By Steve Graff and Katie Delach

What does it take to become the most vilified drug company in America? Raise the price of your life-saving injection device more than 450 percent. Make it difficult for many users of the drug – including many children among the more than 3.6 million – to afford it. Defend your price hike, then equivocate in your public statements and arouse the fury of Congress as well as patients. The product is the EpiPen, made by Mylan N.V., which this summer surpassed Turing Pharmaceuticals and its brash CEO, Martin Shkreli, as the prime example of the drug company that puts profits – extravagant profits – first.

Since 2009, Maylan has steadily increased the price of its EpiPen, a necessity for millions of people with severe allergies. Originally, the two-pen pack cost a pharmacy $103.50. Since then, the price rose to $264.50 in July 2013; to $461 in May 2015; and this summer to $608.61. On August 21, a headline in Forbes.com read: “Why Did My­lan Hike EpiPen Prices 400%? Because They Could.” As with Turing’s Daraprim, the product that Mylan sells is de­cades old; the company bought it in 2007 and any re­search and development costs were recouped long ago. In Mylan’s case, it is maintaining the $608.61 for the “branded” version but has announced a generic version of the EpiPen – but a hike from an original price of $100 in 2008 to $300 for the generic version is still steep. 

Mylan and Turing Pharmaceuticals are by no means the first companies to increase the price of already-approved drugs, which often places them beyond patients’ reach. According to an AARP Public Policy Institute report, drug prices have steadily increased and outpaced inflation for years now. Is it simply a case of capitalism at work? Or should there be a difference when the lives of people are at stake?

In this issue of Penn Medicine, we take a look at these issues from different perspectives. In one case, inside our hospitals, our physicians and pharmacists are helping patients find new ways to afford the rising costs of their drugs. In addition, a recent Penn Medicine study encourages physicians to select an equivalent generic drug instead of a brand-name drug when prescribing a medication. We also check in with Ezekiel J. Emanuel, the chair of the Perelman School’s Department of Medical Ethics and Health Policy, a widely quoted expert whose background in both economics and ethics informs his analysis.

HUP’s Efforts to Soften the Blow

Like patients, hospitals have been struggling to deal with the rising cost of drugs. “This is becoming a huge problem,” says Richard Demers, M.S., R.Ph., director of pharmacy services at the Hospital of the University of Pennsylvania. “Companies are buying drugs and turning around and increasing the price by a lot – it’s a profit grab. There are multiple approved drugs out there today that have been hiked up.” And it’s costing both patients and hospitals, during a time when reimbursements from the Centers for Medicare and Medicaid Services have already been cut.

The issue is also relevant for newly developed drugs, partic­ularly ones for cancer, which now frequently cost well over $100,000 a year. New biologic agents can do wonders for managing patients’ conditions, but improvements come with significant financial costs. Pharmaceutical companies argue that research endeavors and costly manufacturing justify the high price tags, but Demers asserts that pricing is ultimately guided by what the market can bear.

Some patients are able to shoulder the rising costs of out-of-pocket medical expenses – which remain even after some of the most premium insurance plans pick up a share of the costs – through savings, loans, or financial assistance pro­grams through charitable foundations and even the makers of the drugs. But others are ruined by these costs: Last year, bankruptcies from unpaid medical bills were estimated to af­fect two million Americans. Those bills continue to be the most common reason people file for bankruptcy in this coun­try. The customary response of the pharmaceutical industry is that spending for drugs accounts for only about 10 percent of the nation’s health care costs and that published list prices do not reflect the discounts and rebates that companies may of­fer. Even so, the out-of-pocket medical expenses can be dev­astating.

Every day at Penn Medicine, nurses, physicians, pharma­cists, and financial counselors are working behind the scenes to ensure that patients can afford their lifesaving medical care. Specialists coordinate and communicate with insurance com­panies on patients’ behalf, seek out sponsorships from phar­maceutical companies, and work with foundations that help subsidize medical bills for those in need.

“To help solve this problem, we all need to take a step back and work together to figure this out, so the person who is sick doesn’t have to go through these gyrations to get something that could save their lives,” Demers says. Penn has worked with hundreds of patients on their medical bills, helping to alleviate some of the burden and keeping them on track for care.

Of course, HUP is not alone in its efforts to keep drug costs down. A Washington Post article this spring (“Hospitals Rat­tled by Drug-price Increases”) pointed out that some hospitals are trying to manage their budgets by restricting or adjusting the medications they provide. For example, the list prices of two injectable heart medications, Nitropress and Isuprel, have risen more than 200 percent and 500 percent respectively. At the University Hospitals of Cleveland, when doctors sign into the electronic medical record to prescribe certain drugs, a row of five dollar signs pops up. The message, as the Post puts it, is clear: “Think twice before using this drug. Pick an alter­native if possible.”

Can a “Nudge” Make a Significant Difference?


At Penn Medicine, a recently formed “nudge unit” – the world’s first such unit in a health system – is also attempting to influence how physicians prescribe. The approach, how­ever, is somewhat more subtle. 

In their book Nudge: Improving Decisions About Health, Wealth, and Happiness (2008), Richard Thaler, a behavioral economics expert at the University of Chicago, and Cass Sun­stein, a legal scholar, describe how “small interventions in the environment or incentives can encourage people to make bet­ter decisions.” Decision-making of any kind is strongly influ­enced by how choices are presented and information is framed. While the basic principles of nudge theory aren’t ex­actly new, the evidence-based applications are. The successes of the first nudge units – such as the Behavioural Insights Team (BIT), created by former British Prime Minister David Cameron in 2010 in an attempt to improve public services and save money – are currently spurring worldwide efforts across many industries to find the most effective ways to in­fluence how decisions are made. By applying seemingly insig­nificant “nudges” to standard operating procedures, the BIT has produced notable results. For example, there has been an increase of 100,000 registered organ donors per year in En­gland, and the number of army applicants has doubled.

What kind of small changes are involved? It could be as simple as requiring people to opt out of something instead of asking them to opt in. Or it could be requiring that people se­lect “yes” or “no” to adding a dessert to their online pizza de­livery order before allowing them to proceed to check out.

In the health care arena, researchers at Penn Medicine ap­plied nudges to default prescription settings in electronic medical records. The goal was to encourage physicians to pre­scribe more generic drugs instead of brand-name medica­tions. In their study, when a physician prescribed a drug for a patient, the electronic medical record would default to an equivalent generic, if available. When warranted, the physi­cian could still prescribe the brand name by selecting the “dis­pense as written” checkbox. The researchers compared the prescribing rates before and after the addition of the opt-out checkbox. The results, published online in JAMA Internal Medicine in May, showed that by simply adding an opt-out checkbox to prescription default options, generic prescribing rates increased from 75 percent to 98 percent. In the long run, this seemingly small change could produce a significant cost savings for both patients and the health system.

“Systematic errors in decision-making – from what provid­ers do (or fail to do) to choices patients make – often hinder our ability to deliver high-value care,” says Mitesh Patel, M.D., M.B.A. ’09, M.S. ’14. Director of the Penn Medicine Nudge Unit, he is an assistant professor of medicine in the Perelman School and of health care management in the Wharton School. “Applying principles from behavioral sciences to the way we design applications or systems in which decisions are made can steer us towards better decisions, higher value, and improved outcomes.”

Penn Medicine has a multidisciplinary group of experts in behavioral economics. Through the Center for Health Incen­tives and Behavioral Economics, it has been a national leader in applying and testing these concepts within real-world ap­plications. However, how choices presented within digital en­vironments affect the delivery of care has not been closely ex­amined until now. The team at Penn is working to design, im­plement, and test various ways in which nudges can be used.


Ezekiel J. Emanuel believes that drug prices are too high, but responsibility is shared.

Ezekiel J. Emanuel, M.S.C., M.D., Ph.D., is the chair of the Perelman School’s Department of Medical Ethics and Health Policy and the University’s vice provost for global initiatives. For two years, however, he served as special advisor for health policy to the director of the Office of Management and Bud­get in the White House. He looks at the rising cost of drugs from the double perspective of economics and ethics.

The week that Emanuel spoke to Penn Medicine, Heather Bresch, the CEO of Mylan N.V., testified before Congress about the price of the EpiPen, which has increased from $100 for a two-pack in 2009 to $600 today. As Emanuel sees it, the high price of drugs is only part of the grim state of high health care costs in general. Emanuel was blunt: “It’s mind-boggling and outrageous. I sliced open my finger and went to an E.R. in New York.” There he was given a tetanus shot, and the whole treat­ment was over in about five minutes. “It was done by a nurse, not a doctor or nurse practitioner. They charged more than $1,000 just for that. That’s the kind of thing that the public is responding to.” As for the cost of drugs, he continued, “There’s been a steady stream of outrage. . . . Even drugs where there’s been no further research on them or changes of any kind, they are steadily raising the rates of those drugs.” That was the case with Mylan, which bought the EpiPen business in 2007.

Speaking about Mylan on CBS’s “Squawk Box” in late Au­gust, Emanuel argued that there is basically a monopoly in the drug business, and the companies exploit it to raise prices. The only way to keep prices reasonable in such a situation is, he said then, “government regulation, unfortunately.”

On the other hand, as he told Penn Medicine, Emanuel sees no need to single out villains among the drug companies. “I don’t like to think of it that way – who we put in the public stockade.” Instead, he said, he is concerned that there are no incentives to actually save money. “Doctors aren’t paid in any way to bring total cost of care down. We need to provide in­formation on how much does this drug versus that drug cost, or how much this specialist costs versus another in terms of what they do and the quality of care. Right now, there are no incentives, and that’s part of the reason why it’s so costly.” 

Another problem he sees is drug pricing inflated by the middle men – “and drug companies are somewhat responsible for that. It’s really the system: there’s a game of discounts when you bundle drugs together. But doctors can have an ef­fect on drug prices in deciding what they prescribe when they use price as a factor in that choice.” Most patients don’t re­ceive that information about cost, but, Emanuel continued, there are many places that do provide it. In California, for ex­ample, “the guidelines for the practice require that drug or­ders are put through an affordability filter, and it chooses the drug that is most affordable unless there’s a specific reason. So you won’t get the fancy insulin – you’ll get the standard 70/30 insulin because it’s the more affordable option.” 

Would doctors protest that their time is already so limited? “There’s no excuse for not knowing,” Emanuel said emphati­cally. “If you treat hypertension, you start with the most af­fordable option. And if that doesn’t work, you escalate. It’s not rocket science.” He believes the same thinking should prevail with tests. “If you’re responsible for total cost of care for a pool of patients and order unnecessary tests, that’s going to work against them. You have to create a financial incentive for them not to order unnecessary tests.” 

As for the patients themselves? “Patients make demands for specific drugs and more tests and more treatments that are not necessarily better,” Emanuel said. “I think we also need patients to be aware because their premiums go up and they see the bills coming in, and that is a reflection of the demand for services. But I don’t want to lay it on the patients, they are minor players in this. It’s more the doctors and the health care providers." — Dawn Fallik

The Impact of “Financial Toxicity”


“If a simple, low-cost change like adding an opt-out check box to prescription settings can make a significant impact, there are likely other refinements that can be made just as easily that will also result in cost savings for patients and health systems,” says C. William Hanson, M.D. ’83, chief med­ical information officer at Penn Medicine and a member of the advisory board of its Nudge Unit. “It’s a valuable area of research to continue exploring.”

In addition to hurting patients’ bank accounts, the high costs of drugs can affect their health as well. Treatments may be delayed or stopped altogether, and patients’ quality of life can plummet during times of financial strain. The problem is pervasive enough that a relatively new term has been coined: “financial toxicity.” It’s described as the financial burden re­lated to health care – and it seems to affect even wealthy pa­tients and those with insurance. Like a more traditional side effect, this kind of toxicity may threaten a patient’s well-being.

A study published in Lancet Haematology by researchers at Penn’s Abramson Cancer Center (ACC) has documented these harmful effects on patients who have multiple myeloma. The senior author was Edward Stadtmauer, M.D., chief of he­matologic malignancies and a professor of hematology/oncol­ogy at the center. He and his colleagues found that even pa­tients with multiple myeloma who have health insurance may be vulnerable to financial toxicity. And that includes those who earn more than $100,000 a year.

The costs of newly approved therapeutics for blood cancer have increased 10-fold during the past 15 years. Many agents are priced at $10,000 or more a month. Patients can be on them for months, even years.

Nearly half of the 100 patients surveyed in the ACC study dipped into their savings to pay for their care, and 17 percent reported delays in treatment because of costs. One in five bor­rowed money, and 10 stopped treatment altogether. Surprisingly, the study included patients with demographic characteristics thought likely to protect against financial burden. All partici­pants were insured, and all patients with Medicare fee-for-service coverage had supplemental insurance to assist with some out-of-pocket costs. In addition, they had a median household in­come and education level above the national average. 

“The treatments and clinical outcomes for our patients are really poised to change for the better,” said the study’s co-au­thor, Scott Huntington, M.D., in a Lancet podcast. A former oncologist in the Abramson Cancer Center, he is now a fac­ulty member at Yale University. But despite the promise of new cancer treatments, he went on to acknowledge what he calls “the untenable rise in costs.” As Huntington put it, “Pa­tients with cancer are already at risk for financial burden re­lated to lost wages or extraneous expenses that we can’t really control as health care providers. This really makes it that much more important for us as oncologists to confront these rising treatment costs in part to try to decrease this treat­ment-related financial toxicity.” If they fail to do so, he warned that widespread access to promising cancer treatments may be in jeopardy.

Indeed, the issue goes beyond blood cancers. A recent com­mentary in Mayo Clinic Proceedings pointed out that the cost of cancer drugs increased between 1995 and 2013 by an aver­age of $8,500 a year, a spike that has many physicians speak­ing out more vigorously. The commentary, signed by more than 100 oncologists, noted that out-of-pocket costs now make up about 20 to 30 percent of the total cost of cancer treatment. For example, a patient with cancer who needs one cancer drug that costs $120,000 per year (the going rate for newly approved drugs) could have out-of-pocket expenses as high as $25,000 to $30,000.

That’s more than half the average household income – and possibly more than the median take-home pay for a year. 

“This increase is causing harm to patients with cancer and their families,” the authors wrote. “The current pricing system is unsustainable.”

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