Health care cost spike

The eye-popping increase in premiums for those who buy health insurance through MNsure’s marketplace has consumers justifiably steaming. But before they start assigning blame to the usual targets — Obamacare and MNsure — they need to examine the facts behind the price jump.

The state’s five insurers in the MNsure marketplace say its simple economics. The premiums they receive aren’t enough to cover the cost of health care. The numbers back up their argument. Last year, insurers took in $1 billion in premiums but spent $1.3 billion on health care costs for their clientele. And they expect it to get worse in 2016.

There are a number of factors responsible for the gap between premiums and health care costs, but one of the most significant has been the dramatic rise in the cost of prescription drugs to treat everything from cancer to blood pressure. Since October 2007, the price for dozens of established drugs has soared. While the consumer price index rose just 12 percent during that period, one diabetes drug quadrupled in price and another rose 160 percent, according to an analysis by DRX, a provider of comparison and management software for health plans. And these are hardly isolated cases. At least 15 cancer drugs introduced in the last five years cost more than $10,000 a month, according to data from the Memorial Sloan Kettering Cancer Center.

The dilemma of rising drug prices drew national attention after Martin Shkreli, founder of Turing Pharmaceuticals, raised the price of the drug Daraprim from $13.50 a tablet to $750. Shkreli was roundly criticized for price gouging and later had to trim the price boost. But he’s just a symptom of an epidemic of greed in the pharmaceutical industry, one that’s affecting consumers and state budgets alike.

The consolidation of drug companies into larger conglomerates is fueling part of the increase, but it’s also fueled the repackaging of long-established drugs, turning them into high-priced “specialty drugs.”

Valeant Pharmaceuticals jacked up the price of two heart drugs it acquired from Marathon Pharmaceuticals, raising the prices of Isuprel and Nitropress by 525 percent and 212 percent, respectively.

A generic drug used to treat Parkinson’s disease, available for years on the market in pill form, is being reconfigured as a time-release capsule, so expect that drug to see a dramatic increase in price, as well.

Big pharma justifies the price increases, claiming the money is needed for research and development of new and better drugs. Yet, as we’ve seen, some of these drugs have been on the market for years. Drug companies are simply jacking up prices to pad profits and because they think they have enough control of Congress to get away with it.

Many of the same drugs sold at exorbitant prices in the U.S. are available in other countries at far more affordable rates, because their governments don’t allow the flagrant corporate abuse that is standard procedure here in the U.S. And how do you justify a drug such as Sovaldi, which is used to treat hepatitis C and costs $1,000 a pill? Thanks in large part to Sovaldi, state Medicaid programs spent $1.33 billion on hepatitis C therapies through the third quarter of last year. The state of California is now spending more just to treat hepatitis C than it spends on its statewide transportation system. The state estimates the cost of treating patients with newer, more effective drugs could drain $1.43 billion to $2.05 billion from the state’s budget in the next year. And that’s just for one specific disease.

While implementation of the Affordable Care Act has thankfully increased the number of people with health insurance, if the drug industry simply views that development as an opportunity to rake in massive profits at the taxpayers’ expense, the federal government needs to act.

If Congress is ever going to get a handle on a workable national health care system, it needs to address rising medical costs — in particular the excessive rise in prescription drug prices. A good place to start may be eliminating the ability of drug companies to repackage existing generic drugs and relabel them as specialized drugs with an attendant jump in price.

The current situation is a chief driver of rising health care costs and, as a result, the spiraling of insurance premiums. Let’s deal with this headache before even aspirin costs the equivalent of the average home mortgage. No other country allows this kind of abuse of its citizens by a major industry. It’s time to put an end to it here in the U.S.