There are a lot of factors involved in drug pricing that don’t enter my head when I’m seeing a patient. The three letters “PBM,” for example (pharmacy benefit manager), have never crossed my mind when I’m writing a prescription. Nor has the word “rebate.” Or the phrase “pay for delay.” Or “marketing exclusivity.”
Basically, I only care about two things: (1) Is there a good drug available to treat my patient’s condition, and (2) Can my patient afford that drug. If I can answer “yes” to both questions, I will be happy. If either one of the answers is a “no,” I will feel like our system has failed my patient.
Simplistic as this framework is, it goes a long way to describing how we should think about drug pricing.
Scenario 1: A good drug is available but is not affordable. If there is a good drug available, it is everyone’s responsibility to make sure patients can afford it. I don’t have the space or patience to delve into all the drug pricing hullabaloo related to companies like Mylan and Valeant here. Suffice it to say that drug companies should set a price that is within reason. While a coarse tool, cost effectiveness analysis should play a large role in determining a fair price. If the price is reasonable, payers should cover it.
A good example is antiviral treatment for hepatitis C infection. The old treatment for hepatitis C virus consisted of ribavirin and interferon, fairly cheap drugs that were both toxic and ineffective for too many patients. So when Gilead and other companies came out with safe and effective treatments for hepatitis C, they were right to set the price high. In fact, analyses have shown these drugs to be cost-effective in almost all scenarios. Drug companies and patients are right to have fought states and insurers who refused to cover these antivirals.
Insurers have pointed out that they are at risk of insolvency if they cover all patients with hepatitis C. While this may be true, it is not the drug companies’ responsibility to keep insurers solvent. The federal government can create a fund to lend money to payers to spread the costs of these drugs over many years—or perhaps Gilead and others could use all their excess cash to lend the money directly to insurers who cover their drugs, spreading their windfall over more years in exchange for broader coverage.
Scenario 2: Several good drugs are available. Only some are affordable. This is basically the situation with cholesterol-lowering drugs. There are two classes of drugs that are very effective at lowering LDL (bad) cholesterol: statins and PCSK9 inhibitors. Statins have been around for over a decade and are now available as generics for a few dollars per month. PCSK9 inhibitors only got FDA approval a year ago and cost around $1,000 per month.
In almost all cases, statins get a “yes” for both of my key questions: They are effective at lowering cholesterol and preventing deaths, and they are affordable. While PCSK9 inhibitors seem to be effective (some key trials are still pending), they are not affordable for most patients because insurers do not cover them unless a statin wasn’t enough. Do I care that these drugs are not affordable? Not really. Except in rare cases, the statins work perfectly well. Only patients with extremely high cholesterol or risk of heart disease need the PCSK9 inhibitors, and in these patients the drugs are covered by insurance.
Scenario 3: There are no good drugs available. This is not a drug pricing problem. It is a scientific innovation problem. In these cases, the government can help by funding basic research through the NIH, and the FDA must release the brakes on drug development. Since 2003, the NIH budget has decreased by 22 percent, creating a vacuum in basic science research that will cut into drug development for decades. The FDA, on the other hand, has taken bolder steps to expedite approval for drugs that could represent major improvements over existing therapies. Through the fast track, breakthrough therapy, accelerated approval, and priority review programs, the majority of drugs approved today receive some form of expedited regulatory treatment to help reach the clinic faster.
The third scenario is, of course, the most painful. For a doctor it is excruciating to tell a patient I have nothing to offer them; I can only imagine how it must feel as a patient. We should do whatever we can to support scientists and drug companies working to develop treatments for these conditions. When new drugs are developed, we must be prepared to pay for them at a fair price determined through cost effectiveness analyses. On the front line of healthcare, the shenanigans employed by drug companies, insurers, PBMs, and others are all irrelevant at the moment the prescription is written and the patient gets the right treatment.