If science-based medicine is unaffordable, then your care won’t be science-based. Prescription drug costs are one of the biggest concerns in health care today. There seems to be no upper limit on prices, with some new treatments costing over $1,000 per day. The arrival of new drugs to treat (and cure) hepatitis C has created a perfect pharmaceutical storm: highly effective treatments, a large population of potential patients, and huge per-patient costs. It’s renewing the debate about whether important medical treatments are being priced out of the reach of the patients that need them. It’s not just hepatitis. Cancer drug costs are rising as well, driven by more patients and new drugs that in some cases are transforming our expectations about what cancer drugs can do. And while many of us rely on some form of drug insurance to protect us from high drug costs, insurers are struggling with balancing coverage and premiums: A report by Express Scripts paints a grim picture:
An estimated 576,000 Americans spent more than the median household income on prescription medications in 2014. This population of patients grew an astounding 63% from 2013. Further, the population of patients with costs of $100,000 or more nearly tripled during the same time period, to nearly 140,000 people. The total cost impact to payers from both patient populations is an unsustainable $52 billion a year.
This isn’t just an issue in the United States. Prescription drug costs are climbing around the world, because we’re effectively all in this together: We all rely on private companies to bring new drugs to market, and we’re largely buying the same drugs from the same small group of companies. Because ready access to safe and effective prescription drugs is so important to the practice of medicine and the delivery of health care, the pharmaceutical industry is heavily regulated – not just by the FDA, but by regulators worldwide. Yet despite the dual requirements of regulatory disclosure and the financial obligation to be transparent (as many pharmaceutical companies are publicly-held), little is known about how much it costs to bring drugs to market, and how manufacturers arrive at their selling prices. Pharmaceutical manufacturers claim that high drug costs reflect the high costs of research and development (R&D), and provide the incentives for companies to invest heavily and take risks, when many drugs may never make it to market. Are they correct? (more…)
A few weeks ago I reviewed Ben Goldacre’s new book, Bad Pharma, an examination of the pharmaceutical industry, and more broadly, of the way new drugs are discovered, developed and brought to market. As I have noted before, despite the very different health systems that exist around the world, we all rely on private, for-profit, pharmaceutical companies to supply drug products and also to bring newer, better therapies to market. It’s great when there are lots of new drugs appearing, and they’re affordable for consumers and health systems. But that doesn’t seem to be the case. Pipelines seem to be drying up, and the cost of new drugs is climbing. Manufacturers refer to the costs of drug development when explaining high drug prices: New drugs are expensive, we’re told, because developing drugs is a risky, costly, time consuming endeavor. The high prices for new treatments are the price of innovative new treatments, both now and in the future. Research and development (R&D) costs are used to argue against strategies that could reduce company profitability (and presumably, future R&D), be it hospitals refusing to pay high drug costs, or changing patent laws that will determine when a generic drug will be marketed.
The overall costs of R&D are not the focus in Goldacre’s book, receiving only a short mention in the afterword, where he refers to the estimate of £500 million to bring a drug to market as “mythical and overstated.” He’s not alone in his skepticism. There’s a fair number of papers and analyses that have attempted to come up with a “true” estimate, and some authors argue the industry does not describe the true costs accurately or transparently enough to allow for objective evaluations. Some develop models independently, based on publicly available data. All models, however, must incorporate a range of assumptions that can influence the output. Over a year ago I reviewed at a study by Light and Warburton, entitled Demythologizing the high costs of pharmaceutical research, which estimated R&D costs at a tiny $43.4 million per drug – not £500 million, or the $1 billion you may see quoted. Their estimates, however, were based on a sequence of highly implausible assumptions, meaning the “average” drug development costs are almost certainly higher in the real world. But how much higher isn’t clear. There have been at least eleven different studies published that estimate costs. Methods used range from direct data collection to aggregate industry estimates. Given the higher costs of new drugs, having an understanding of the drivers of development costs can help us understand just how efficiently this industry is performing. There are good reasons to be critical of the pharmaceutical industry. Are R&D costs one of them?
Despite the variety of health systems across hundreds of different countries, one feature is near-universal: We all depend on private industry to commercialize and market drug products. And because drugs are such an integral part of our health care system, that industry is generally heavily regulated. Yet despite this regulation, little is publicly known about drug development costs. But aggregate research and development (R&D) data are available, and the pharmaceutical industry spends billions per year.