Popularizing Prescription Drugs

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rx-bottle-and-cashLaura Ries was moved to action when she saw a TV commercial portraying a woman happily sharing time with her grandchildren after taking Lyrica, a prescription medication, for diabetic nerve pain of which her elderly mother suffers.

“The ad showed someone who was enjoying life again,” said Ries, president of a marketing strategy firm in Atlanta, who then researched the drug and spoke with her mother’s doctor. “This was very related to what my mom was experiencing.”

Her reaction was precisely the aim of ‘direct-to-consumer’ advertising: getting patients or their family members to remember a drug’s name and ask the doctor for a prescription.

Spending on such commercials has grown 62 percent since 2012, even as ad spending for most other product types was flat.

“Pharmaceutical advertising has grown more in the past four years than any other leading ad category,” said Jon Swallen, chief research officer at Kantar Media, a consulting firm that tracks multimedia advertising. It exceeded $6 billion last year, with television picking up the lion’s share, according to Kantar data. Major network evening news and daytime drama programs are heavy with drug ads.

But the increase of drug advertisements has generated new controversy, in part because the ads inevitably promote high-priced drugs, some of which doctors say have limited practical utility for the average patient-viewer. For example, 60 capsules of Lyrica costs about $400 [the drug Ries asked about for her mother].

Critics, including the American Medical Association who called a ban in 2015, say ‘direct-to-consumer’ advertising inflates demand for new, more expensive drugs and encourages patients to ask their doctors for often marginal — and sometimes inappropriate — drugs that are stimulating high health care costs.

Such prohibition is unlikely. Previous efforts to push such an outcome have stalled, generally on free-speech arguments by the powerful drug lobby who declare that such ads provide valuable information to patients about treatment options.

Spending Zooms

One thing is certain: ‘direct-to-consumer’ advertising is big. And, as nearly everyone who watches TV knows, it’s getting bigger.

Some programs — the nightly news and sitcoms aimed at older Americans — get most of their advertising from drug companies. A Kantar analysis shows 72 percent of commercial breaks on the “CBS Evening News” have at least one pharmaceutical advertisement. Commonly, the ads target a range of conditions that generally affect this demographic. Sixty-two percent of commercial breaks during “General Hospital” include a drug ad.

“A lot of these ads target the caregivers and the children of older people,” said consultant Tom Lom, a former managing partner of Saatchi & Saatchi Consumer Healthcare, which has created ads for pharmaceutical giants.

Drug companies were on track to spend an estimated $6.4 billion on ‘direct-to-consumer’ advertising in the U.S. last year, up 5 percent from 2015, according to Kantar. In 2012, spending for pharmaceutical TV ads was the 12th-largest category. By last year, drug ads were sixth.

While substantial, the spending was less than the amount spent by automakers, retail and restaurants. Networks — ABC, CBS, NBC — along with cable channels like CNN — draw a lot of the pharmaceutical advertising.

According to Swallen, the effect of the ban on networks would be a daunting, 8 percent loss of total ad revenue, and its impact would be most evident for programming popular with viewers older than 60 ­— for instance, evening news shows. Similarly, cable networks such as the Hallmark Channel, which draw viewers from this demographic, would feel the pinch because they work on lower budgets.

Why Some Drugs Are Advertised

For years, the ‘direct-to-consumer’ industry was mostly focused on drugs that relieved chronic, typically non-fatal afflictions like heartburn (Nexium), allergies (Claritin) and high cholesterol (Lipitor).

More recently, Lom said, advertising has focused on more serious illnesses affecting seniors, such as Alzheimer’s disease. Ads for drugs that target constipation caused by other drugs — opioids — hit the scene last year, reflecting the large numbers of people taking painkillers.

In 2016, the top three ads based on total spending were Lyrica, $313 million; Humira, $303 million; and Eliquis, $186 million, according to Kantar Media.

The reasons why some drugs are advertised more than others vary, with drug companies evaluating which products are most likely to bring them the most revenue.

Drugmakers do not care “whether it’s a rare, expensive drug or a popular cheap drug,” said Amanda Starc, associate professor of strategy at Northwestern’s Kellogg School of Management. “They’re looking at the marginal return on advertising. A small number of customers spending a lot or a big number spending a little.”

How Advertising Plays To Consumers

The United States is one of two countries — the other is New Zealand — that allows ‘direct-to-consumer’ advertising, a long-standing practice that became more common in the mid-1980s after the FDA issued new rules. Most advertising was in print. But more television advertising began appearing when some of the rules were relaxed a decade later.

Lom said the ads give consumers a “head start” on knowing about drugs that might be available for their ailments, speeding up the consumer education process.

Surprisingly, 62 percent of physicians, for instance, said they would or might prescribe a harmless, even placebo, treatment to a patient who does not need it but demands it, according to a 2016 poll conducted by Medscape, an online physician education website.

Current rules require that if a drug is named in an ad, information must be included about side effects and adverse reactions. That makes it even more important that drug advertising be visually captivating — if not surprising, say consultants.

Meanwhile, the side effects are glossed over. “The ads describe the risks and at the same time play pleasant music — or show happy images — which helps to distract people from getting the message,” says Dr. Aaron Kesselheim, associate professor of medicine at Harvard Medical School.

Those that do advertise, however, appear to have a handle on the market. Ries, the brand consultant, says it wasn’t just the ad that helped her to remember Lyrica, but the name, too, which was easy to spell and pronounce.

Reis said her mother did take the Lyrica “and it’s helped.” That’s a good thing, says the brand guru who takes pride in looking out for her mother. “The ad spurred the conversation.”

But whether the advertising empowers patients or leaves them vulnerable is debatable.

The Strange Case About Off Patent Drug Pricing

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rx-bottle-and-cashThere is a conflict at the heart of pharmaceutical pricing in the United States. On one hand, it’s in the public’s interest for pharmaceutical companies to get a good return on the huge investments they make in developing new drugs; on the other hand, it’s in the public’s interest of affordability.

The system tries to resolve this by granting companies temporary monopolies (aka patents) on the drugs they develop — letting them effectively set the price unilaterally — but then allowing competition from generic substitutes once the patents expire. Many people have strong opinions about whether we have struck the right balance, or should regulate drug prices as most other wealthy countries do — although regulating prices appears to depress spending on research to develop new drugs.

However here is an interesting and too-little-emphasized fact: Most of the recent high-profile controversies over drug pricing do not have much of anything to do with this conflict. For example:

Epinephrine, the substance delivered by the EpiPen allergic-reaction injectors that drugmaker Mylan has been selling for more than $300 a dose lately, is a human hormone (also known as adrenaline) that was first isolated by a Japanese chemist in 1900. You can buy a vial containing half as much of the substance as an EpiPen does for $4.49 from Ace Surgical Supply.

Pyrimethamine, the anti-infection drug that under the brand name Daraprim made Martin Shkreli infamous when his company, Turing Pharmaceuticals, increased the price from $13.50 to $750 a tablet a year ago, was developed in the 1950’s at Burroughs-Wellcome, which later became part of GlaxoSmithKline. It has been off patent for decades.

Many of the drugs subjected to the biggest price increases by Valeant, the once-high-flying serial acquirer that ran into trouble about the same time Turing did last year, were similarly developed many decades ago and unprotected by patents.

None of the products mentioned above were developed by the companies selling them now. Mylan does not make the EpiPen (Pfizer does); Mylan acquired the marketing rights nine years ago. Mylan is able to charge so much because the design of the injector is proprietary. Competitor Sanofi did get Food and Drug Administration approval for its Auvi-Q injector in 2012, but abandoned the product early this year because of dosage problems.

With the brand name Daraprim, the market for the drug is quite small, so no one ever bothered to develop a generic competitor. And one of the (many) issues at Valeant was that it effectively controlled a specialty pharmacy, Philidor, that altered doctors’ prescribed generic orders to substitute more expensive Valeant drugs.

A new breed of pharmaceutical company has emerged (Valeant is, or at least was, the archetype) that does not develop drugs but identifies business opportunities in existing drugs —many of them with expired patents — that the previous owners were too lazy, timid, or decent to fully exploit. So they acquire them and increase the prices. One should take the price increases cited above with a grain of salt, meaning that with rebates and other incentives, most insurers pay nowhere near list price. However, the new discount price is now higher and the general idea has been to extract more money out of old drugs than was previously being extracted.

Increasing the value of off-patent drugs presumably gives drug companies at least a little bit more financial incentive to develop new drugs. But sudden big price increases in off-patent drugs may seem like a violation of the long-standing contract between the pharmaceutical industry and society.

In the case of the EpiPen, perhaps competition, not price regulation, is the solution to the problem. It’s a product for which there is a large and growing market, and there are already multiple competitors being sold in Europe, where prices for both the generics and brand-name EpiPens are much lower than in the United States. Tear down this wall, FDA!

The situation is totally different, though, for Daraprim, which is essential for treating certain parasitic infections but is (1) only prescribed to about 2,000 Americans a year and (2) does not need to be taken for long periods. That is not a market opportunity to warm a generics manufacturer’s heart. In fact, it may be a natural monopoly.


Fraud Emerges as Compounding Drug Sales Skyrocket

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PharmacistsWhat the government is spending on “compounded” drugs that are mostly handmade by retail pharmacies has skyrocketed, drawing the attention of federal investigators who are raising concerns of fraud and overbilling.

Spending on these medications in Medicare’s Part D program, for example, rose 56 percent last year, with some of the costliest products, including topical pain creams, priced at hundreds or thousands of dollars per tube. The federal workers’ compensation program has also seen a recent spike in spending.

The spending jump, along with a sharp increase in the number of patients getting the compounded drugs “may indicate an emerging fraud trend,” said Miriam Anderson, who helped oversee a June report on the Medicare spending by the inspector general’s office at the Department of Health and Human Services.

Some of the prescriptions may not have been medically necessary — or even dispensed at all, notes the report, which also details recent fraud cases brought by U.S. attorneys in several states.

The practice of compounding drugs, which is done by mixing drugs in pharmacies or special compounding centers by licensed pharmacists, is as old as the pharmacy profession itself. By creating specifically tailored medications, compounding is aimed at patients who cannot take commercially available, FDA-approved medications.

But use among Medicare beneficiaries and federal employees in workers’ compensation insurance plans has recently soared, according to Anderson’s report and a separate Postal Service inspector general’s study of the workers’ compensation program released last spring.

Similar run-ups in spending for compounded drugs were also noted by private-sector benefit managers in recent years.

In Medicare’s drug program, known as Part D, the number of Medicare beneficiaries getting compounded drugs has grown 281 percent since 2006 to nearly 280,000 in 2015. Spending on such drugs in Medicare’s Part D grew 625 percent between 2006 and 2015, to $509 million, according to the OIG report. That is still a tiny fraction of the program’s total spending on drugs.

The fastest-growing category of compounded drugs are topical creams and gels, often used for pain. Spending on those increased 3,466 percent in the Medicare program since 2006, the report said, while the average cost per prescription hit $331, up from $40 in 2006.

A large spike in spending for compounded drugs led the U.S. Postal Service to try to hold back payments for its share of federal workers’ compensation costs last year, saying the agency overseeing the program had failed to more strictly police the use of such drugs. It eventually paid.

Overall, the federal government’s worker’s compensation program, which includes the Postal Service, saw the spending on compounded medications grow from $2.35 million in fiscal 2011 to $214 million in fiscal 2015, according to the Department of Labor, which oversees the program.

New rules from the Department of Labor went into effect July 1, aimed at slowing the spending. Among other changes, the agency will now limit initial prescriptions to 90 days.

While legitimately prescribed compounded drugs “can dramatically improve a patients’ quality of life,” it is also important to have “proper controls around billing,” said John Voliva, executive vice president of the International Academy of Compounding Pharmacists. The HHS inspector general’s report demonstrated that such controls “are not in place,” he said.

Benefits vs. Drawbacks

The studies come amid ongoing scrutiny of the drug compounding industry, particularly following a meningitis outbreak that killed 64 Americans in 2012. Those deaths were linked to a Massachusetts pharmacy that sold tainted injectable medications.

Following that outbreak, some states tightened their oversight of such pharmacies, particularly those producing products that must be sterile.

Compounding pharmacies are generally overseen by state boards of pharmacy, and the drugs they produce are not considered FDA approved. The agency does get involved, however, when it is concerned that pharmacies might not be making medications properly or have started to mass produce treatments, rather than preparing them for individual patients.

When prescribed appropriately, compounded drugs allow patients who can’t take or tolerate commercially prepared products to have special formulations mixed just for them. Patients who can’t swallow pills, for example, can get liquid formulations or those allergic to certain dyes can get products made without them.

And sometimes such drugs can be more cost-effective.

When Turing Pharmaceuticals raised the price of a drug used for patients with compromised immune systems from $13.50 a pill to $750 last year, for example, one of the nation’s largest pharmacy benefit managers partnered with a compounding pharmacy to produce its own version for $1 a pill, said Glen Stettin, senior vice president for clinical research of Express Scripts.

Nationally, since 2012, pharmacies have been required to report all the ingredients they used to make a compounded drug. The idea was to provide insurers with more information about what they were being billed for and to make sure there were no hidden ingredients.

The effect that had on drug prices is up for debate. Stettin and others say a few unscrupulous pharmacies began adding more ingredients so they could charge more.

“They are [creating] combinations of things that have never been tested together,” said Stettin. “We saw a diaper cream that was billed at $1,000, where a patient could get one over the counter for $2.50.”

In California, federal investigators say a marketer for one pharmacy paid doctors to write prescriptions for compounded pain creams formulated to include a “five-pack” of the most expensive ingredients. Then the pharmacy could bill California’s worker’s compensation program $3,000 per tube for creams it cost about $20 to make, according to a federal indictment filed in June.

In Florida, federal prosecutors also in June unsealed an indictment against a doctor who allegedly was given kickbacks — including a $72,000 BMW — for sending prescriptions to a particular pharmacy, which then billed Tricare, Medicare and other government health programs for compounded creams. Prices ranged from about $900 to $21,000 for a one-month supply, according to court documents.

To combat rising spending, Express Scripts in 2014 drew up a list of about 1,000 ingredients used by compounders for which it would no longer pay, saying they were high priced and were not any safer or more effective than other treatments. Many of its clients, including the military health program Tricare, have incorporated that list into their health plans.

Since the limit, Express Scripts says it has seen its clients’ spending on pharmacy-made drugs fall sharply. The list has also prompted two antitrust lawsuits filed against Express Scripts in federal court by compounding pharmacies.

Awaiting Action

What actions Medicare will take — and the effectiveness of a July 1 2016 change in how such medications are paid for in the federal compensation program — remain unclear. The Medicare report does not make any recommendations, although investigators expect to issue a follow up report that will.

In its March 2016 report, the inspector general criticized a lack of action by the Labor Department to address the growing spending, saying that it estimated the Postal Service “has incurred over $81.8 million in excessive compound drug costs and nearly $4.1 million in excessive administrative fees” for the past two fiscal years.

Following that, the Labor Department issued new rules it says will “contain the cost of compound drugs … but still allow for appropriate medical treatment,” according to Leonard J. Howie III, director of the Office of Workers’ Compensation Programs.





Drug Makers Sidestep Price Barriers

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Couple Medicare Surprises

The pain reliever Duexis is a combination of two older drugs, the generic equivalents of Motrin and Pepcid. If prescribed separately, the two drugs purchased together would cost no more than $20-$40 per month. By contrast, Duexis which contains both older drugs in a single pill, costs about $1500 per month.

Needless to say, many insurers do not want to pay for Duexis. Yet sales of the drug are growing rapidly, in large part because its manufacturer, Horizon Pharma, who has figured out a way to circumvent efforts of insurers and pharmacists to switch patients to the generic components, or even to the over-the-counter versions.

It is called “Prescriptions Made Easy.” Instead of sending their patients to the drugstore with a prescription, doctors are urged by Horizon to submit prescriptions directly to a mail-order specialty pharmacy affiliated with the drug company. The pharmacy mails the drug to the patient and deals with the insurance companies, relieving the doctor of the reimbursement hassle that might otherwise discourage them from prescribing such an expensive drug.

Horizon is not alone. Use of specialty pharmacies seems to have become a new way of trying to keep the health system paying for high-priced drugs. Valeant Pharmaceuticals International, which has attracted government and media scrutiny for its huge price increases, does much the same thing for its dermatology products with a specialty pharmacy called Philidor Rx Services.

“They are all trying to get rid of the sticker shock of using their drugs,” said Dr. Kenneth Beer, a dermatologist in West Palm Beach, Fla. “They become the drugstore now,” he said.

He said Valeant’s program, which he had used, buffered physicians from insurers and complaints from their patients about high prices.

“It lowers one barrier to using their products,” he said.

Valeant revealed in October 2015 that it had received subpoenas from federal prosecutors in Manhattan and Massachusetts seeking information about its financial assistance programs for patients, pricing decisions and the distribution of its products. It is not clear if the probes are related in any way to Valeant’s relationship with Philidor.

Philidor, based in Hatboro, Pa., reveals little about itself on its website. It was denied a license in California in 2014 because, the state said, its application had not truthfully identified its owners and financial officers. Phone calls asking to speak to Philidor executives were not returned.

Valeant had said little about Philidor until J. Michael Pearson, Valeant’s chief executive, revealed the company’s quarterly earnings that Valeant had purchased an option to acquire Philidor in late 2015. He said that Valeant consolidated Philidor’s results in its own financial reports.

Mr. Pearson also said that the pricing environment had changed, and that the industry was “being aggressively sort of attacked for past pricing actions.” He said that Valeant was considering divesting the division selling neurological drugs where, he said, the biggest price increases had occurred.

He also said that in the future, price increases would be “more modest,” probably not more than 10 percent a year. Last year, he said, increases in list prices averaged 36 percent for the branded drugs sold by Valeant in the United States.

Specialty pharmacies are most known for providing patient assistance with complex drugs, many of them requiring refrigeration and injections for serious diseases and rare genetic disorders. But the drugs dispensed through the specialty pharmacies used by Horizon and Valeant are for common ailments like arthritis pain, acne and toenail fungus.

The programs do offer advantages to patients. The drugs are delivered quickly and co-pays are subsidized. Horizon said 98 percent of patients getting Duexis have co-payments of no more than $10, less than the co-pays would be for generics in many cases.

Moreover, if the insurer refuses to pay, the patient already has the drug and the manufacturer absorbs the cost. A spokesman for Horizon said that happened for a large number of Duexis prescriptions. Still, Horizon and Valeant apparently come out ahead because enough insurers do pay.

The practice is legal,  providing that co-pay assistance is not used for patients covered by Medicare or other federal programs. For federal programs, co-pay assistance is considered an illegal inducement to get someone to use a drug. Both Horizon and Valeant say they confine their programs to commercially insured patients.

In August 2015, one analyst asked the company to discuss the positive points of the Prescriptions Made Easy program.

“I think simply, the positive is we drove over $100 million in net revenue in the second quarter and rapidly increased prescriptions,” Timothy P. Walbert, the chief executive, replied. He then said the program was “doing the right thing for patients.”

Duexis is a combination of ibuprofen, an anti-inflammatory drug, and famotidine, the ingredient in Pepcid, which is supposed to prevent the serious and even lethal gastrointestinal problems that can result from chronic use of ibuprofen or similar drugs. Both drugs are available as generics, and over-the-counter. Horizon says that by combining the two drugs into one pill, taken three times a day, makes it more likely that patients will get the benefit of the stomach protection.

Horizon has increased the price of Duexis about tenfold since the drug was introduced in late 2011. In 2013, it acquired the main competitor to Duexis, a drug called Vimovo, which is a combination of the pain reliever naproxen and the stomach protector Nexium. Horizon immediately raised the price of Vimovo about 600 percent, and has roughly doubled it again since then, so both drugs now cost about the same amount per month.

It has become common in the last several years for pharmaceutical companies to offer co-payment assistance to make sure patients are not deterred from using a drug by out-of-pocket costs. Once the patient uses the drug, the pharmaceutical company is paid by the insurance company. Insurers say co-pay assistance circumvents their efforts to encourage the use of cheaper drugs by setting lower co-pays for them, thereby driving up overall medical spending.

Starting this year, the nation’s two largest pharmacy benefit managers, Express Scripts and CVS Health, said they would not pay for Duexis and Vimovo.

Despite that, Horizon said in its regulatory filing for the second quarter, “with the successful adoption of our Prescriptions Made Easy program by physicians,” sales volumes for Duexis increased by 72 percent in the first half of this year compared to the first half of 2014. In dollars, sales of Duexis rose 131 percent in the first half to $73.1 million. In the second quarter, 71 percent of Duexis prescriptions and 61 percent of those for Vimovo went through the Prescriptions Made Easy program.

Horizon targeted physicians whose patients had strong commercial coverage. “Patients whose insurance covers Horizon’s medications serve to support co-pay buy-downs for patients with less generous coverage.

Horizon said in its regulatory filing that prescriptions filled through the program “are less likely to be subject to the efforts of traditional pharmacies to switch a physician’s intended prescription of our products to a generic or over-the-counter brand.” It said that if it were unable to get physicians to direct prescriptions to Prescriptions Made Easy, “We may experience a significant decline in Duexis and Vimovo prescriptions as a result of formulary exclusions.”

This article is for informational purposes only; no personal advice or recommendation is intended.


Novel Plan to Curb Drug Costs

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This is about consumer-friendly ratings regarding the benefits of new drugs, the limits on what patients pay for drugs, and requiring drug companies to disclose how much they actually spend on research.

With the public concerned about the high cost of new medications, these are some of the proposals offered today [September 18, 2015] by a policy center often aligned with the Obama administration.

The multistep plan from the Center for American Progress aims to get the attention of the 2016 Democratic presidential candidates. Hillary Rodham Clinton and Vermont Senator Bernie Sanders are both on record advocating action against overpriced medications.

In a break from standard liberal solutions, the proposal refrains from urging that the government be empowered to negotiate drug prices for Medicare patients. By law, Medicare’s prescription drug program can’t do that now. Topher Spiro, the center’s health policy expert, said he hopes the new emphasis on paying for value and consumer education will attract at least some Republican support.

“We’ve been talking about Medicare negotiation … for many, many years and gotten nowhere,” said Spiro. “We wanted to change the dynamic.” While some of the proposals require legislation, others could be green-lighted by the administration.

But the Pharmaceutical Research and Manufacturers of America strongly criticized the plan, saying in a statement it would impose “arbitrary caps” on prices, “thwart innovation, impede the development of new medicines for patients and cost countless jobs.” Industry says the cost of drugs reflects investment in research as well as the uncertainties of developing a new medication.

Nevertheless, insurers, employers, and state and federal policymakers may be interested in the new proposals. A poll this summer found that 72 percent of Americans think the cost of prescription drugs is unreasonable. The outcry gained momentum after the introduction last year of a $1,000-a-pill cure for hepatitis C.

The 45-page plan seeks to rein in the overall cost of drugs while ensuring that patients get to share in the savings.

Among its recommendations:

—Requiring drug companies to disclose how much they spend on research and development, production, and sales and marketing. If a manufacturer fails to meet a threshold for research spending, it could be required to make payments to a new fund to support the National Institutes of Health. Taxpayer-funded NIH research provides the springboard for some new drugs.

—Commissioning an independent research organization to evaluate new drugs for effectiveness. In a strategy similar to safety testing of cars, patients and doctors would get easy-to-understand ratings of whether a new drug provides no added benefit, minor added benefits or significant added benefits when compared to existing medications. The ratings would be included in advertising and would become the basis for pricing recommendations from the independent evaluator. The price guidelines would not be arbitrary, but based on evidence, said Spiro.

—If a new drug is priced more than 20 percent above the recommended price, and if the manufacturer relied on taxpayer-funded research to develop it, the government would be allowed to license that medication’s patent to generic competitors. The center claims a 1980 federal law known as Bayh-Dole provides this authority.

—Protecting people covered through employer plans and other private insurance by capping cost-sharing for drugs at $3,250 annually and setting monthly limits as well.

—Granting exemptions from antitrust laws so insurers and pharmacy benefit managers together could negotiate prices for the highest cost drugs with manufacturers.

—Changing Medicare’s payment policy for medications administered in a doctor’s office, including many cancer drugs. Physicians currently get an added administrative fee of 6 percent of the drug’s price. Critics say that creates financial incentives to prescribe the most expensive medication.

A prominent doctor and researcher said the plan has the potential to shift drug company pricing from a hunt for profits to a search for value.

The pharmaceutical industry is currently enjoying “a rising tide in prices that is carrying everything along,” said Dr. Peter B. Bach of Memorial Sloan-Kettering Cancer Center in New York City.

“But the bull’s eye we want them to be aiming at is higher,” added Bach. Under the plan “you would maximize your profits by winning on creating the best medicine.”