well that — for certain drugs that are expensive or dangerous — prescribers have to justify that drug to someone else before prescribing it. I think that’s made me a better prescriber.

Now, the advantages of the VA system compared to a private medical practice working with an insurer is that with the VA, it’s all one computer system, you often know the people adjudicating your request, there’s transparency, and you get immediate feedback. They’ve made the process very easy, and it just gets integrated into your practice.

DB: Is that an argument in general for the integrated health systems that are becoming more common?

WG: Sure. When payers and providers are more aligned, when people know each other and share a system, it’s easier to work toward value.

DB: You’re active on Twitter, and tweeted that how we pay for drugs and health care could be called “deference pricing.” Talk a little about what you meant by that.

WG: That was a tongue-in-cheek response to a conversation about “reference pricing,” which means the payer takes steps to figure out and set what “should” be paid. I was saying what we have for drugs is more like deference pricing.

We defer to price hikes on existing drugs where companies charge whatever they want because they’ve obtained a monopoly. We defer on new drugs, because we don’t have any system other than negotiating, and we don’t negotiate as much as we could. And then you also have Medicare Part D, where the government reinsures private plans, so there’s less incentive to control costs. A lot of current drug pricing is deferring to what drug companies charge.

DB: So, we all need to be less deferential — or is this an argument for more stringent regulation?

WG: It’s probably going to be a mix. We can do more negotiating within the existing market structure if we limit choices that people have.

As an example: A PBM chose to cover two different, expensive new PCSK9 drugs for cholesterol, saying they got great deals. OK, but I guarantee that they would’ve received a better price if they said they were only going to cover one. So what market forces or reasons drove that approach? This is one of the transparency issues in the system. It’s a little opaque how PBMs make money in terms of rebates that are negotiated and what rebates get passed on.

One of the market forces in play is that people are getting higher deductibles. As a consumer, I hate that. Everyone hates that. But that may be a way that consumers feel more of the pinch and then demand more of a say in how much we should be willing to pay.

DB: It’s hard not to keep coming back to the total cost to the system, and how that cost is distributed. You said during the panel that “in 10 years, everybody will be on a specialty drug.” The positive in that statement is that there’s that much promise in being able to treat people. But what are the solutions to distribute all that extra cost in our system in a way that is sustainable?

WG: Right now, it is paid for with higher deductibles; higher health insurance premiums; lower salaries; and probably higher taxes. That’s how we all pay for these drugs, even if we’re not paying directly or using them personally. So, if people want more and more expensive drugs, we can continue to raise premiums, and say, basically, “as a member of society, I accept paying more, so if I get cancer, my $250,000-a-year drug will be covered.” Maybe we can agree on that. But I don’t think people are thinking that way now, or realizing how much of health care costs eventually diffuse to other things like lower salary and higher taxes, or states having less money for education because they must spend more on employee health care and on Medicaid programs.

So we can keep doing that, and maybe biosimilars and other developments will eventually bring down prices, or we can look at more immediate changes, which is what the political candidates are talking about, like letting Medicare negotiate drug prices.

Some people have also suggested leveraging a kind of “take-back” clause. The government allows private universities to patent technologies that are developed using NIH money. There’s a provision in the law that if licensing decreases access to patented therapies for consumers, the government can take back the intellectual property. It’s never been used, but some people have floated the idea that the government should say, “these are government-funded inventions and now they’re costing us too much money and access is decreasing, so we’re taking action.”

DB: You made the point during the panel discussion that government research often lays the foundation for developing new drugs, so that’s another way that everyone’s taxes subsidize the industry.

WG: The pharmaceutical industry spends less on true research and development than they want you to believe. That’s not to say they don’t do important research, and a lot of it, but they tend to minimize the role that government-funded research plays in their drug development. They get incredible benefit from the fundamental research funded by the government, the government grants patents, and then on top of that they make incredible amounts of money directly paid for or subsidized by government. The argument that the pharmaceutical industry has to make all that money or they’ll stop creating new cures — that’s being a little disingenuous, and it’s a reason that consumers and advocates on this pricing issue get angry.

We are currently seeing that anger channeled by politicians. This discontent is also an opportunity for consumers to make their voices heard about the struggles they face with prescription drug costs, and all health care costs.