COMPTROLLER LEMBO,IN TESTIMONY
TO CONGRESSIONAL DEMOCRATIC STEERING AND POLICY COMMITTEE: "INVESTIGATE AND
REVERSE RUNAWAY PHARMACEUTICAL DRUG PRICES
Wednesday, December 2, 2015 |
Downes (860.702.3308 |
Comptroller Kevin Lembo, in
written testimony submitted to the Democratic Steering and Policy Committee
for a hearing today, detailed the consequences of a runaway pharmaceutical drug
marketplace that threatens to obstruct patient care and overcome health care
budgets across the public and private sectors.
In October, Lembo who administers health benefits on behalf of more than
200,000 state and municipal employees, retirees and their dependents called on
Connecticuts congressional delegation to immediately investigate and act to
reverse the root causes of these alarming pharmaceutical drug price increases.
The Democratic Steering and Policy Committee, co-chaired by Congresswoman
Rosa L. DeLauro, held a hearing, "Ensuring Access and Affordability of
Prescription Drugs, While Spurring Innovation, to further investigate the
causes and possible solutions to concerning rises in pharmaceutical drug pricing
Lembo submitted written testimony that detailed consequences experienced at
the state level, and recommended areas of investigation and possible solutions
"These drugs lifesaving, life-changing medications are not yachts,
private jets and other material icons of wealth reserved only for the privileged
few, Lembo said.
Lembo pointed to published reports that highlighted an extreme example of a
price spike for the drug Daraprim after the rights to the drug were acquired by
"The headline rightfully grabbed significant attention but the issues raised
by this story are not isolated or unique, Lembo said. "They signal a more
pervasive and intensifying trend in the pharmaceutical marketplace.
"The sharp rise in pharmacy costs comes at a time when we are seeing great
success in limiting medical spending by promoting preventive care and chronic
disease management through the states Health Enhancement Program (HEP). The
drastic increases in pharmacy costs are undermining our medical cost savings.
Lembo recently implemented new restrictions on the state plan to curb a rapid
rise in unregulated compound drug prescriptions through the state health plan
that have dramatically reduced state spending by approximately $2 million per
month on certain questionable medications.
Despite these and other efforts to manage health-care costs, Lembo said
pharmaceutical costs continue to skyrocket due to several factors in the market.
"The factors behind rising pharmacy costs include market consolidation, new
pricing models and outright profiteering. Projections indicate no future relief
as pharmacy costs are expected to continue to rise at an exorbitant rate in the
coming years. Meanwhile, pharmaceutical companies are recording historic
"We applaud the profit motive in our free market society as a mechanism to
efficiently distribute resources and drive innovation, but excessive profits can
cause significant harm when applied unbridled to essential and lifesaving
medicines in an uncompetitive marketplace. High costs are pushing certain
treatments out of reach for some and, on a macro level, our society has fewer
resources to expend on other important priorities.
Lembo said the issues plaguing the pharmaceutical market are twofold and each
will likely require distinct remedies. The issues are:
significant price increases in certain traditional brand and generic
significant additional costs associated with the introduction and expanded
utilization of new specialty drugs.
Generic and Brand Price Hikes
The state plan has experienced significant cost increases for non-specialty
drugs an unsustainable 16.9 percent as a result of substantial price hikes
in traditional brand and generic medications, Lembo said.
"The increased costs come at a time when we are seeing very little change in
overall utilization for brand and generics and the changes we are seeing
should result in lower, not higher, costs, Lembo said.
For example, last fiscal year the state experienced a slight reduction in the
utilization of brand drugs and a slight increase in the generic dispensing rate.
Despite these encouraging utilization patterns, Lembo said the state still
incurred significant additional costs driven by price hikes of long available
traditional brand and generic medications.
As the extreme case involving the drug Daraprim demonstrated, companies have
been buying up the rights to generic and brand drugs and then increasing prices.
"Industry consolidation has eroded competition in the market, which in turn
allows pharmaceutical companies to demand higher prices, Lembo said. "Even
worse, a significant backlog of applications to manufacture generic medications
at the U.S. Food and Drug Administration (FDA) is contributing to the lack of
competition and high prices.
Lembo urged the federal delegation to quickly:
Strengthen anti-trust laws to limit consolidation in the pharmaceutical
industry and ensure that adequate competition remains to drive competitive
pricing in all drug classes; and
Reduce the FDA backlog of generic drug approvals, and sharply reduce the
review time of such applications, in order to swiftly introduce competition to
"Additionally, the promise of lower cost generics only occurs when generics
come to market after patent protection for a brand name drug expires, Lembo
said. "Pharmaceutical company stall tactics have delayed the introduction of
generic competition for some blockbuster brand drugs.
In Fiscal Year 2015, the state employee plan incurred significant costs for the
brand drug Nexium as a result of a significant delay in the release of a generic
version of the drug. The delay resulted in substantial costs for the state
employee plan, which expended more than $8 million that year for the brand name
version when an available generic would have significantly reduced the costs to
"The combination of delayed approvals at the FDA and significant market
consolidation has increased prices for generic and brand drugs as a result of
reduced competition, Lembo said.
"The specialty drug market poses its own significant challenges that are
separate and distinct from those related to traditional brand and generic
drugs, Lembo said. "The added costs resulting from specialty drugs, in large
part, are for new innovative treatments that are often more effective than those
previously available. As such, specialty drug manufacturers are adding real
value to the medical system. Still, specialty medications are launching at much
higher price points than similar specialty drugs released just three or four
years ago creating a significant cost burden for health plans and consumers.
Lembo detailed the effect of specialty drug cost increases on the state plan:
Specialty drug costs for the state employee plan are increasing at an
astronomical 54.7 percent.
Specialty drugs accounted for just 1.2 percent of total prescriptions in
Fiscal Year 2015, but 25.6 percent of total costs and the percentage is rising
At the current cost trend, specialty drug costs will increase to more than
half of the states total drug spend in just a few short years.
"All indications are that the trend will continue as the majority of new FDA
approvals anticipated in the next four years are specialty drugs, Lembo said.
"Many of these medications will bring much needed relief to individuals, but the
runaway prices are unsustainable and must be addressed.
Significant investments have been made in the development of these new
treatments, and better treatments like the new class of Hepatitis C drugs are
saving lives and reducing long-term medical costs, Lembo said. However, not all
specialty drugs have such clear medical cost savings, and yet the high prices
are not limited to the Hepatitis C drugs. They can be found across the spectrum
of specialty drugs.
Lembo said at least two current proposals should be thoroughly examined:
Reducing the data exclusivity period from 12 years to 7 years for biologics
(the exclusivity period refers to the time during which data used to obtain FDA
approval is protected from use by generic manufacturers); and
Allowing Medicare to use its market power to negotiate lower drug prices.
"Both should be thoroughly examined -- however, provisions should also ensure
that negotiated Medicare prices serve as a reference price for the privately
insured market, Lembo said.
"The State of Connecticut and health plans across the country are seeing
unsustainable growth in pharmacy drug spending. The root causes of the increased
costs include industry consolidation and delays in generic drug approvals that
are allowing pharmaceutical companies to demand higher prices for existing
generic and brand drugs. At the same time, newly released specialty drugs are
being priced significantly higher than those released only a few years ago as
pharmaceutical manufacturers move to a "what the market will bear pricing
"The rapid price increases are straining the state budget and, more importantly,
placing significant burdens on consumers who need access to these medications.
Swift action is necessary to infuse competition into the marketplace and
institute strategies to control costs where competition is inadequate or
"I urge congress to fully evaluate the options available to put pharmacy
spending back on a sustainable path.
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