Drug prices are a prime example of the monetization of medical care. The price of drugs is currently based on the ability of the manufacturer to increase it (exclusivity and lack of competition) and the seriousness of the person’s illness (the more dreadful the illness the higher the price). The cost of research of course is an issue, but when Pharma raises the price of generics hundreds percent you know that it’s all about profit and that the costs of drug development has nothing to do with it.
It is a fact that the fiduciary responsibility of the drug manufacturer is to the stock holder not to the patient. So costs skyrocket and we in the U.S. pay more for everything medical than anyone else in the world. Are we dumb or simply naive. We seem to buy into drug company and politicians propaganda that we have the best of all worlds, when we don’t.
The rate of increase in drug prices has outpaced that of overall medical care every year since 2008. A recent survey found that retail prices of selected brand-name dermatological medications increased an average of 401% between 2009 and 2015 (363% in real terms, accounting for inflation), while prices of the generic medications increased an average of 279% between 2011 and 2014 (265% in real terms). These price increases for dermatological drugs are well above the national average for all drugs and payers—up 23% in real terms between 2009 and 2015. They do not reflect the possibilities that patients might switch to cheaper alternatives, or there may be slower growth in prices paid by insurers and public programs.
Retail prices have increased dramatically for other types of drugs, as well. The aggregate retail price of a basket of 477 widely used drugs doubled between 2006 and 2013, even though retail prices for generics decreased. Per life-year gained, new anticancer drugs prices have quadrupled in 2 decades and now exceed conventional levels of cost-effectiveness.
Constraining prices so more drugs are cost-effective—for example, below $100,000 per quality-adjusted life year—is one approach to managing drug price inflation. Although the political prospects for such a policy are poor, recent value-based contracts between manufacturers and insurers or pharmacy benefits management companies are similar in spirit. For example, Cigna’s payments to Novartis for the heart failure drug Entresto are linked to how effectively it reduces hospitalization.
Medicynical Note: The article follows with a discussion of how much we as a society can pay for drugs. Frakt seems to accept that $100,000/QALY is doable and posits that perhaps we can pay even more–though not much. On the other hand one can reasonably argue that we’ve already exceeded our ability to pay and that for a QALY drugs for a year’s treatment should at a maximum cost no more than a our culture’s median or average income for a year –that is $50,000-60,000. And that may be too expensive. Read the article!