PF Nov 2018 - Pharma Price Controls - Pro Position

Resolved: The United States federal government should impose price controls on the pharmaceutical industry.

For Intro and Con and other PF topics click here.

Pro Position

Maybe it's me but I see problems for the Pro in this debate. There is a huge amount of evidence which supports the argument that price controls have negative consequences. I will leave the particulars of that point of view for later when I write my comments about the Con position. As I stated in the introduction to this topic, the assumption, based upon the wording and influenced by recent stories in the news, is the U.S. federal government (USFG) should force a price ceiling on the pharmaceutical industry. For example, there is the well-publicized case of EpiPens, used to treat potentially deadly, allergic reactions which rose in price over 500% from 2007 to 2014 . It was a price increase which far out-paced the rate of inflation and generated outcries from consumers who depended upon the product for their very lives should they be inadvertently exposed to allergens. At the time, there were accusations of price-gouging, negative remarks about the compensation paid to industry executives and a general sense the manufacturers were taking advantage of the market to unjustly enrich themselves. Thus, one easily perceives a default position for the Pro. The USFG should impose a price ceiling which limits the cost of the product. The rationale for this argument is based in the idea there is a moral obligation to save lives. So the debate is framed as a clash of lives outweigh profits.

Indeed, there is significant precedence for the idea the USFG has a duty to protect the health and lives of citizens. This has been backed up in several Supreme Court cases. It may be quite reasonable to assume, the courts would support intervention by the USFG if the government can demonstrate the action falls within their duty to provide for the general welfare. (IF...) As a general principle, however, Con will easily find evidence to support the idea that direct intervention by the USFG will have detrimental effects on the industry which may limit or eliminate the incentive to develop and market new products which could also protect the health and well-being of many citizens.

So...does Pro have a case?

Topicality

In debate, it is essential the discussion conforms to the resolution (the "topic"). Being topical means, the debater is constrained to a generally agreeable interpretation of what the resolution means. It further means the points of view and ensuing discussion or clash conforms to reasonable and predictable limits. It is important for debaters to be topical because obviously, should a debater begin arguing a point which is outside of the implied boundaries of reasonability, there is a good chance the opponent could not predict such a line of argumentation would be presented, the opponent would be at a significant disadvantage, and the kind of clash which promotes understanding and ultimately education, would not occur and this is bad for debate. It makes sense the side making claims in defense of the resolution should be topical. However, while the side not defending the resolution is not necessarily under the same constraints to be directly topical, there is an expectation the non-defending side will still be constrained by reasonability. For example, a Con team which claims individual states can impose price controls would be non-topical but reasonable. A Con team which argues governments should provide prescription drug coverage would be non-topical and unreasonable. The agreement about what is topical is open for interpretation. For example, a "price control" may be interpreted to mean a price cap or ceiling and most people would assume that implies the resolution and ensuing debate should focus on the USFG setting a maximum price for the sale of a pharmaceutical product. We could say if the USFG establishes that product 'x' must be sold for 'y' dollars or less it could be considered reasonably topical. But what if the USFG took another course of action which had the same effect of imposing a price ceiling? Is that topical? What if the USFG does set a direct price ceiling but provides other incentives to promote development and marketing of new products? Is that topical? Can it be contested under the rules of Public Forum debate which prohibits the use of "plans" or "counter-plans"?

Let me clarify why I digressed somewhat with a discourse on topicality. I don't think any Public Forum judge wants to listen to a topicality debate. No Public Forum judge wants to listen to a debate about the NSDA rules of Public Forum debate so I would recommend avoiding positions which may trigger such a debate. Nevertheless, some flexibility in interpretation is possible and reasonable, especially when a topic has very limited ground on one side or the other under a very strict interpretation of the resolution.

First we expand the definition of price controls beyond that used in my introduction to the topic.

USDOC 2004:

The study examined the drug price regulatory systems of 11 OECD countries and found that all rely on some form of price controls to limit spending on pharmaceuticals. The principal methods these governments employ are reference pricing, approval delays and procedural barriers, restrictions on dispensing and prescribing, and reimbursement. These methods prevent companies from charging a market-based price for their products. They also tend to be nontransparent, as the criteria and rationale for certain pharmaceutical prices or reimbursement amounts are not fully disclosed even to the pharmaceutical companies seeking to market their drugs. 

Based on the above U.S. Department of Commerce report a price control includes an array of actions which may contribute to controlling prices. Mrazek further expands the definition to include "indirect" measures which achieve the desired outcome.

Mrazek 2002:

The regulation of the ex-manufacturer‘s price may be direct or indirect. Measures for the direct fixing of prices include negotiations, price setting, international price comparisons, price cuts or freezes, and price/volume trade-offs. Other measures have taken a more indirect approach to regulating pharmaceutical prices by regulating profits, calculating “cost-effective” prices or setting maximum reimbursement prices.[454-5]

Smoke  and Mirrors

The overwhelming refrain from the Pharmaceutical Industry which will no doubt be parroted by the Con side is, drug prices need to be high to support the exorbitant cost of research and development of new drugs. They say, that while price controls can lower prices, price controls ultimately harm public health by limiting development of new and better pharmaceuticals. There may be some truth to these claims, but the only way to be sure is through industry transparency. What are the real costs, versus what the industry is telling us and what about those products which already exist and have been sold on the market for many years? Why do they cost so much?

Berman, et al

Drug manufacturers sometimes justify their exorbitant prices based on the costs of research and development and the difficulty of introducing a new drug. However, evidence suggests that drug prices today generally are not set with reference to the cost of innovation. Furthermore, these costs can be accounted for if drug manufacturers provide information regarding public funding of R&D costs (including tax benefits) and granular data by clinical trial phase. More information about R&D costs, as well as public investments in R&D and other influences on pricing will help inform both fair prices for particular drugs and future legislative approaches to drug pricing. [7]

Market Domination

It is well documented that free and fair competition can be effective in controlling prices. However, many companies, acting in the best interests of their investors and share-holders will take steps to reduce or eliminate competitors. The old model of buying out competitors and shutting them down is being replaced with a new model: buy the rights to a particular product and take advantage of the fact it is no longer sold competitively.

Derse, et al 2016:

A new business model is emerging in which pharmaceutical companies buy the rights to a drug, then raise the price dramatically. Often, the drugs are produced by one manufacturer, with few or no alternatives.
“It is one thing to charge high prices in order to recoup costs associated with the research and development of a drug,” says Jonathan D. Alpern, MD, co-author of a recent paper on the topic. Alpern is an infectious disease fellow at University of Minnesota.
Companies are not recouping research and development costs, however, because the drugs already exist on the market. Craig M. Klugman, PhD, a professor in the Department of Health Sciences at Chicago-based DePaul University, says, “They are very simply trying to maximize the profit on their purchase of these drugs. The motivation is nothing more or less than greed.”
The 'new' business model, hits underprivileged populations particularly hard and forces patients to seek alternative treatment from 'unregulated' sources.

The impact of these latest trends in market dominance effects the well-being of vulnerable populations and forces some to seek treatment from unregulated sources.

Derse, et al 2016:

Alpern notes the activity has been especially prominent in markets dominated by economically disadvantaged patient populations. Thus, access to life-saving drugs is being limited for patients who can’t afford them. “This has now become a common scenario, with outcomes that I think are unacceptable,” Alpern says.
Patients are going without treatment, receiving second-line therapy, or acquiring the drug from overseas or the internet. “This places clinicians in ethically difficult positions,” says Alpern. “Do you allow your patient to go without therapy, or support them in acquiring the drug from an unregulated source?”

The Regulatory Commission

One proposed model for controlling prices in the pharmaceutical industry is the same employed by local and federal governments to manage monopolies by public utilities.

Arak & Tschinkel 2017:

A better approach is to start with a public utilities method, which is frequently used when there is a natural monopoly in production, such as for water or power. In these cases, state and local governments typically allow a company to have a monopoly over the market but also establish regulatory commissions to determine “fair” prices. Such prices take into account current costs, the need for investment in production facilities and the need to earn a rate of return on capital invested.
A wrinkle with drug developers is that they can incur substantial costs in their quest for new medications, including dead-end ideas and extensive testing. A 2014 report put the cost to develop a new drug at $2.6 billion, while others put it at around half that.
Under our proposal, an independent federal panel consisting of scientists, medical professionals, public health experts and economists – perhaps working as part of the FDA approval process and called on when the price of a drug is above a specific threshold – would determine the maximum price a government buyer such as Medicare or Medicaid could pay for a new drug. It could also do the same for existing treatments – for example, it could have turned down Turing’s huge Daraprim price hike.
A key element of this idea is that the panel would develop methods to identify and set maximum prices for existing and prospective drugs that cure a serious illness, improve the quality of life, limit contagion or otherwise provide large benefits to society. These procedures would need to make sure that producers of these important new drugs are sufficiently rewarded for those costly efforts.

Many ethicists agree, the regulation of pricing should be done at the federal level. It is the best way to prevent unfair practises by companies which end up dominating the market and cutting out competition.

Derse, et al 2016:

Klugman says bioethicists should encourage Congress to regulate the drug industry, and require review of all corporate sales of drug licenses and patents to ensure that the new owners will not seek excessive profits and high charges.
“Utilities and insurers already have to submit requests for price increases for government approval,” notes Klugman. Similarly, insurance companies and large corporations need to be reviewed by the FTC to be sure that changes do not cause monopolies or impose a price burden on consumers.
“Drug companies should have to do the same — whether the entire company is being acquired, or merely a few drugs are being sold,” says Klugman.

Price Control Compendium

Scott Kneor, Chief Pharmacy Officer at the Cleveland Clinic, views the current trends in pharmaceutical industry pricing an immoral act that transcends politics because not only are those who need the products affected, everyone is affected by unjustifiably high prices. Knoer provides a compendium of solutions which can be employed to regain some control over the problem.

Knoer 2016:

Ban direct-to-consumer advertising. Why do drug companies spend so much more on marketing than they do on research and development? Because advertising works. The American Medical Association and the American Society of Health-System Pharmacists have endorsed banning direct-to-consumer advertising because it leads to the over-prescribing of expensive drugs when more cost-effective options often exist. (Only two countries allow direct-to-consumer advertising—the U.S. and New Zealand, whose residents happen to take significantly more prescription drugs than those in comparable countries.) Drug companies spent $5.4 billion on direct-to-consumer ads in 2015, an increase of 19 percent over 2014. In fact, five of the ten fastest-growing ad spenders in 2015 were pharma companies, according to Ad Age. Valeant spent $441 million on advertising in 2015 on drugs like Jublia, a $500-per-bottle drug for toenail fungus that has a total course-of-treatment cost of $20,000. Direct-to-consumer drug advertising is not a constitutional right. We haven’t always had drug ads. FDA relaxed the rules in 1999 creating the deluge of ads we see today. These regulations should be rescinded in light of the negative cost impact to society.

Eliminate “pay-to-delay” payments. When a brand-name drug’s patent is about to expire, competing manufacturers begin to consider making a generic alternative, which will cost less than the brand-name drug and cut into its profits. To stop that from happening, the manufacturers of brand-name drugs will pay the generic manufacturers to not produce a generic version. It should not be legal to crush competition and manipulate the market in this way.

Pass the Creating And Restoring Equal Access To Equivalent Samples Act Act of 2016. Competition in the marketplace is a critical part of managing drug prices. However, competition has been stifled by the holders of certain patent-protected drugs. The CREATES Act requires manufacturers of brand-name drugs to provide the required samples of their products to generic manufacturers, allowing them to conduct studies demonstrating the equivalence of the generic version. This would allow generic versions of these drugs to get to market faster after the patent protection ends, creating a competitive market.

Allow some drug imports when companies egregiously raise prices. This is another means of creating competition—and it can still require the FDA to allow drug importation to hospitals through existing supply chains, as long as FDA’s quality standards are met.

Eliminate patient assistance co-pay cards. Pharmaceutical companies offer these cards to patients to help reduce their out-of-pocket expenses. While this may sound like a good thing, the real purpose is to direct patients to higher-cost branded drugs as opposed to using much cheaper alternatives. Eliminating a co-pay saves patients’ money but shifts the payment burden to insurance companies, which is eventually passed on to consumers.

Conclusion

It is perhaps indisputable, there is a high cost associated with the development, testing, and approval of new drugs and treatments in the United States. However, there is a great deal of opacity preventing the government and consumers from seeing the real costs in a unbiased way. It is not unreasonable for a corporation to expect to recuperate its expenditures incurred prior to offering the product for sale to the public. Nevertheless, there is a huge public health risk to not striking the correct balance between pricing for recuperation of expenses and pricing for excess profit. There is a point when reasonable profits become unreasonable and expected prices become price-gouging. Pro contends, the bright-line should not be set by the industry itself, but rather the USFG with an interest in providing for the general well-being of the citizens. Clearly pharmaceutical companies must have incentive to continue marking new products, but there can be no excuse for "immoral" price-gouging to satisfy the financial interests of investors. Perhaps one such solution is convert the pharma to a non-profit industry. But until that happens, the USFG has a fiduciary responsibility to protect the public health by imposing price controls.

For all these reasons and more, we urge a Pro ballot.

Arak M, Tschinkel S, The Conversation, Why the ‘free market’ for drugs doesn’t work and what we can do about it, January 19, 2017. http://theconversation.com/why-the-free-market-for-drugs-doesnt-work-and-what-we-can-do-about-it-70007


Berman A, Lee T, Pan A, Rizvi Z, Thomas, A, Curbing Unfair Drug Prices: A Primer for States, Global Health Justice Partnership of the Yale Law School and the Yale School of Public Health, National Physicians Alliance, Universal Health Care Foundation of Connecticut. https://law.yale.edu/system/files/area/center/ghjp/documents/curbing_unfair_drug_prices-policy_paper-080717.pdf


Knoer SJ, How to Stop Immoral Drug Price Increases, Time, September 7, 2016, Knoer is the Chief Pharmacy Officer at the Cleveland Clinic. http://time.com/4475970/stop-immoral-drug-prices/


Mrazek MF, Comparative Approaches to Pharmaceutical Price Regulation in the European Union, Croatian Medical Journal, LSE Health and Social Care, London School of Economics and Political Science, London, UK, 2002
https://pdfs.semanticscholar.org/5aaf/8e5bb2ee6af74c4c8d21ab734d842f42d3c0.pdf


USDOC, Pharmaceutical Price Controls in OECD Countries, Implications for U.S. Consumers, Pricing, Research and Development, and Innovation, U.S. Department of Commerce, International Trade Administration, Washington, DC, December 2004. https://2016.trade.gov/td/health/DrugPricingStudy.pdf


Derse AR, Soverson S, Drachenberg J, Spektor D, Kusterbeck S, Drastic Surge in Drug Prices: ‘Unethical and Immoral’, Relias Media, Medical Ethics Advisro, November 1, 2016. https://www.reliasmedia.com/articles/139464-drastic-surge-in-drug-prices-unethical-and-immoral (Note: this is a subscription service with permits open access for a limited number of site visits.)