The assault on drug prices

cost-of-drugsPOST SUMMARY: According to an editorial in today’s Times “pharma companies are taking advantage of a mix of laws that force insurers to include essentially all expensive drugs in their policies, and a philosophy that demands that every new health care product be available to everyone, no matter how little it helps or how much it costs.”

The article goes on to say “we can free insurers and government programs from the requirement to include all expensive drugs in their plans as we explain to the public that some drugs are not effective enough to justify their price. … Or we can piggyback on the gumption of bolder countries, and demand that policy makers set drug prices in the United States equal to those of Western Europe.”


Michael Rosenblatt has a different take. He says “much of the recent press about drug pricing has taken a narrow view of the topic.”

  • Much of the debate on the cost of medicines focuses on the initial U.S. price. But prices vary within different sectors of U.S. health care, across nations, and over time. And for most new drugs, patents expire approximately 12 years after market introduction. In the U.S. today, generics make up 86% of prescriptions.
  • Focusing only on the cost of a medicine — without considering its health-improving or life-saving benefits, or consequent reductions in other health care expenses — ignores its real value.
  • Competition among research-driven companies brings better medicines to patients, but it also has become so intense that, for the first time, blockbuster drugs are rapidly becoming obsolete.

John LaMattina has a different view.  He says ” the pricing of new drugs has little to do with R&D costs. Rather, the setting of a drug’s price is based on the drug’s perceived value in the eyes of payers (private and public) and physicians.”  He goes on to say “but, this IS an industry. It MUST make a profit not just to survive, but to prosper. Anyone thinking that the pharmaceutical industry is making outrageous profits just has to look at the cost cutting going on at Merck and other pharmaceutical companies, as well as the consolidation that has happened in the industry over the last 15 years.”

pharmaceutical r&D

So where are patients in these discussions? Well, first when it comes to cancer drugs insurers and the government are afraid to say “no”. However, some patients are making the choice to say no to high priced treatments because they don’t want to live with the side effects and a reduced quality of life.

The pharma industries model of high prices and mergers is not sustainable.  In the end biopharma companies are going to have look internally at ways to both streamline the organization  while continuing to cut development costs.  It’s a hard rock to crack but now is the time to star hammering not discuss the size of the rock.