Latest Drugwonks' Blog
From the current edition of Newsweek …
There Is a Sure Cure, but It’s Not Covered by Your Health Insurance Plan
When 41-year-old New Jersey resident Amy Speicher was diagnosed with advanced skin cancer, she feared the disease as well as the hair loss, vomiting and crippling fatigue that usually come with cancer treatment.
None of that came to pass. Speicher sailed through her treatment, balancing parenting and a full-time job. How? Her insurance paid for a groundbreaking immunotherapy, which has far fewer side effects than run-of-the-mill chemo.
Unfortunately, her story is the exception. Throughout the country, insurers increasingly shun the most advanced cures, treatments and tests because they don't want to foot the bill. This short-term focus on profits is callous—and counterproductive. Denying patients the best health care leaves them sicker, ultimately raising insurers' expenses.
In recent years, insurers have replaced fixed co-pays—say, $20 at the pharmacy—with "co-insurance," where patients are asked to pay a percentage of an advanced medicines' total cost. Insurers know many patients can't afford these payments and will ask their doctors for less expensive—and often, less effective—medicines.
Insurers have also embraced "fail first" policies to limit patients' access to cutting-edge treatments. Such policies require patients to use cheaper treatments first. Only if those treatments fail—and patients get sicker—do insurers pony up for cutting-edge drugs.
Increasingly, insurers are also refusing to pay for some treatments unless a doctor first seeks permission before writing a prescription. Most drug regimens should begin immediately, so waiting days or even weeks for an insurer to approve a doctor's prescription simply isn't tenable.
Consider the case of Angela and Nate Turner, both addicted to opioids. Their doctor sought insurer permission to prescribe a treatment that lessens drug cravings. As the insurer delayed, precious time passed. Angela became violently ill from withdrawal after waiting for three days. After waiting five days, Nick succumbed to his urges and used heroin.
Insurers are even reducing coverage of preventive care.
For instance, insurers in New Jersey, Tennessee and North Carolina have stopped covering the only genetic screening test approved by the Food and Drug Administration. Such tests scan for genetic mutations that often lead to hereditary breast or ovarian cancer. The insurers now cover only cheaper, lower-quality genetic tests, none of which have proved to be as accurate.
The less-precise tests could raise a woman's risk of receiving a false positive, a test result that incorrectly concludes she's likely to get cancer and should undergo expensive preventive surgery. Worse, lower-quality tests could also lead to false negatives. Women would incorrectly think they have little risk of cancer and opt out of preventive surgeries that could save their lives.
Subpar insurance harms patients' financial health too. Using a better medicine or genetic test from the start prevents lost productivity and needless hospitalizations. In fact, for every dollar spent on newer advanced medicines, non-drug medical spending drops by more than $7.
Insurers know that better preventive care is ultimately cost-effective. But they hesitate to make large up-front investments in patients' health since people frequently switch insurers. Companies don't want to spend heavily—and jeopardize their sacred quarterly results—to save their rivals money a few years down the road.
But this short-term thinking won't save them in the long run. If the overall pool of insured people becomes sicker, insurers' expenses will increase. Year-to-year fluctuations obscure the fact that insurers are just recruiting each other's sick people.
Under the Affordable Care Act, insurers can't resort to their old practice of flat-out denying people coverage. And their new strategies of restricting access to the best treatments only make people sicker, delaying the inevitable expense of covering their care.
Health care economists tout "precision medicine"—the strategy of giving patients treatments and tests uniquely suited to their health and genetic backgrounds—as a way to ultimately prevent and cure illnesses and curb health care spending. But precision medicine works only if insurers pay for the treatments doctors recommend.
If insurers want to help their customers, and their own bottom lines, they need to think long term and cover treatments that prevent and wipe out diseases.
Peter J. Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.
There Is a Sure Cure, but It’s Not Covered by Your Health Insurance Plan
When 41-year-old New Jersey resident Amy Speicher was diagnosed with advanced skin cancer, she feared the disease as well as the hair loss, vomiting and crippling fatigue that usually come with cancer treatment.
None of that came to pass. Speicher sailed through her treatment, balancing parenting and a full-time job. How? Her insurance paid for a groundbreaking immunotherapy, which has far fewer side effects than run-of-the-mill chemo.
Unfortunately, her story is the exception. Throughout the country, insurers increasingly shun the most advanced cures, treatments and tests because they don't want to foot the bill. This short-term focus on profits is callous—and counterproductive. Denying patients the best health care leaves them sicker, ultimately raising insurers' expenses.
In recent years, insurers have replaced fixed co-pays—say, $20 at the pharmacy—with "co-insurance," where patients are asked to pay a percentage of an advanced medicines' total cost. Insurers know many patients can't afford these payments and will ask their doctors for less expensive—and often, less effective—medicines.
Insurers have also embraced "fail first" policies to limit patients' access to cutting-edge treatments. Such policies require patients to use cheaper treatments first. Only if those treatments fail—and patients get sicker—do insurers pony up for cutting-edge drugs.
Increasingly, insurers are also refusing to pay for some treatments unless a doctor first seeks permission before writing a prescription. Most drug regimens should begin immediately, so waiting days or even weeks for an insurer to approve a doctor's prescription simply isn't tenable.
Consider the case of Angela and Nate Turner, both addicted to opioids. Their doctor sought insurer permission to prescribe a treatment that lessens drug cravings. As the insurer delayed, precious time passed. Angela became violently ill from withdrawal after waiting for three days. After waiting five days, Nick succumbed to his urges and used heroin.
Insurers are even reducing coverage of preventive care.
For instance, insurers in New Jersey, Tennessee and North Carolina have stopped covering the only genetic screening test approved by the Food and Drug Administration. Such tests scan for genetic mutations that often lead to hereditary breast or ovarian cancer. The insurers now cover only cheaper, lower-quality genetic tests, none of which have proved to be as accurate.
The less-precise tests could raise a woman's risk of receiving a false positive, a test result that incorrectly concludes she's likely to get cancer and should undergo expensive preventive surgery. Worse, lower-quality tests could also lead to false negatives. Women would incorrectly think they have little risk of cancer and opt out of preventive surgeries that could save their lives.
Subpar insurance harms patients' financial health too. Using a better medicine or genetic test from the start prevents lost productivity and needless hospitalizations. In fact, for every dollar spent on newer advanced medicines, non-drug medical spending drops by more than $7.
Insurers know that better preventive care is ultimately cost-effective. But they hesitate to make large up-front investments in patients' health since people frequently switch insurers. Companies don't want to spend heavily—and jeopardize their sacred quarterly results—to save their rivals money a few years down the road.
But this short-term thinking won't save them in the long run. If the overall pool of insured people becomes sicker, insurers' expenses will increase. Year-to-year fluctuations obscure the fact that insurers are just recruiting each other's sick people.
Under the Affordable Care Act, insurers can't resort to their old practice of flat-out denying people coverage. And their new strategies of restricting access to the best treatments only make people sicker, delaying the inevitable expense of covering their care.
Health care economists tout "precision medicine"—the strategy of giving patients treatments and tests uniquely suited to their health and genetic backgrounds—as a way to ultimately prevent and cure illnesses and curb health care spending. But precision medicine works only if insurers pay for the treatments doctors recommend.
If insurers want to help their customers, and their own bottom lines, they need to think long term and cover treatments that prevent and wipe out diseases.
Peter J. Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.
When it comes to biosimilars, where is True North?
An interesting new paper on the value of biosimilars from the folks at Amundsen Consulting. The paper is appropriately titled, “Who Saves?” The answer isn’t what patients want to hear.
Per the report:
“It may be difficult for patients, physicians, and advocates to understand the value of biosimilar therapies: Because patient costs are not likely to decline, use of biosimilars may be especially difficult to rationalize for those patients who are already gaining clinical benefits from innovator therapies. Without the realization and effective communication of how payers will use savings to support patient care or reduce cost, the value of biosimilars to the U.S. healthcare system will be limited ... Therefore, it is critical that the savings recognized by other parties translate into meaningful improvements in access or new programs/initiatives that advance patient care. Moreover, they need to be communicated to patients and plan sponsors effectively."
The complete paper can be found here.
An interesting new paper on the value of biosimilars from the folks at Amundsen Consulting. The paper is appropriately titled, “Who Saves?” The answer isn’t what patients want to hear.
Per the report:
“It may be difficult for patients, physicians, and advocates to understand the value of biosimilar therapies: Because patient costs are not likely to decline, use of biosimilars may be especially difficult to rationalize for those patients who are already gaining clinical benefits from innovator therapies. Without the realization and effective communication of how payers will use savings to support patient care or reduce cost, the value of biosimilars to the U.S. healthcare system will be limited ... Therefore, it is critical that the savings recognized by other parties translate into meaningful improvements in access or new programs/initiatives that advance patient care. Moreover, they need to be communicated to patients and plan sponsors effectively."
The complete paper can be found here.
My colleague Peter Pitts has penned an eloquent response to the UN Secretary General’s High Level Panel on Access to Medicines Report.
The Report is entitled: Promoting Innovation and Access to Health Technologies. But that’s false advertising. The report recommends shredding patent protection for new medicines and claims that the cost of medical innovation should have nothing to do with prices.
I am not surprised. The recommendation has nothing to do with the facts. Rather, the panel claims that there is "policy incoherence between the justifiable rights of inventors, international human rights law, trade rules and public health.”
Really? Seems to me that the thousand-fold improvement in public health worldwide is the result of the commercialization of medical inventions. As Nobel Prize winning economist Angus Deaton has observed: “Progress in health has been as impressive as progress in wealth. In the past century, life expectancy in the rich countries increased by thirty years, and it continues to increase today by two or three years every ten years. Children who would have died before their fifth birthdays now live into old age, and middle-aged adults who once would have died of heart disease now live to see their grandchildren grow up and go to college. Of all the things that make life worth living, extra years of life are surely among the most precious.”
But the UN panel breezes through how this progress has been achieved – and how countries such as Venezuela has starved its people -- to argue that inequalities of access require redistribution and confiscation of private property.
To be sure, progress has opened up inequalities as new medicines originated in America (for the most part) and were consumed there first at launch prices that put such drugs out of reach for much of the world. As Professor Deaton notes: “These “health inequalities” are one of the great injustices of the world today... (But) when new inventions or new knowledge comes along, someone has to be the first to benefit, and the inequalities that come with waiting for a while are a reasonable price to pay. “
That is, eliminating inequality is less important than eliminating disease or poverty. And in my opinion the UN panel’s ideas and ideology should be judged by whether or not it will increase absolute well-being not whether it makes Paul Krugman happy.
The idea that letting rogue states violate IP will somehow increase well-being should have died with Venezuela, Argentina Brazil, India or Thailand. There is no empirical evidence that state regulation promotes betterment. On the contrary, the countries pushing for greater government control over private ideas are also societies where the extreme inequality of power strangles growth, including Russia and China.
Not surprisingly, in such countries the confiscation of IP is just another tool for rewarding rich and powerful interests. Government production of medicines through compulsory licensing with contracts to produce and counterfeit US developed innovations. As Deaton notes: “Powerful and wealthy elites have choked off economic growth before, and they can do so again if they are allowed to undermine the institutions on which broad-based growth depends.”
The UN Panel is not simply assaulting patent protection. It is attacking, as the brilliant economist Deirdre McCloskey observes, two levels of ideas: the ideas in the heads of entrepreneurs for the betterments themselves (the electric motor, the airplane, the stock market); and the ideas in the society at large about the businesspeople and their betterments (in a word, that liberalism).
The UN Panel on Patent Expropriation is, to paraphrase McCloskey “obsessed with first-act changes that cannot much help the poor, and often can be shown to damage them grievously, and are obsessed with an angry envy at the consumption of the very rich. They are willing to stifle, through the generation and commercialization of ideas that lead to greater well-being the trade-tested betterments that in the long run have gigantically helped the poor.”
This assault on health innovation is not only an attack on American productivity, it is a direct hit on the access to medicines the panel professes to promote.
The Report is entitled: Promoting Innovation and Access to Health Technologies. But that’s false advertising. The report recommends shredding patent protection for new medicines and claims that the cost of medical innovation should have nothing to do with prices.
I am not surprised. The recommendation has nothing to do with the facts. Rather, the panel claims that there is "policy incoherence between the justifiable rights of inventors, international human rights law, trade rules and public health.”
Really? Seems to me that the thousand-fold improvement in public health worldwide is the result of the commercialization of medical inventions. As Nobel Prize winning economist Angus Deaton has observed: “Progress in health has been as impressive as progress in wealth. In the past century, life expectancy in the rich countries increased by thirty years, and it continues to increase today by two or three years every ten years. Children who would have died before their fifth birthdays now live into old age, and middle-aged adults who once would have died of heart disease now live to see their grandchildren grow up and go to college. Of all the things that make life worth living, extra years of life are surely among the most precious.”
But the UN panel breezes through how this progress has been achieved – and how countries such as Venezuela has starved its people -- to argue that inequalities of access require redistribution and confiscation of private property.
To be sure, progress has opened up inequalities as new medicines originated in America (for the most part) and were consumed there first at launch prices that put such drugs out of reach for much of the world. As Professor Deaton notes: “These “health inequalities” are one of the great injustices of the world today... (But) when new inventions or new knowledge comes along, someone has to be the first to benefit, and the inequalities that come with waiting for a while are a reasonable price to pay. “
That is, eliminating inequality is less important than eliminating disease or poverty. And in my opinion the UN panel’s ideas and ideology should be judged by whether or not it will increase absolute well-being not whether it makes Paul Krugman happy.
The idea that letting rogue states violate IP will somehow increase well-being should have died with Venezuela, Argentina Brazil, India or Thailand. There is no empirical evidence that state regulation promotes betterment. On the contrary, the countries pushing for greater government control over private ideas are also societies where the extreme inequality of power strangles growth, including Russia and China.
Not surprisingly, in such countries the confiscation of IP is just another tool for rewarding rich and powerful interests. Government production of medicines through compulsory licensing with contracts to produce and counterfeit US developed innovations. As Deaton notes: “Powerful and wealthy elites have choked off economic growth before, and they can do so again if they are allowed to undermine the institutions on which broad-based growth depends.”
The UN Panel is not simply assaulting patent protection. It is attacking, as the brilliant economist Deirdre McCloskey observes, two levels of ideas: the ideas in the heads of entrepreneurs for the betterments themselves (the electric motor, the airplane, the stock market); and the ideas in the society at large about the businesspeople and their betterments (in a word, that liberalism).
The UN Panel on Patent Expropriation is, to paraphrase McCloskey “obsessed with first-act changes that cannot much help the poor, and often can be shown to damage them grievously, and are obsessed with an angry envy at the consumption of the very rich. They are willing to stifle, through the generation and commercialization of ideas that lead to greater well-being the trade-tested betterments that in the long run have gigantically helped the poor.”
This assault on health innovation is not only an attack on American productivity, it is a direct hit on the access to medicines the panel professes to promote.
Just when you thought it was impossible for the United Nations to be less relevant comes The Report of the United Nations Secretary-General’s High-Level Panel on Access to Medicines.
What’s the UN’s answer to broader access to medicines? Doing away with patents. Disregarding intellectual property. Compulsory Licensing. A triple-play of nonsense and unintended consequences. But we’ve heard it all before.
The UN is living proof of HL Mencken’s famous maxim that, “For every complex problem there is an answer that is clear, simple, and wrong.”
The focus of the UN report is on new, on-patent medicines, but the report ignores the WHO’s model Essential Drug List. Why? Because it doesn’t fit the narrative of “Big Pharma as the enemy.” After all, very few of the 400 or so drugs deemed essential are new, or patented or were ever patented in the world’s poorest countries. In category after category, from aspirin to Zithromax, in almost every case and in almost every country, these medicines have always been (or have been for many years) in the public domain. That is, the medicine is fully open to legal and legitimate generic manufacture.
And yet, they are not readily available.
There are important implications for the world’s poorest patients. If these patients had reliable and affordable access to these several hundred essential medicines, all available theoretically as multi-source, that is from generics companies, then global mortality and morbidity might be cut as much as 10-20% — a huge gain for populations around the world. Given the potential hugely positive impact on access to medicines, any reasonable person might ask why doesn’t a body that largely represents the needs and desires of the Developing World address this issue?
The UN report isn’t a serious attempt to address access. It’s just another political broadside against patents and intellectual property. For shame.
Perhaps the next Secretary General of the United Nations should be … Forrest Gump.
Neatly timed to coincide with the UN’s screed comes Colombia’s Declaration of Public Interest to impose additional price cuts on the Novartis’ Gleevec. This decision has the potential to result in higher spending on lower-quality generics. Here’s how PhRMA’s Brian Toohey directly addresses the issue,
“There continues to be no legitimate reasons for Colombia to enforce a declaration of public interest for the product in question. This medicine is being provided to all Colombian patients who need it and almost half of the patients needing the drug are taking a generic version. In addition, the medicine has been sold in Colombia at a price negotiated and agreed to by the Colombian Government under its existing pricing system and there is no apparent shortage or evidence of other access issues. The Colombian Government’s actions are therefore without merit.
“Biopharmaceutical innovators support strong national health systems and timely access to quality, safe and effective medicines for patients who need them. Ad hoc price cuts are not effective or sustainable ways to improve access or achieve other critical public health goals. Pricing systems should be based on transparent rules and fair processes that provide business certainty for pharmaceutical innovators.
“The enforcement of a declaration of public interest as a mechanism to impose superfluous price controls sets a harmful global precedent, undermining the incentives that enable high-risk research and development investments in life-saving medical innovation and a host of other cutting-edge industries.
“The way to achieve access to medicines is not through compromising incentives for innovation but by leveraging the collective abilities, strengths and resources of all stakeholders to improve health outcomes.”
Bravo.
What’s the UN’s answer to broader access to medicines? Doing away with patents. Disregarding intellectual property. Compulsory Licensing. A triple-play of nonsense and unintended consequences. But we’ve heard it all before.
The UN is living proof of HL Mencken’s famous maxim that, “For every complex problem there is an answer that is clear, simple, and wrong.”
The focus of the UN report is on new, on-patent medicines, but the report ignores the WHO’s model Essential Drug List. Why? Because it doesn’t fit the narrative of “Big Pharma as the enemy.” After all, very few of the 400 or so drugs deemed essential are new, or patented or were ever patented in the world’s poorest countries. In category after category, from aspirin to Zithromax, in almost every case and in almost every country, these medicines have always been (or have been for many years) in the public domain. That is, the medicine is fully open to legal and legitimate generic manufacture.
And yet, they are not readily available.
There are important implications for the world’s poorest patients. If these patients had reliable and affordable access to these several hundred essential medicines, all available theoretically as multi-source, that is from generics companies, then global mortality and morbidity might be cut as much as 10-20% — a huge gain for populations around the world. Given the potential hugely positive impact on access to medicines, any reasonable person might ask why doesn’t a body that largely represents the needs and desires of the Developing World address this issue?
The UN report isn’t a serious attempt to address access. It’s just another political broadside against patents and intellectual property. For shame.
Perhaps the next Secretary General of the United Nations should be … Forrest Gump.
Neatly timed to coincide with the UN’s screed comes Colombia’s Declaration of Public Interest to impose additional price cuts on the Novartis’ Gleevec. This decision has the potential to result in higher spending on lower-quality generics. Here’s how PhRMA’s Brian Toohey directly addresses the issue,
“There continues to be no legitimate reasons for Colombia to enforce a declaration of public interest for the product in question. This medicine is being provided to all Colombian patients who need it and almost half of the patients needing the drug are taking a generic version. In addition, the medicine has been sold in Colombia at a price negotiated and agreed to by the Colombian Government under its existing pricing system and there is no apparent shortage or evidence of other access issues. The Colombian Government’s actions are therefore without merit.
“Biopharmaceutical innovators support strong national health systems and timely access to quality, safe and effective medicines for patients who need them. Ad hoc price cuts are not effective or sustainable ways to improve access or achieve other critical public health goals. Pricing systems should be based on transparent rules and fair processes that provide business certainty for pharmaceutical innovators.
“The enforcement of a declaration of public interest as a mechanism to impose superfluous price controls sets a harmful global precedent, undermining the incentives that enable high-risk research and development investments in life-saving medical innovation and a host of other cutting-edge industries.
“The way to achieve access to medicines is not through compromising incentives for innovation but by leveraging the collective abilities, strengths and resources of all stakeholders to improve health outcomes.”
Bravo.
Allergan CEO Brent Saunders published a social contract with patients on his corporate blog. In doing so, Saunders demonstrates that the first question for a leader always is: 'Who do we intend to be?' Not 'What are we going to do?' but 'Who do we intend to be?
Saunder's begins by noting that large price increases undermine the mission of medical innovation:
“Basically, in this social contract patients understood that making new medicines required significant investment. At the same time companies, doing the hard, long and risky work of bringing new medicines to market, understood that they had to price medicines in a way that made them accessible to patients while providing sufficient profit to encourage future investment. It was designed to be a win-win-win. New medicines for patients. Lower overall cost or damage of disease. An appropriate return on capital for those taking risk by investing time and talent in the arduous and uncertain task of developing new treatments.
Those who have taken aggressive or predatory price increases have violated this social contract!
I don’t like what is happening, and despite the fact that it is hard to speak out publicly on this, now is the time to take action to spell out what this social contract means to me. By doing so, I am conveying to my Allergan colleagues that we must keep this social contract in mind as we make business decisions that ultimately improve wellbeing, and as a result, address the hopes others place in us.”
Saunders first observes that “large payers making decisions that may limit patient access to our medicines in favor of a competitor based on the latter’s willingness to pay more rebates. In order to ensure that patients and physicians have access to a full array of medical options, we believe that these intermediaries should have open access to formularies whenever possible. “
In the main however, he discusses what his company will do to reinvigorate the social contract with patients:
We commit to these responsible pricing ideals for our branded therapeutics.
• We will price our products in a way that is commensurate with, or lower than, the value they create by mitigating or avoiding the need for other treatment modalities or providing better quality of life to those patients without other treatment options.
• We will enhance access to patients. This means that Allergan will enhance our patient assistance programs in 2017 to match the current industry leader(s).
• We will work with policy makers and payers to facilitate better access to our medicines.
• We will not engage in price gouging actions or predatory pricing.
• We will limit price increases. Where we increase price on our branded therapeutic medicines, we will take price increases no more than once per year and, when we do, they will be limited to single-digit percentage increases. Our expectation is that the overall cost of our drugs, net of rebates and discounts, will not increase by more than low-to-mid single digits percentages per year, slightly above the current annual rate of inflation.
• We will not engage in the practice of taking major price increases without corresponding cost increases as our products near patent expiration. While we have participated in this industry practice in the past, we will stop this practice going forward. Where new regulatory requirements impose added costs, we will seek to reflect those costs in our pricing.
• We commit to providing an aggregate view of the net impact of price on our business at least annually.
Three quick observations:
1. Every biopharmaceutical company should take or make the same pledge. Failing to do so is tantamount to siding with price gouging.
2. To limit out of patient of pocket costs Allergan will consider taking the rebates now pocketed by PBMs and insurers and give them directly to patients in the form of increased patient assistance. Other biopharma companies should make the same pledge.
3. The Allergan social contract includes ensuring that the increased cost of government regulation not be passed on to consumers whenever possible and to limit price increases net of rebates. See point 2 for how this will be done.
If most drug companies adopt and live up to the Allergan social contract it would be the most disruptive and positive step the industry has ever taken to establish its value.
Ultimately, biopharmaceutical companies will need to replace the current business model in which hundreds of billions in rebates go to corporate profits, not patients and in which so-called drug value framework builders are focused on driving down drug prices to increase rebates under the guise of making drugs affordable to patients.
Hence, the social contract developed by Brent Saunders is also a call to replace a business model that has become financially and morally unsustainable. To increase and accelerate access now, companies have to reward insurers and PMBs less and help patients more by reducing the cost (and increase in cost) of medicines. Otherwise any social contract with patients will be an exercise in hypocrisy.
Saunder's begins by noting that large price increases undermine the mission of medical innovation:
“Basically, in this social contract patients understood that making new medicines required significant investment. At the same time companies, doing the hard, long and risky work of bringing new medicines to market, understood that they had to price medicines in a way that made them accessible to patients while providing sufficient profit to encourage future investment. It was designed to be a win-win-win. New medicines for patients. Lower overall cost or damage of disease. An appropriate return on capital for those taking risk by investing time and talent in the arduous and uncertain task of developing new treatments.
Those who have taken aggressive or predatory price increases have violated this social contract!
I don’t like what is happening, and despite the fact that it is hard to speak out publicly on this, now is the time to take action to spell out what this social contract means to me. By doing so, I am conveying to my Allergan colleagues that we must keep this social contract in mind as we make business decisions that ultimately improve wellbeing, and as a result, address the hopes others place in us.”
Saunders first observes that “large payers making decisions that may limit patient access to our medicines in favor of a competitor based on the latter’s willingness to pay more rebates. In order to ensure that patients and physicians have access to a full array of medical options, we believe that these intermediaries should have open access to formularies whenever possible. “
In the main however, he discusses what his company will do to reinvigorate the social contract with patients:
We commit to these responsible pricing ideals for our branded therapeutics.
• We will price our products in a way that is commensurate with, or lower than, the value they create by mitigating or avoiding the need for other treatment modalities or providing better quality of life to those patients without other treatment options.
• We will enhance access to patients. This means that Allergan will enhance our patient assistance programs in 2017 to match the current industry leader(s).
• We will work with policy makers and payers to facilitate better access to our medicines.
• We will not engage in price gouging actions or predatory pricing.
• We will limit price increases. Where we increase price on our branded therapeutic medicines, we will take price increases no more than once per year and, when we do, they will be limited to single-digit percentage increases. Our expectation is that the overall cost of our drugs, net of rebates and discounts, will not increase by more than low-to-mid single digits percentages per year, slightly above the current annual rate of inflation.
• We will not engage in the practice of taking major price increases without corresponding cost increases as our products near patent expiration. While we have participated in this industry practice in the past, we will stop this practice going forward. Where new regulatory requirements impose added costs, we will seek to reflect those costs in our pricing.
• We commit to providing an aggregate view of the net impact of price on our business at least annually.
Three quick observations:
1. Every biopharmaceutical company should take or make the same pledge. Failing to do so is tantamount to siding with price gouging.
2. To limit out of patient of pocket costs Allergan will consider taking the rebates now pocketed by PBMs and insurers and give them directly to patients in the form of increased patient assistance. Other biopharma companies should make the same pledge.
3. The Allergan social contract includes ensuring that the increased cost of government regulation not be passed on to consumers whenever possible and to limit price increases net of rebates. See point 2 for how this will be done.
If most drug companies adopt and live up to the Allergan social contract it would be the most disruptive and positive step the industry has ever taken to establish its value.
Ultimately, biopharmaceutical companies will need to replace the current business model in which hundreds of billions in rebates go to corporate profits, not patients and in which so-called drug value framework builders are focused on driving down drug prices to increase rebates under the guise of making drugs affordable to patients.
Hence, the social contract developed by Brent Saunders is also a call to replace a business model that has become financially and morally unsustainable. To increase and accelerate access now, companies have to reward insurers and PMBs less and help patients more by reducing the cost (and increase in cost) of medicines. Otherwise any social contract with patients will be an exercise in hypocrisy.
Almost seven years to the day of the FDA's November 2009 two-day Part 15 hearing on social media, a new Part 15 meeting on off-label communications, Manufacturer Communications Regarding Unapproved Uses of Approved or Cleared Medical Products; Public Hearing
The 2009 affair was "The Super Bowl of Part 15 hearings." Attended by hundreds of interested stakeholders, many of who were skilled communications professionals. The FDA listened as speaker after speaker (including me) offered timely comments on the new frontier of social media. The FDA listened -- and then waited until June 2014 to issue draft guidance.
The big difference between that meeting and the November 2016 version is that there are already a slew of lawsuits that have seriously undercut the agency's authority in regulating off-label speech. Another important difference is that industry already has released its own guidelines. It's also important to note the meeting will take place immediately after national elections. If the folks at White Oak think this will deter attention, they are mistaken.
The agency is soliciting comments as to the ways communications from drugmakers regarding off-label use information are distinct, and whether they provide unique benefits compared to other sources. The announcement lays out eight lengthy sets of questions. Some specific ones are:
* What are the benefits for clinical decision making, research, coverage, reimbursement or other purposes if firms communicate to health care professionals, payers, researchers and patients information about off-label uses? Are there risks, and ways to mitigate these risks?
* To what extent do changes occurring in the health care system that give payers and formulary committees more influence on prescribing decisions provide incentives for firms to generate the necessary high-quality data demonstrate safety and effectiveness for off-label uses?
* What processes do firms use to determine whether information is scientifically appropriate to communicate to health care professionals about a product?
* What information should firms communicate to make audiences aware that the medical product is not indicated for a certain use and to distinguish between the approved uses of the medical product and the unapproved use?
The agency is asking a lot of excellent questions, but they've had a lot of time to ponder all of them already. The only thing that is clear is that no guidance on the topic will be forthcoming until well after a new President takes office -- and that could have profound implications on the direction of both agency thinking and timing.
It will surely be worthwhile, but can the sequel live up to the original?
The 2009 affair was "The Super Bowl of Part 15 hearings." Attended by hundreds of interested stakeholders, many of who were skilled communications professionals. The FDA listened as speaker after speaker (including me) offered timely comments on the new frontier of social media. The FDA listened -- and then waited until June 2014 to issue draft guidance.
The big difference between that meeting and the November 2016 version is that there are already a slew of lawsuits that have seriously undercut the agency's authority in regulating off-label speech. Another important difference is that industry already has released its own guidelines. It's also important to note the meeting will take place immediately after national elections. If the folks at White Oak think this will deter attention, they are mistaken.
The agency is soliciting comments as to the ways communications from drugmakers regarding off-label use information are distinct, and whether they provide unique benefits compared to other sources. The announcement lays out eight lengthy sets of questions. Some specific ones are:
* What are the benefits for clinical decision making, research, coverage, reimbursement or other purposes if firms communicate to health care professionals, payers, researchers and patients information about off-label uses? Are there risks, and ways to mitigate these risks?
* To what extent do changes occurring in the health care system that give payers and formulary committees more influence on prescribing decisions provide incentives for firms to generate the necessary high-quality data demonstrate safety and effectiveness for off-label uses?
* What processes do firms use to determine whether information is scientifically appropriate to communicate to health care professionals about a product?
* What information should firms communicate to make audiences aware that the medical product is not indicated for a certain use and to distinguish between the approved uses of the medical product and the unapproved use?
The agency is asking a lot of excellent questions, but they've had a lot of time to ponder all of them already. The only thing that is clear is that no guidance on the topic will be forthcoming until well after a new President takes office -- and that could have profound implications on the direction of both agency thinking and timing.
It will surely be worthwhile, but can the sequel live up to the original?
An article in The Huffington Post and the Global Living Healthy Foundation's blistering response to ICER’s defense against against criticism that I and others made about how anti-patient and pro-rationing it is, makes my planned second post about the organization unnecessary. As Patient Rising’s Jonathan Wilcox put it in the HuffPo piece, ICER claims it is objective because it uses:
“…mathematical calculations known as “value frameworks” to justify the nonprofit’s preference to target certain drugs. But this is no unbiased test or dispassionate statistical measurement. It’s a Catch-22 in which patients can’t win because the ICER process determines they have a lesser quality of life than a healthy person – forever. “
Similarly, the Global Health Living Foundation had this to say about ICER’s zealous defense of the quality adjusted live year as a perfectly ethical and rigorous measure of what patient’s truly value from medical care:
“The QALY was ultimately found to be so offensive and contradictory to the beliefs surrounding patient care in the U.S. that its use in computations was disallowed (outlawed) by the Affordable Care Act. The ban on using cost-per-QALY thresholds also seems to reflect longstanding concerns that the approach would discriminate on the basis of age and disability. The worry is that the metric unfairly favors younger and healthier populations that have more potential QALYs to gain.”
Ouch. ICER continues to evade this important question. Apart from some soft promise to look at QALYs going forward, it continues to double down on their use in determine access to and price of medicines. And despite the legitimate ethical and methodological questions about ICER’s work, JAMA is willing to be ICER’s seal of medical approval.
Case in point: JAMA’s recent publication of “Cost-effectiveness of PCSK9 Inhibitor Therapy in Patients with Heterozygous Familial Hypercholesterolemia or Atherosclerotic Cardiovascular Disease.” This is a recycling of ICER’s blacklisting of the two PCSK9 inhibitors that reduce high cholesterol in people who – because of a specific mutation or side effects – don’t respond to statins.
I am not surprised that JAMA would publish a high speculative and poorly constructed comparative effectiveness article. That’s because in general most CER work winds up in medical journals where – to put it gently – the reviewers of articles have little or no expertise in econometrics or best practices for health economic studies. I even wonder if the reviewers even read the article or did more than check for typos. For instance, in the JAMA article on the authors conclude:
“The results of multiple scenario analyses suggest that reducing the price of PCSK9 inhibitors remains the primary approach to improving the value of these therapies.”
The article goes on to say that “If ongoing clinical trials demonstrate that the drugs do not improve clinical outcomes as predicted by their effect on LDL-C, this model will have overestimated their cost-effectiveness.”
The authors completely ignore the other possibility: that studies will show increased cost-effectiveness. This violates a cardinal principle of HTA research:
“All data are imperfect point estimates of underlying distributions that incorporate a variety of errors. All analytical methods are subject to biases and limitations. Thus, extensive sensitivity analyses are required to determine the robustness of HTA findings and conclusions. The limitations of the analysis should always be acknowledged.”
The JAMA/ICER study also violate best practice principles for cost effectiveness analysis proposed by the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) Drug Cost Task Force Report:
“The task force recommended discouraging studies from claiming that they are taking a true societal perspective when they are not. “
Yet ICER continually claims that their studies and recommendations consider ‘societal choices’ even though the costs and benefits of such choices are never formally modeled.
Further, ISPOR the task force suggests that studies state “that using some fraction (e.g., 40–60%) of net acquisition drug cost (i.e., cost net of discounts and rebates) would be an appropriate proxy for opportunity cost for a societal CEA for marketed products, but that a limited societal or a health systems perspective is more relevant and useful for current decision-makers.”
ICER ignores this modest proposal claiming it is too hard to estimate net drug costs (even as it has no problem estimating for patients how much their lives are worth.) This speaks to the fact that ICER gets most of its money from insurers and PBMs. That’s not a problem so long as all the exceptions to best practices are identified and limitations of ICER studies with regard to measure societal value are highlighted.
As a I have mentioned elsewhere, ICER uses list price to establish how much drug prices should be cut to be cost effective. It ignores the fact that the discounts and rebates to reach that price would go right to insurers, employers and PBMs, not patients whose QALY hangs in the balance. It fails to acknowledge that the choice of list price will affect it’s analysis or that it reflects the perspective of the health system.
ICER can get away with recycling it’s biased research in JAMA. The publication’s reviewers of HTA are about as effective in policing violations of basic HTA practices as the UN Peacekeeping Force in Lebanon is in preventing Hezbollah from threatening Israel.
But ICER’s day of reckoning is coming. Patients, researchers, real economists and others are beginning to challenge the role of ICER specifically (and pre-determined value frameworks in general) in making life changing decisions on behalf of everyone else.
“…mathematical calculations known as “value frameworks” to justify the nonprofit’s preference to target certain drugs. But this is no unbiased test or dispassionate statistical measurement. It’s a Catch-22 in which patients can’t win because the ICER process determines they have a lesser quality of life than a healthy person – forever. “
Similarly, the Global Health Living Foundation had this to say about ICER’s zealous defense of the quality adjusted live year as a perfectly ethical and rigorous measure of what patient’s truly value from medical care:
“The QALY was ultimately found to be so offensive and contradictory to the beliefs surrounding patient care in the U.S. that its use in computations was disallowed (outlawed) by the Affordable Care Act. The ban on using cost-per-QALY thresholds also seems to reflect longstanding concerns that the approach would discriminate on the basis of age and disability. The worry is that the metric unfairly favors younger and healthier populations that have more potential QALYs to gain.”
Ouch. ICER continues to evade this important question. Apart from some soft promise to look at QALYs going forward, it continues to double down on their use in determine access to and price of medicines. And despite the legitimate ethical and methodological questions about ICER’s work, JAMA is willing to be ICER’s seal of medical approval.
Case in point: JAMA’s recent publication of “Cost-effectiveness of PCSK9 Inhibitor Therapy in Patients with Heterozygous Familial Hypercholesterolemia or Atherosclerotic Cardiovascular Disease.” This is a recycling of ICER’s blacklisting of the two PCSK9 inhibitors that reduce high cholesterol in people who – because of a specific mutation or side effects – don’t respond to statins.
I am not surprised that JAMA would publish a high speculative and poorly constructed comparative effectiveness article. That’s because in general most CER work winds up in medical journals where – to put it gently – the reviewers of articles have little or no expertise in econometrics or best practices for health economic studies. I even wonder if the reviewers even read the article or did more than check for typos. For instance, in the JAMA article on the authors conclude:
“The results of multiple scenario analyses suggest that reducing the price of PCSK9 inhibitors remains the primary approach to improving the value of these therapies.”
The article goes on to say that “If ongoing clinical trials demonstrate that the drugs do not improve clinical outcomes as predicted by their effect on LDL-C, this model will have overestimated their cost-effectiveness.”
The authors completely ignore the other possibility: that studies will show increased cost-effectiveness. This violates a cardinal principle of HTA research:
“All data are imperfect point estimates of underlying distributions that incorporate a variety of errors. All analytical methods are subject to biases and limitations. Thus, extensive sensitivity analyses are required to determine the robustness of HTA findings and conclusions. The limitations of the analysis should always be acknowledged.”
The JAMA/ICER study also violate best practice principles for cost effectiveness analysis proposed by the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) Drug Cost Task Force Report:
“The task force recommended discouraging studies from claiming that they are taking a true societal perspective when they are not. “
Yet ICER continually claims that their studies and recommendations consider ‘societal choices’ even though the costs and benefits of such choices are never formally modeled.
Further, ISPOR the task force suggests that studies state “that using some fraction (e.g., 40–60%) of net acquisition drug cost (i.e., cost net of discounts and rebates) would be an appropriate proxy for opportunity cost for a societal CEA for marketed products, but that a limited societal or a health systems perspective is more relevant and useful for current decision-makers.”
ICER ignores this modest proposal claiming it is too hard to estimate net drug costs (even as it has no problem estimating for patients how much their lives are worth.) This speaks to the fact that ICER gets most of its money from insurers and PBMs. That’s not a problem so long as all the exceptions to best practices are identified and limitations of ICER studies with regard to measure societal value are highlighted.
As a I have mentioned elsewhere, ICER uses list price to establish how much drug prices should be cut to be cost effective. It ignores the fact that the discounts and rebates to reach that price would go right to insurers, employers and PBMs, not patients whose QALY hangs in the balance. It fails to acknowledge that the choice of list price will affect it’s analysis or that it reflects the perspective of the health system.
ICER can get away with recycling it’s biased research in JAMA. The publication’s reviewers of HTA are about as effective in policing violations of basic HTA practices as the UN Peacekeeping Force in Lebanon is in preventing Hezbollah from threatening Israel.
But ICER’s day of reckoning is coming. Patients, researchers, real economists and others are beginning to challenge the role of ICER specifically (and pre-determined value frameworks in general) in making life changing decisions on behalf of everyone else.
From today’s edition of the Detroit News …
Doctor-industry lunches are good for you
Drug firms have discovered a powerful new mind-control technology that threatens to topple our healthcare system: a free slice of pizza. That’s the implication — but not the actual findings — of a new study in JAMA Internal Medicine.
The report finds that physicians who accept complimentary meals of under $20 in value from pharmaceutical representatives are more likely to prescribe certain brand-name medications to Medicare patients. The more frequent — and more expensive — the meals, the greater the effect on doctors’ prescribing rates.
Is the drug industry corrupting America’s medical practitioners through a cunning use of appetizers? Not quite. The study fails to mention that doctors voluntarily attend these meetings to stay informed about new medicines — not new recipes.
What’s more, the article never bothers to ask a basic question: are doctor-industry interactions bad for the health of patients? To date, there is no evidence to suggest that they are.
In reality, meals are often provided as part of educational events hosted by drug companies. The point of these meetings is to convey technical information to doctors about a particular drug. Doctors who attend the meeting and learn about a medicine’s clinical effectiveness are obviously more likely to prescribe that drug than physicians who didn’t go to the meeting and have never heard of the medicine. Similarly, doctors who already prescribe a company’s medicine are more likely to receive lunch invites than doctors who aren’t in sales reps’ rolodexes.
In other words, it’s hardly surprising or scandalous that doctors who meet with salespeople are more likely to use what they’re selling — once they’ve learned about the value of the medicines being discussed.
Complaints about drug-company influence would be a lot more credible if researchers could show it harmed patients’ well-being. For instance, do free meals compel doctors to prescribe a brand-name drug when a cheaper generic would suffice? Do they persuade physicians to use one particular treatment when a different therapy would be more effective?
There’s simply no way for physicians to stay current on every pharmaceutical product at their disposal. By one estimate, some 1,700 articles are published on the top 25 medicines each year. Drug producers use a variety of promotional efforts to cut through this information glut.
Dennis Ausiello, chief of medicine at Massachusetts General Hospital, and Thomas Stossel, a professor at Harvard Medical School, have made this point. According to them, “company salespersons complement physicians’ information derived from many sources. They tell physicians about a limited range of products about which their employers train them under strict FDA regulations.”
Since when did transmitting accurate medical information to doctors become a bad thing?
To be sure, pharmaceutical firms are motivated by profit. But improving patient health and boosting sales aren’t mutually exclusive ends — especially when the product in question addresses a genuine public health need.
Moreover, it’s simplistic and insulting to assume that highly-educated doctors are selling out their patients for the price of a slice. In a 2008 survey of physicians conducted by KRC Research, only 11 percent reported being greatly influenced by pharmaceutical representatives. Clinical knowledge, a patient’s specific circumstances, and insurance restrictions all played a larger role in determining prescribing practices.
Let’s hope misinterpreted studies and manufactured media outrage don’t lead to further restrictions on these meetings. If that were to happen, doctors might go without a free lunch — but patients would go without the best treatment plans possible.
Peter Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.
Doctor-industry lunches are good for you
Drug firms have discovered a powerful new mind-control technology that threatens to topple our healthcare system: a free slice of pizza. That’s the implication — but not the actual findings — of a new study in JAMA Internal Medicine.
The report finds that physicians who accept complimentary meals of under $20 in value from pharmaceutical representatives are more likely to prescribe certain brand-name medications to Medicare patients. The more frequent — and more expensive — the meals, the greater the effect on doctors’ prescribing rates.
Is the drug industry corrupting America’s medical practitioners through a cunning use of appetizers? Not quite. The study fails to mention that doctors voluntarily attend these meetings to stay informed about new medicines — not new recipes.
What’s more, the article never bothers to ask a basic question: are doctor-industry interactions bad for the health of patients? To date, there is no evidence to suggest that they are.
In reality, meals are often provided as part of educational events hosted by drug companies. The point of these meetings is to convey technical information to doctors about a particular drug. Doctors who attend the meeting and learn about a medicine’s clinical effectiveness are obviously more likely to prescribe that drug than physicians who didn’t go to the meeting and have never heard of the medicine. Similarly, doctors who already prescribe a company’s medicine are more likely to receive lunch invites than doctors who aren’t in sales reps’ rolodexes.
In other words, it’s hardly surprising or scandalous that doctors who meet with salespeople are more likely to use what they’re selling — once they’ve learned about the value of the medicines being discussed.
Complaints about drug-company influence would be a lot more credible if researchers could show it harmed patients’ well-being. For instance, do free meals compel doctors to prescribe a brand-name drug when a cheaper generic would suffice? Do they persuade physicians to use one particular treatment when a different therapy would be more effective?
There’s simply no way for physicians to stay current on every pharmaceutical product at their disposal. By one estimate, some 1,700 articles are published on the top 25 medicines each year. Drug producers use a variety of promotional efforts to cut through this information glut.
Dennis Ausiello, chief of medicine at Massachusetts General Hospital, and Thomas Stossel, a professor at Harvard Medical School, have made this point. According to them, “company salespersons complement physicians’ information derived from many sources. They tell physicians about a limited range of products about which their employers train them under strict FDA regulations.”
Since when did transmitting accurate medical information to doctors become a bad thing?
To be sure, pharmaceutical firms are motivated by profit. But improving patient health and boosting sales aren’t mutually exclusive ends — especially when the product in question addresses a genuine public health need.
Moreover, it’s simplistic and insulting to assume that highly-educated doctors are selling out their patients for the price of a slice. In a 2008 survey of physicians conducted by KRC Research, only 11 percent reported being greatly influenced by pharmaceutical representatives. Clinical knowledge, a patient’s specific circumstances, and insurance restrictions all played a larger role in determining prescribing practices.
Let’s hope misinterpreted studies and manufactured media outrage don’t lead to further restrictions on these meetings. If that were to happen, doctors might go without a free lunch — but patients would go without the best treatment plans possible.
Peter Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.
From Drugchannels: “Ronny Gal, Ph.D., a senior analyst at the investment bank Sanford C. Bernstein & Co., just published a great client note on the Mylan EpiPen pricing brouhaha.”
Gal’s note should be read and memorized by every reporter, editorialist, talking head so that it is seared into their frontal cortex when writing about drug prices. I have helpfully italicized and placed the critical indights in bold. And I have given these important observations their very own paragraphs.
Thus spake Gal:
“We received multiple questions from investors about Mylan rolling back price increases.
The problem is that this would not necessarily help consumers much.
The price charged to consumers is set by payors.
(NB Repeat silently to yourself: The price charged to consumers is set by payors. The price charged to consumers is set by payors. The price charged to consumers is set by payors. )
Thus, to reduce consumer prices, Mylan would have to renegotiate increases, discounts and rebates to the payors; this will take some time and we suspect payors are not too unhappy seeing Mylan swinging in the wind a bit. Further, they will demand some steep discounts to help Mylan off the hook."
(NB: Note that in order to reduce prices to consumers, Mylan would have to also pay PBMs and insurers a discount, just because)
My next post will explain why Mylan’s authorized generic strategy, while risky, is also inspired and could launch a movement of companies who will refuse to payoff PBMs, insurers, hospitals and government agencies and use the money to cover drugs at point of care.
But for now, I hope everyone takes Ronny Gal's insights to heart and applies them when writing, talking or debate about drug prices.
Failing to do so is tantamount to lying.
Gal’s note should be read and memorized by every reporter, editorialist, talking head so that it is seared into their frontal cortex when writing about drug prices. I have helpfully italicized and placed the critical indights in bold. And I have given these important observations their very own paragraphs.
Thus spake Gal:
“We received multiple questions from investors about Mylan rolling back price increases.
The problem is that this would not necessarily help consumers much.
The price charged to consumers is set by payors.
(NB Repeat silently to yourself: The price charged to consumers is set by payors. The price charged to consumers is set by payors. The price charged to consumers is set by payors. )
Thus, to reduce consumer prices, Mylan would have to renegotiate increases, discounts and rebates to the payors; this will take some time and we suspect payors are not too unhappy seeing Mylan swinging in the wind a bit. Further, they will demand some steep discounts to help Mylan off the hook."
(NB: Note that in order to reduce prices to consumers, Mylan would have to also pay PBMs and insurers a discount, just because)
My next post will explain why Mylan’s authorized generic strategy, while risky, is also inspired and could launch a movement of companies who will refuse to payoff PBMs, insurers, hospitals and government agencies and use the money to cover drugs at point of care.
But for now, I hope everyone takes Ronny Gal's insights to heart and applies them when writing, talking or debate about drug prices.
Failing to do so is tantamount to lying.
From today’s edition of the Sacramento Bee …
Rising drug prices the fault of insurers, not drug companies
By Peter J. Pitts
Special to The Bee
Republican voters hate Obamacare, but they hate high prescription drug prices even more. Health care scholar Avik Roy recently pointed to the polls as a reason the GOP must develop a “clear plan to tackle the high and rising price of branded prescription drugs.” He proposed a number of measures aimed at reining in supposedly greedy pharmaceutical firms.
But Roy, like many others who have weighed in on the cost of medicines, overlooks two key points. First, the very real financial pain many Americans feel at the pharmacy counter is the fault of insurers – not drug companies. Second, the obsessive focus on cost obscures the vastly higher value of new drugs.
For most Americans, the price of drugs means the co-pays or co-insurance they fork over when picking up prescriptions. Insurers, not drug manufacturers, set those rates and they’ve been increasing cost-sharing requirements for years. Of those who buy individual health plans through their jobs, a record 46 percent must pay their first $1,000 of medical expenses.
The insurance industry has managed to pull the wool over Americans’ eyes and convince them that drug prices aren’t tied to the pharmaceutical industry’s investments in research and development. That’s intuitively and factually wrong.
Since 2000, drug firms have spent more than $500 billion developing new medicines. Research costs last year alone totaled almost $59 billion, up from $15.2 billion in 1995. The pharmaceutical sector spends five times more on R&D than aerospace, and two and a half times more than the software industry.
Much of this money goes toward the hundreds of potential treatments that never make it to market. Of those few medicines that enter human testing, just 12 percent win federal approval. The high failure rate is why creating just one FDA-approved medicine costs nearly $2.6 billion.
Drug companies don’t have “infinite pricing power,” as critics claim. Just look at the fierce competition among the makers of hepatitis C treatments. Gilead, the first company to enter the market, priced its two cures, Sovaldi and Harvoni, at $84,000 and $94,500 for full courses of treatment.
Soon other firms entered the market, sparking a fierce price war that led to 50 percent discounts for insurers. Hepatitis C drugs now cost less in the U.S. than in Europe.
Most patients don’t know this – and how would they? Insurers largely pocketed the discounts instead of passing them along to consumers.
Critics’ single-minded focus on drug prices ignores the immense value that modern medicines deliver to patients. Pegasys – the previous “best practice” treatment for hepatitis C – required weekly injections for as long as 48 weeks. Since few patients completed treatment due to severe side effects, much of the drug was wasted. The newer treatments are vastly more effective, curing 90 percent of patients in just 12 weeks, with mild side effects.
And let’s not forget the price of not using these drugs. One in three patients with the hepatitis C virus eventually develops liver cirrhosis, which can require a transplant. A “routine” liver transplant costs close to $300,000.
New and better drugs aren’t a problem; they’re the solution to America’s worsening chronic disease burden. Demonizing the creators of these medicines will do nothing to bring down patients’ skyrocketing co-insurance payments and deductibles. But it would sap investors’ enthusiasm to pour money into expensive research that ultimately saves lives.
Rising drug prices the fault of insurers, not drug companies
By Peter J. Pitts
Special to The Bee
Republican voters hate Obamacare, but they hate high prescription drug prices even more. Health care scholar Avik Roy recently pointed to the polls as a reason the GOP must develop a “clear plan to tackle the high and rising price of branded prescription drugs.” He proposed a number of measures aimed at reining in supposedly greedy pharmaceutical firms.
But Roy, like many others who have weighed in on the cost of medicines, overlooks two key points. First, the very real financial pain many Americans feel at the pharmacy counter is the fault of insurers – not drug companies. Second, the obsessive focus on cost obscures the vastly higher value of new drugs.
For most Americans, the price of drugs means the co-pays or co-insurance they fork over when picking up prescriptions. Insurers, not drug manufacturers, set those rates and they’ve been increasing cost-sharing requirements for years. Of those who buy individual health plans through their jobs, a record 46 percent must pay their first $1,000 of medical expenses.
The insurance industry has managed to pull the wool over Americans’ eyes and convince them that drug prices aren’t tied to the pharmaceutical industry’s investments in research and development. That’s intuitively and factually wrong.
Since 2000, drug firms have spent more than $500 billion developing new medicines. Research costs last year alone totaled almost $59 billion, up from $15.2 billion in 1995. The pharmaceutical sector spends five times more on R&D than aerospace, and two and a half times more than the software industry.
Much of this money goes toward the hundreds of potential treatments that never make it to market. Of those few medicines that enter human testing, just 12 percent win federal approval. The high failure rate is why creating just one FDA-approved medicine costs nearly $2.6 billion.
Drug companies don’t have “infinite pricing power,” as critics claim. Just look at the fierce competition among the makers of hepatitis C treatments. Gilead, the first company to enter the market, priced its two cures, Sovaldi and Harvoni, at $84,000 and $94,500 for full courses of treatment.
Soon other firms entered the market, sparking a fierce price war that led to 50 percent discounts for insurers. Hepatitis C drugs now cost less in the U.S. than in Europe.
Most patients don’t know this – and how would they? Insurers largely pocketed the discounts instead of passing them along to consumers.
Critics’ single-minded focus on drug prices ignores the immense value that modern medicines deliver to patients. Pegasys – the previous “best practice” treatment for hepatitis C – required weekly injections for as long as 48 weeks. Since few patients completed treatment due to severe side effects, much of the drug was wasted. The newer treatments are vastly more effective, curing 90 percent of patients in just 12 weeks, with mild side effects.
And let’s not forget the price of not using these drugs. One in three patients with the hepatitis C virus eventually develops liver cirrhosis, which can require a transplant. A “routine” liver transplant costs close to $300,000.
New and better drugs aren’t a problem; they’re the solution to America’s worsening chronic disease burden. Demonizing the creators of these medicines will do nothing to bring down patients’ skyrocketing co-insurance payments and deductibles. But it would sap investors’ enthusiasm to pour money into expensive research that ultimately saves lives.
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.
