How Drug Companies Are Driving Up Costs in US Prisons
Policy + Politics

How Drug Companies Are Driving Up Costs in US Prisons

Rick Wilking

The combination of an aging population, rising medical service costs and staggering increases in prescription drug prices for treating hepatitis C and cancer sparked a 37 percent overall increase in the federal prison system’s health care costs over the past eight years, according to a new Government Accountability Office study.

The Bureau of Prisons, which oversees 154,000 inmates, is by no means the largest federal agency providing health care services, and is dwarfed by the Department of Veterans Affairs, Medicaid and Medicare. However, the federal prison system is an important microcosm of the federal government’s mounting fiscal challenge in providing medical care to more than 100 million Americans.

Related: How Big Pharma Lobbyists Keep Medicare Drug Prices High

Between fiscal 2009 and 2016, the federal prison system spent or budgeted more than $9 billion for treating inmates – from $978 million in 2009 to $1.34 billion last year. Currently, about 19 percent of the bureau’s annual operating budget goes toward medical, dental and mental health treatment.

On an inflation adjusted per capita basis, health care obligations rose from $6,334 in 2009 to $8,602 in 2016.

Far and away, the biggest drain on the bureau’s annual medical and health care budget was the purchase of anti-viral wonder drugs like Sovaldi and Harvoni that have revolutionized the treatment of the often deadly hepatitis C virus.

Hepatitis C affects at least 2.7 million people in this country and was responsible for more than 19,000 deaths in 2014, according to the Centers for Disease Control and Prevention.

While the Bureau of Prisons treats just a small portion of those suffering from the disease, the prison system’s spending for the new drugs surged 427 percent over the past eight years, according to the GAO. The prisons spent $46.7 million on hep C drugs between 2009 and 2016.

The new report issued Monday cautions that the Bureau of Prisons “lacks or does not analyze certain health care data necessary to understand and control its costs.” For instance, while the bureau’s data shows how much it is spending overall on health care both inside and outside prison gates, it lacks data showing expenditures for individual inmates or for a particular health care service.

Related: Medicare Spending on Hepatitis C Drugs Is Soaring

Yet the data that the Bureau of Prisons provided GAO offers one of the clearest insights to the financial impact of rising prescription drug costs on the federal government, insurers and individuals. A number of federal courts have ruled that inmates have a constitutional right to adequate medical, dental and mental health care

According to the analysis, the Bureau of Prison’s total pharmaceutical expenditures rose from $61.4 million in fiscal 2009 to $111.7 million in fiscal 2016, an 82 percent increase. After accounting for ebbs and flows in the inmate population over this period, the GAO concluded that per capita expenditures increased from $443 per inmate in fiscal 2009 to $715 in fiscal 2016, an increase of more than 60 percent.

Much of those increases were due to new advances in medications and biologics to treat hepatitis C liver damage and certain kinds of cancer, according to the study. A turning point was the Food and Drug Administration’s approval of two new hepatitis C drugs in May 2011, which provided a cure but at a steep cost.

The Bureau of Prisons’ hep C medication expenditures increased by almost 132 percent in just the first full year after the drug became available, between 2011 and 2012.

California-based Gilead Sciences was the first to enter the field beginning in December 2013 with Sovaldi and Harvoni, highly profitable drugs that carried retail prices of up to $95,000 for a full treatment.

Related: Budget-Strapped States Are Rationing Hepatitis-C Drug Treatment

Since 2014, the FDA has approved competing drugs with similar high cure rates from AbbVie, Merck and Bristol-Myers Squibb. More recently, the FDA approved another Gilead hepatitis C drug with even greater effectiveness but a lower price than the company’s two other drugs.

As these newer medications became the standard of care for treating hepatitis C, the Bureau of Prisons was required to use them.

At the same time, bureau spending on cancer drugs rose sharply, from $1.9 million in fiscal 2009 -- or 6 percent of total spending on drugs in greatest demand -- to $7.9 million in 2016 or 15 percent of major drug spending.

The report was requested by Sen. Chuck Grassley (R-IA), chair of the Senate Judiciary Committee, and Sen. Claire McCaskill of Missouri, the ranking Democrat on the Committee of Homeland Security and Governmental Affairs.

GAO said it undertook the study “in light of the importance of providing health care to BOP inmates, and the rising costs associated with providing care.”