The Facts About the Cost and Value of New Medicines

The Facts About the Cost and Value of New Medicines

November 10, 2015 11:54 AM EST

A great article by Tomas Philipson in Forbes that states the truth about the cost and value of new medicines.

Here's the knock-out blow against the lies and mis-statements regarding the 'unsustainable' cost of of new drugs"

"As costs have risen, many insurers have responded by increasing cost sharing for specialized therapies as part of their pharmaceutical insurance design. For example, CMS allows Part D plans to create a “formulary tier” specifically for drugs costing $600 or more per month. About 90% of plans use this tier and among these plans, more than half require patients to pay 25% or more of costs. Co-insurance for specialty drugs, which are taken by the sickest 3% of patients, can be as high as 50%.

This design means that the sickest patients also take the largest financial hits; a form of “double jeopardy.” However, this has primarily led to outrage against manufacturers rather than payers. For example, oncologists have criticized manufacturers for high prices because their patients cannot afford treatment. This is somewhat ironic since, as the General Accounting Office noted in July, cancer centers with higher markups on cancer drugs prescribe more of them, a practice partially enabled by the federal government’s 340B drug pricing program intended to provide discounted drugs to lower income patients. In addition, other forms of health care are equally, if not more expensive – such as ICU care – yet there appears to be comparably less concern over these costs. Perhaps the reason is that ICU care – which often costs approximately $4,000 per day – is often fully covered (as it should be), whereas specialty treatments remain only partially covered.

The reality is that less generous coverage of specialty drugs may punish the sickest patients and is not consistent with basic tenets of insurance, which are designed to cover rare but expensive events."
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