Rising Cost Of Drugs: Where Do We Go From Here?
[Click to Enlarge] The trends are clear: patients and institutions across the nation are concerned about skyrocketing drug prices. This post offers some information about drug pricing, explores the notion of market intervention, and proposes a series of responses to high pharmaceutical costs. A few jaw-dropping facts quickly illustrate the pattern of rising drug costs. The average annual cost of cancer drugs increased from roughly $10,000 before 2000 to over $100,000 by 2012, according to a recent study in Mayo Clinic Proceedings. Several breakthrough specialty medications and orphan drugs recently approved by the Food and Drug Administration (FDA) have subsequently entered the pharmaceutical market with hefty price tags. Consider Biogen Idec’s multiple sclerosis drug, Tecfidera, which costs $54,900 per patient per year; hepatitis C cures from Gilead Sciences, with a sticker price of $84,000 per patient; and Orkambi, a cystic fibrosis drug from Vertex Pharmaceuticals approved this month, priced at a whopping $259,000 per year. If specialty pharmaceutical prices are dropping jaws, generic drug prices have at least managed to raise eyebrows. In 222 generic drug groups, prices increased by 100 percent or more between 2013 and 2014, according to Forbes. As generic drugs have long provided payers some respite from other more expensive products and services, rising prices in generics like Mylan NV’s albuterol sulfate—which increased about 4,000 percent from 2013 to 2014—are well worth the concerns. The increase in drug costs—projected by the Centers for Medicare and Medicaid Services Office of the Actuary to be 12. 6 percent in 2014—has far outpaced inflation, which has hovered between zero and 2 percent over the last three years; it has also outstripped growth in other medical costs. Pricewaterhouse Coopers (PwC), in its 2013 annual medical cost trend report, projected overall cost growth to be 6.5 percent in 2014 in the large employer market. In stark contrast, a recent Express Scripts analysis declared a 13.1 percent increase in prescription drug spend in the same period. On the surface, it appears as if drug manufacturers are unduly milking the udder of American health care reimbursement, even as it runs dry for insurers and providers. Yet, this is hardly a crime. The behavior of the pharmaceutical industry is tolerated, suggesting that drugmakers have sufficient rationale for pricing products. In contrast, a Kaiser Health Tracking Poll last month found that 73 percent of Americans find the cost of drugs to be unreasonable, and most blamed drug manufacturers for setting prices too high. Some particularly high cost medications for hepatitis C have even forced insurers and Medicaid programs to limit usage of the drugs. The financial success of Big Pharma, medical innovations brought by its investments, absence of price intervention, public concerns, reactionary measures that affect clinical care — together these phenomena paint a puzzling picture. Pricing Drugs While research and development can indeed carry large costs and span multiple years, there is simply more to pricing drugs. Many modern-day assessments cite the value that a new drug brings to patients, along with savings incurred…