1. Continuing Trends and Impact of Specialty Pharmaceuticals The Michigan Association of Health Plans John Rother, President and CEO National Coalition on Health Care

2. Rx Spending Growth In 2015, Rx spending total $457 billion, 16.7% of total health expenditure. During the 1990s, Rx drugs accounted for only 7% of NHE. Rx spending is growing faster than any other medical category. Source: CMS, National Health Expenditures by type of service and source of funds, CY 1960-2014

3. Recent acceleration Increases in list prices of branded medicines (5-7% net) Lower impact from patent expirations New brands

4. Spending Growth Drivers (USD Billions)

5. Source: Health Affairs Per Capita Drug Spending

6. What’s behind higher US drug spending? Analysis shows that relative increase in US prices compared to other countries was driven largely by biologics (Health Affairs) Over a ten year time period, the US saw a 181% increase in the average price of prescribed biologics In UK, these prices rose “only” 61% US physicians were also quickest to prescribe biologics when they arrived on the market

7. Specialty drugs are a major driving force.

9. Blockbuster Specialty Drugs In 2014, Sovaldi was launched for $1000 a pill or $80,000 for a course of treatment  represents new norm. Median price for cancer drugs released in past 5 y exceeds $10,000, up from $4500 a decade earlier (AHIP). 8 of the 10 top-selling drugs in 2016 will probably be biologics, some of which are 22x as expensive as traditional drugs (AHIP).

10. Blockbuster Specialty Drugs Specialty drugs account for 1% of prescriptions and 32% of Rx spending (AHIP). Specialty Rx spending increased 11% per year from 2009 to 2015 (HHS).

11. Price Hikes for Existing Drugs Turing CEO Martin Shkreli made headlines for marking up Daraprim from $13.50 to $750 per pill (↑5,556%) overnight, but he is NOT an outlier. Pharma companies increased drug prices by >10% in 2015. This is the 3 rd year in a row with growth >10% (Wash Post). Brand name drugs – 14.8% growth Specialty drugs – 9.2% growth Generic drugs – 2.93% growth

12. Price Hikes For More Common Rxs Average prices of some heavily used drugs have increased astronomically.

13. Lack of transparency in pricing Pharmaceutical industry has said that list prices not accurate reflection of what consumers pay for drugs, because they do not take discounts into account. Bloomberg analysis of 39 medicines with global sales of more than $1 billion a year showed that 30 of them logged price increases of more than double the rate of inflation from 2009 to 2015, even after estimated discounts were factored in. Only 6 drugs had price increases in line with or below inflation.

14. Price Hikes & Medicare Population Average price for 400 widely used Medicare drugs rose 81% over 8 years (AARP). Average annual cost for specialty drug products was $53,384 for Medicare beneficiaries. Social Security retirement benefit averages $15,526.

15. Rx Crisis: Impacts on Americans Over 500,000 Americans had annual drug costs >$50,000 in 2014, a 63% increase over 2013 (Pew). Specialty drugs account for ½ of care costs for many chronic diseases (United Health). 8% of adults stopped taking a drug because of costs and another 19% asked doctors for lower-costs drugs or tried alternative therapies (CDC). After starting expensive drugs, people forgo other medical services like physician visits or procedures (Joyce et al., 2008). Sustainable Rx pricing is the top health care concern for voters in 2016. 72% of Americans believe drug prices are too high (KFF).

16. Future projections HHS expects growth rate to remain high: 7.3% in 2016-2018. There are reasons to worry that growth may be even higher. o Fewer blockbuster drugs are going off patent in the near future. o 42% of drugs in FDA pipeline are specialty (AHIP). o Biologics in the pipeline could have 6-figure price tags. Rx spending is an important contributor to long-term growth in health care costs.

17. Achieving a balance is crucial Increasing costs born by consumers Prohibitive – or at least discouraging – prices mean lower use of life-saving therapies Why are prices so high? Policy should help achieve better balance between innovation and affordability. AFFORDABILITY INNOVATION

18. Campaign for Sustainable Rx Pricing The Campaign for Sustainable Rx Pricing (CSRxP) is a non- partisan coalition of organizations informing the debate on drug pricing and finding bipartisan, market-based solutions to lower drug prices in the United States

19. Our partners include:

20. Where do we go from here? CSRxP Proposals for Change: Transparency Competition Value

21. The Need for Transparency Drug manufacturers regularly justify pricing decisions by citing industry-funded research that it costs billions to bring a new drug to market No evidence or way to determine whether this is true Lack of evidence regarding factors that guide pharma companies’ decisions in setting launch prices or deciding to raise prices for drugs on the market

22. Transparency: Proposals for Change Releasing details of a drug’s unit price, cost of treatment, and projection on federal spending before FDA approval Annually reporting increases in a drug’s list price Disclosing true R&D cost for drugs

23. Competition: Proposals for change Speeding FDA approval of generic drug applications—especially for lifesaving drugs Reducing drug monopolies by incentivizing competition for additional market entrants Strengthening post-market clinical trials and surveillance Target exclusivity protections to most innovative products Promote uptake of biosimilars

24. Value: Paying for what works Insufficient evidence as to how new (and often expensive) drugs compare with older interventions Other countries require data comparing various treatments to help reach a value-based price The US market allows drug manufacturers to set the price without asking manufacturers to justify the cost

25. Value: Proposals for Change Increase funding for private and public research on drug pricing and value Require drugmakers to compare cost and outcomes of new versus existing drugs Expand value-based pricing

26. What we’ve done so far 1. Raised visibility of the Rx price and cost issues using multiple media outlets 2. Raised issue directly with Presidential candidates through voter questions and polling in early primary states 3. Identified policy proposals that add transparency, competition and market factors to Rx pricing

27. CSRxP Ad in Iowa, NH, and SC

28. Our work going forward Focus on six “battleground” states in upcoming election for events to increase engagement with the issue: FL, NC, OH, NV, IA, PA Continue to lay groundwork for the next administration

29. John Rother President & CEO National Coalition on Health Care 1825 K Street NW, Suite 411 Washington, DC 20006 (202) 638-7151 | jrother@nchc.orgjrother@nchc.org www.nchc.orgwww.nchc.org | www.csrxp.orgwww.csrxp.org