The Specialty Drug Pricing Conundrum: Caps May Raise Costs, Not Lower Them

July 15, 2015
71 Views
Money, money, money

Money, money, money

Money, money, money

Money, money, money

It used to require hundreds of thousands of patients taking a drug to make it blockbuster. But over the last decade drug companies have figured out that they can get to $1 billion in product sales with much smaller populations. The key: sky-high prices.

The math is simple. A drug that goes for $1000 per year needs 1 million patients to get to the billion dollar mark, but if the price is $100,000 it takes just 10,000 patients. At $200,000 it’s 5000. Anyway, you get the idea.

You don’t see these dynamics in other fields, but healthcare is different. The two big drivers: third-party payment that shelters patients from the real costs of treatments and an aversion to talking about anything that could be construed as “rationing.”

In fact, as Kaiser Health News reports (States Limiting Patient Costs For High-Priced Drugs) public policy is moving even further away from using cost-sharing to constrain demand by limiting out-of-pocket payment amounts to as low as $100 per month. These policies will backfire as cost containment mechanisms because they will just end up boosting premiums.

Some other states are considering bills to require manufacturers to report their costs for high-priced drugs. That strikes me as pretty useless as well. If it’s a first step toward capping prices, that may discourage companies from moving forward with risky development programs for orphan diseases.

So what can be done, if anything? Well, a few things:

  • Use step therapy and similar programs to try less expensive treatments before defaulting toward the priciest. These programs are used today, but too often patients jump right to the high-priced specialty drug without seeing if something else would work
  • Shift the site of service for infused drugs away from hospital outpatient settings toward the home or physician’s office, which is much less costly
  • Encourage comparative effectiveness research and the adoption of quantitative measures such as Quality Adjusted Life Years (QALYs) to compare the efficacy of different treatments
  • Demand real-world, patient outcomes data from marketed products
  • Once a specialty (biologic) product has been on the market for several years and its patents have expired, regulate its price. This is a safer, more cost effective approach than encouraging so-called biosimilars

Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net

 

You may be interested

Care On The Road: How Telemedicine Can Reach Truck Drivers
Mobile Health
12 views
Mobile Health
12 views

Care On The Road: How Telemedicine Can Reach Truck Drivers

Larry Alton - August 21, 2017

Telemedicine is considered a powerful tool for individuals living in rural areas, far from adequate services or in need of…

Where Is The Balance? Pushing Back Against Consumer Health Tech
eHealth
3 views
eHealth
3 views

Where Is The Balance? Pushing Back Against Consumer Health Tech

Larry Alton - August 18, 2017

When Republican Congressman Jason Chaffetz glibly remarked that Americans struggling to afford insurance should choose between that and their smartphones,…

What to Look for in Patient Solutions Software
eHealth
365 views
eHealth
365 views

What to Look for in Patient Solutions Software

Robert Cordray - August 17, 2017

The medical sector is one area where technology has had a significant impact, largely by providing tools that simplify many…