Allies No Longer: Insurers and Pharma Turn Up the Heat on Each Other

By James Gutman - November 10, 2015

Medicare Advantage plan sponsors and pharmaceutical producers always have had somewhat of an uneasy relationship since what is revenue to the drugmakers is cost to the insurers, at least in the short run. But the two sectors were able to put aside their differences when the Affordable Care Act (ACA) was adopted since each saw the potential for gaining millions of new customers because of the law. Any thoughts that this alliance could endure, however, clearly seem to have disappeared in recent months as drug prices have soared and insurers have gotten bitter that they are subject to strict rate-hike and medical loss ratio curbs while the pharmaceutical producers aren’t.

Consider, as evidence that the gloves are coming off, the campaigns that some of the insurer trade groups have launched in recent months on behalf of their members, and some of the responses by pharmaceutical groups. America’s Health Insurance Plans (AHIP), for instance, launched in September its “Drug of the Week” — which is actually more like a “Drug of the Month” — press release in which it has featured high prices occurring as new pharmaceuticals come into the market and prices on some existing drugs soar. The costly new PCSK9 inhibitors for cholesterol control got the first AHIP raspberry, while 13-year-old arthritis drug Humira got singled out for the second round on the basis of 82% price hikes since 2007 and new and potentially enriching orphan-drug status it won for treating other diseases.

Today AHIP sent out excerpts of articles that show both some Republican and Democratic presidential candidates have started bashing the pharmaceutical industry for raising prices so sharply in recent months. Even some large pharmacy benefit managers are taking up the fight, as shown in AHIP’s Medicare conference last month when Steve Miller, M.D., senior vice president and chief medical officer at Express Scripts Holding Co., said in a drug-price session that “brand drug inflation is totally out of control.”

Pharmaceutical producers, whose chief trade association interestingly hired away AHIP chief spokesperson Rob Zirkelbach about two years ago to perform the same role for it, were having none of this. Lori Reilly, executive vice president for policy and research at that trade group, Pharmaceutical Research and Manufacturers of America, told the AHIP conference session that an “unprecedented level” of rebates and discounts from drug producers substantially limits the effective size of price hikes for both the insurers and their members. Moreover, she noted, the insurer comments don’t take into account the host of current drugs that are losing patent protection in the next five years and thus will be going generic and lowering costs. “Patents come and go, but generics are forever,” Reilly said.

Where is this burgeoning dispute heading? Is it a sign of what’s coming that some portions of the pharmaceutical industry are going right back after insurers, as Biotechnology Industry Organization Chair Ron Cohen, M.D., did at AHIP's conference when he suggested part of the problem is the “unbelievable variation” in how plans treat different drugs via utilization management? Is there some ACA-like common ground the two sides can find before the courts and Congress wind up having to declare winners and losers? Or would that be akin to closing the barn door after the horse — or elephant or donkey — already is out?

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