High-profile cases of rising drug and medication prices are out of the ordinary and do not reflect what is broadly going on with health care spending, according to the chief economist and health care expert at a Washington, D.C.-based think tank.
Cases such as the EpiPen -- the allergy medication at the center of the recent public debate over drug prices -- are not important when considering the wider picture, said Michael Mandel, of the Progressive Policy Institute.
“What is really going is that a lot of competition holds prices down,” he recently told Patient Daily. “Then there is the transition, moving off patent into generics.”
Mandel spoke following the publication of the latest monthly report on health care prices by the Altarum Institute, a nonprofit health research organization.
Altarum reported that the growth in prescription drug prices slowed to a 3.9 percent annual increase, measured from July 2015 to July 2016.
This marks a decline from the 8.5 percent increase Altarum reported last year, and the 12.5 percent annual increase the year before that, when cost growth was being driven by new hepatitis C drugs and Obamacare coverage expansion.
National health spending in July 2016 was 4.9 percent higher than in July 2015, which represents a continuing gradual downward trend over the past six months, according to Altarum.
“When you see the high-profile cases like the EpiPen or some other cases, they are not that important, they are out of the ordinary and not really what is going on,” Mandel said. “What we are seeing here is a combination of competition and controls on drug prices driven by buyers such as pharmaceutical benefit managers.”
Mandel said there may be an occasional spike when “there is a new drug everybody wants and really works, and that’s good news.”
He cited the example of the drug that effectively cures hep C, before adding that competition will bring the price down.
“Investing in new drugs has the potential to hold down costs in the longer term -- the hep C cure dramatically reduces the number of liver transplants,” Mandel said. “When you look at all this, I am not surprised the growth of prices (is) slowing, but would like to see it continue longer. When I see a spike, I do not get overly distressed, and when I see a slowdown, I do not get too excited.”
Additionally, he said it is hard to nail down trends until there is a couple of years of data, but that the data published by Altarum and others are positive.
According to Mandel, having the drug that cures a disease cuts labor costs, the main driver of increased health care spending.
“The increase in drug prices is a smaller contributor to health costs than people think,” he said. “The biggest is labor costs.”
Mandel views pharmaceuticals as a solution to rising health care costs, not the problem.
“It is wonderful if you could spend more on drugs and reduce spending on labor,” he said. “Pharma (pharmaceutical companies) have been getting an unfair rap.”
Mandel believes the main question to ask is whether new drugs are effective in reducing long-term health care needs and long-term use of labor.