Insuring High Drug Prices
Written by Editor   
Thursday, June 19, 2014 12:00 AM

In the U.S., rising prescription drug prices are the law.  The FDA approves drugs on the basis of efficacy and safety, but is not allowed -- by law -- to consider price, which in any case is not usually set until after the regulatory OK.

On the other hand, once a drug is approved the Centers for Medicare and Medicaid Services (CMS) must cover it, but is not allowed to negotiate lower prices.  "That's very strange.  Where else in a free market society do you see the largest customer unable to negotiate for a better price?"

Those two factors combine to skew the market so that prices rise inexorably.

The issue has been making headlines, of course, since Gilead Sciences, of Foster City, Calif., said it would charge $1,000 a tablet for its new hepatitis C drug.  That price is "egregious (and) irresponsible," according to some, but  it illustrates a key but commonplace point -- pharmaceutical companies set their prices "based on what they think the market will bear."

The drugmakers, for their part, say the system is working.

The issue is not how much the drug costs, but the cost combined with how many people are expected to use it.  Most cancer drugs have a relatively small target market, so their sticker prices don't have a huge impact on the big picture, although they might have a serious impact on individuals.  The $1000 a pill drug on the other hand, has a target market of some 3 million Americans with chronic hepatitis C.

The high initial price was part of a pattern that has seen the price of cancer drugs rise precipitously, without much of an additional benefit for patients.  Although the $1000 a pill price is eye-opening, "we're dealing with that sort of thing all the time" in oncology.

It's not uncommon, he said, for cancer drugs to cost $10,000 a month and be taken for 2 years in order to gain an extra month or two of life.

In that context, the price of the Hep. C medication -- which offers most patients a relatively quick cure for an expensive and life-threatening chronic illness -- seems almost reasonable.  But that sort of evaluation -- weighing cost against benefit -- has not traditionally been part of healthcare in the U.S., although other countries do it routinely.

Drugmakers "basically make up what they lose in Europe, for instance, by charging more in the U.S."

Doctors must recognize and discuss the "financial toxicity" of care.