Pharma Critics Ignore HHS Sec. Azar Call for Value in Favor of Forging Facts About Drug Prices

  • by: Robert Goldberg |
  • 05/02/2018
Health and Human Services Secretary Alex Azar will give the keynote at the World Health Care Congress this morning.  In remarks prepared for delivery, Azar focuses on how HHS is “working to transform our healthcare system into one that pays for value. A value-driven healthcare system will look dramatically different from what we have today: Such a system will pay for health and outcomes rather than sickness and procedures. It will deliver better, cheaper healthcare for the people we serve, and it will support the next generation of cures to diseases once considered terminal.”
All of which will be ignored by the critics of the pharmaceutical industry, most of whom are now paid for by the Laura and John Arnold Foundation.  Rather, they will use Azar’s speech as a pretext to flood Twitter with statements about the skyrocketing rate of price increases, how drug companies are making medicines unaffordable and how marginally effective there high priced products really are.
Critics only want to talk about value in terms of how they would set prices and limit access of new medicines based on their measure of how much a life is worth.  Using ICER guidelines, the experts defend hepatitis C drug limits that have cut cure rates from 99 percent to 80 percent or assessments of drugs for cystic fibrosis and treatment resistant high cholesterol that would cut prices by 80 percent but still require patients to pay thousands out of pocket.  As a study I am wrapping up will show:  If they had their way, none of the new medicines introduced since 2000 would be considered valuable at their initial prices.
To be sure, newer drugs are a growing part (46 percent) of total drug spending.  But the critics ignore the reason such novel therapies are a bigger part of treatment for more diseases: they are not just worth it; they are indispensable in making staying healthy more affordable and easier:
Prescription drug spending has reduced the cost of treating disease.  Every dollar spent on new medicines reduces expenditures on costlier and less effective care by $6. 
The more we spend on prescription drugs as a percent of health expenditures to treat or the less we spend on that condition overall.  Nearly 100 percent of health expenditures on polio, measles, pneumonia tuberculosis, HIV, etc., is spent on prescription drugs.  In their absence, the cost of treating each patient with those diseases would be much more if we were spending less on medicines.   Recent studies have found that in the absence of new medicines, health insurance premiums would be on average 15-20 percent higher each year than they are now. 

The newer medicines the healthier we become, the more productive we are and the less expensive health care becomes.  Critics claim that new medicines, especially for cancer, cost more and more yet they do not add much to people living longer and healthier lives.  This ignores the cumulative effect of medicines.  The first and second generation of HIV medicines, measured in isolation, did not seem to increase well-being or life expectancy.  The same goes for new drugs for a wide variety of tumors and rare diseases.  So how do people with HIV live a healthy life with the same life expectancy as someone without the disease?  How has the average life expectancy of someone with cystic fibrosis increased from 20-60 in two decades?  And how has the number of cancer survivors increased from 9.8 million in 2001 to over 16 million in 2017? 
It is true that the sticker price of new drugs has increased, so has the price of lots of things, including other medical procedures and services that prescription drugs have eliminated.  The cost of being hospitalized with breast cancer has increased 200 percent since 2004.   The cost of an allogeneic bone marrow transplant has increased from $750K to $900K between 2008 and 2016.  

At the same time, the out of pocket cost for most medicines has remained the same or declined because 90 percent of our drugs are generic.  

A small percentage of Americans who use new medicines pay more out of pocket each year. But that is largely because health plans and PBMs are collecting rebates while charging the sickest patients a bigger and bigger share of higher retail prices.   The net price of newer medicines has increased less than 2 percent a year since 2013, yet the average out of pocket patient cost has jumped 53 percent due to higher list prices and higher cost sharing.  

Last year I published a study showing that 2 percent of all patients, using 2 percent of prescriptions, paid nearly 25 percent of all out of pocket costs and generated 30 percent -- $39 billion of the nearly $130 billion in rebates.  Critics like to claim that eliminating the out of pocket cost of the newer drugs will do nothing to reign in drug prices.  But they ignore that out of pocket spending has increased by over 50 percent even as the rate of increase in net spending for the most expensive medicines (meaning net of rebates) declined. 

It begs the question of why cost sharing for drugs goes up even as it stays the same for other procedures and services that cost more over time.
And most important, it boggles the mind and the conscience, that they only care about controlling drug prices rather than ensuring access to new medicines, the proven source of value in health care, is made affordable.
Count how many times the critics mention these facts.  It will take a minute at most.  By comparison, counting the number of tweets that ignore the value of medical innovation and distort the data, ignore the context or outright lie to do so, could take months.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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