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John Arnold: U.S. Needs to Regulate Prescription Drugs as a Product That's ‘Vital to Human Need’

At West Health Summit panel, Arnold Ventures co-chair says window for reform is short: ‘This is our shot.’

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Drawing comparisons to the utility sector, Arnold Ventures Co-Chair John Arnold said Tuesday the U.S. needs a strong regulatory environment for prescription drugs, ensuring access to a product considered “vital to human need.”

Arnold was part of a panel at the West Health HCI Summit that included Dan Liljenquist of Intermountain Healthcare, Shelley Lyford, President and CEO of the Gary and Mary West Foundation and West Health, and Michael Peterson of the Peter G. Peterson Foundation.

Watch the full panel conversation here.

The panel was moderated by Tim Lash of West Health, who noted the “toxicity” of the high cost of prescription drugs today in America. A recent survey by nonprofit West Health and Gallup showed Americans borrowed $88 billion over the last year to pay for health care and are cutting back on other expenses or skipping appointments and prescription refills altogether.

He also cited a grim statistic: The problem of patients not taking their medication is estimated to cause 125,000 deaths per year. That’s nearly double the number of Americans killed in the Vietnam War.

Arnold Ventures works to reform the broken drug pricing system and believes all patients should have access to affordable drugs. The philanthropy has invested in nonprofit generic drug company Civica Rx, which has a membership of more than 800 hospitals across the U.S.

“We are interested in [drug prices] for the same reason everybody in this room is: The high price of health care costs are eating America,” Arnold told the panel. “There is a strong and wide swath of policy options that have been well-vetted and are ready to be implemented. And probably most importantly, there’s political will that exists today to make those changes.”

But special interests work to block reform, and as Lyford noted, they represent an army: “On any given day within the beltway in our nation’s capital, there are 1,400 health care lobbyists hard at work. Any given day,” she said. “It is no surprise that Medicare cannot negotiate. Pharma lobby, health care lobby — they are doing their work every day.”

At the federal level you get one shot at it. And this is our shot. And the question is, how ambitious is Congress going to be?
John Arnold Arnold Ventures Co-Chair and Co-Founder

Arnold said there are multiple problems and failures in the system, including manufacturers blocking cheaper generics with pay-for-delay settlements — an agreement in which a drug maker pays generic drug companies to delay the entry of generics into the market — and preventing generic companies from accessing samples of brand name drugs. He also cited drug makers’ exploitation of orphan drugs for rare diseases and the use of patent thickets to maximize drug makers’ profits. (Humira, the world’s top-selling drug, has 247 patents filed by AbbVie.)

Arnold outlined three areas where work is needed: improving the path to generics, ridding the industry of misaligned incentives (such as the practice of pharmacy benefit managers placing higher-priced drugs on the formulary to maximize their rebates), and pricing.

“What do you do with drugs that are in a competitive class and drugs that are a monopoly in their class? Right now the government is relying on the private sector and PBMs (pharmacy benefit managers). PBMs do a pretty good job (negotiating prices) in drugs with a competitive class (three or more) … But what do we do with the drugs that are a monopoly in their class. What do we do about what price they can charge?”

“All of our economic peers have adopted some type of that formula. Are we at a point politically where we are going to do it in the U.S.?”

Arnold said the window for reform is short.

“You can have a criminal justice bill that passes in the state Legislature every year. At the federal level you get one shot at it. And this is our shot. And the question is, how ambitious is Congress going to be?”

Watch the full panel conversation here.