Wednesday, December 7, 2016

The True Story of America’s Sky-High Prescription Drug Prices

Let’s say you’re at the doctor. And the doctor hands you a prescription.

The prescription is for Humira, an injectable medication used to treat a lot of common conditions like arthritis and psoriasis. Humira is an especially popular medication right now. In 2015, patients all around the world spent $14 billion on Humira prescriptions — that’s roughly the size of Jamaica's entire economy.

Let’s say your doctor appointment is happening in the United Kingdom. There, your Humira prescription will cost, on average, $1,362. If you’re seeing a doctor in Switzerland, the drug runs around $822.

But if you’re seeing a doctor in the United States, your Humira prescription will, on average, run you $2,669.

How does this happen? Why does Humira cost so much more here than it does in other countries?

Humira is the exact same drug whether it’s sold in the United States, in Switzerland, or anywhere else. What’s different about Humira in the United States is the regulatory system we’ve set up around our pharmaceutical industry.

The United States is exceptional in that it does not regulate or negotiate the prices of new prescription drugs when they come onto market. Other countries will task a government agency to meet with pharmaceutical companies and haggle over an appropriate price. These agencies will typically make decisions about whether these new drugs represent any improvement over the old drugs — whether they’re even worth bringing onto the market in the first place. They’ll pore over reams of evidence about drugs’ risks and benefits.

The United States allows drugmakers to set their own prices for a given product — and allows every drug that's proven to be safe come onto market. And the problems that causes are easy to see, from the high copays at the drugstore to the people who can’t afford lifesaving medications.

What’s harder to see is that if we did lower drug prices, we would be making a trade-off. Lowering drug profits would make pharmaceuticals a less desirable industry for investors. And less investment in drugs would mean less research toward new and innovative cures.

There’s this analogy that Craig Garthwaite, a health economist, gave me that helped make this clear. Think about a venture capitalist who is deciding whether to invest $10 million in a social media app or a cure for pancreatic cancer.

“As you decrease the potential profits I’m going to make from pancreatic cures, I’m going to shift more of my investment over to apps or just keep the money in the bank and earn the money I make there,” Garthwaite says.

Right now America’s high drug prices mean that investing in pharmaceuticals can generate a whole bunch of profits — and that drugs can be too expensive for Americans to afford.

Let’s say you’re a pharmaceutical executive and you’ve discovered a new drug. And you want to sell it in Australia. Or Canada. Or Britain.

You’re going to want to start setting up some meetings with agencies that make decisions about drug coverage and prices.

These regulatory bodies generally evaluate two things: whether the country wants to buy your drug and, if so, how much they’ll pay for it. These decisions are often related, as regulators evaluate whether your new drug is enough of an improvement on whatever is already on the market to warrant a higher price.

So let’s say you want to sell your drug in Australia. You’ll have to submit an application to the Pharmaceutical Benefits Advisory Committee, where you’ll attempt to prove that your drug is more effective than whatever else is on the market right now.

The committee will then make a recommendation to the country’s national health care system of whether to buy the drug — and, if the recommendation is to buy it, the committee will suggest what price the health plan ought to pay.

Australia’s Pharmaceutical Benefits Advisory Committee is not easy to impress: It has rejected about half of the anti-cancer drug applications it received in the past decade because their benefits didn’t seem worth the price.

But if you do succeed — and Australia deems your drug worthy to cover — then you’ll have to decide whether the committee has offered a high enough price. If so, congrats! You’ve entered the Australian drug market.

Other countries regulate the price of drugs because they see them as a public utility

Countries like Australia, Canada, and Britain don’t regulate the price of other things that consumers buy, like computers or clothing. But they and dozens of other countries have made the decision to regulate the price of drugs to ensure that medical treatment remains affordable for all citizens, regardless of their income. Medication is treated differently because it is a good that some consumers, quite literally, can’t live without.

This decision comes with policy trade-offs, no doubt. Countries like Australia will often refuse to cover drugs that they don’t think are worth the price. In order for regulatory agencies to have leverage in negotiating with drugmakers, they have to be able to say no to the drugs they don’t think are up to snuff. This means certain drugs that sell in the United States aren’t available in other countries — and there are often public outcries when these agencies refuse to approve a given drug.

At the same time, just because there are more drugs on the American market, that doesn’t mean all patients can access them. “To think that patients have full access to a wide range of products isn’t right,” says Aaron Kesselheim, an associate professor of medicine at Harvard Medical School. “If the drugs are so expensive that you can’t afford them, that’s functionally the same thing as not even having them on the market.”

It also doesn’t mean we’re necessarily getting better treatment. Other countries’ regulatory agencies usually reject drugs when they don’t think they provide enough benefit to justify the price that drugmakers want to charge. In the United States, those drugs come onto market — which means we get expensive drugs that offer little additional benefit but might be especially good at marketing.

This happened in 2012 with a drug called Zaltrap, which treats colorectal cancer. The drug cost about $11,000 per month — twice as much as its competitors — while, in the eyes of doctors, offering no additional benefit.

“In most industries something that offers no advantage of its competitors and yet sells for twice the price would never even get on the market,” Peter Bach, an oncologist at Sloan-Kettering Memorial Hospital, wrote in a New York Times op-ed. “But that is not how things work for drugs. The Food and Drug Administration approves drugs if they are shown to be ‘safe and effective.’ It does not consider what the relative costs might be.”

by Sarah Kliff, Vox | Read more:
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