To Reduce Prescription Drug Prices, Assemble a Team of Unlikely Allies
In December, Pfizer and Moderna became the first companies to receive emergency authorization for their COVID-19 vaccines. Though this news offered hope to a world in crisis, many logistical questions ensued: Who will get the vaccine first? How much will it cost? Will insurers cover it? Fortunately, as frontline workers began to receive the first doses, health officials reassured the public that vaccines would be available free-of-charge to every American, with the government footing the bill. This was welcome news — and also a sharp departure from what we as a society have come to expect in terms of the cost and accessibility of important medicines.
The announcement that these life-saving vaccines would be universally accessible was remarkable, which speaks volumes about the status quo of lack of access to innovative medicines. Shouldn’t facilitating widespread access to essential, modern health care be the key responsibility of all stakeholders within the health care industry?
Two decades ago, a new oncology therapy typically clocked in around $20,000 annually. Today, treatments for conditions from Crohn’s to cancer routinely list for significantly more, with prices ranging from $100,000 to well over $200,000 per year — exponential growth (albeit inflation adjusted) over the course of a generation.
There’s a basic understanding that underpins most drug development. Pharmaceutical companies spend years — and often, billions of dollars — developing medicines. In return for that investment, they’re awarded a patent and the right to sell their drug for a reasonable profit. But too often, patent abuses, like continued patent extensions without true innovation, block competition and an anti-competitive, rebate-driven contracting model leads to pharmaceutical monopolies. These monopolies create an environment ripe for high and continuously escalating drug prices, often without support of new clinical data. Even as new entrants secure approval, the pharmaceutical market defies the typical norms of supply and demand and drug prices often rise, as opposed to falling with growing competition and improving technology. A recent report showed that even with seven additional options approved for multiple sclerosis between 2006 and 2016, patient out-of-pocket costs rose more than 7-fold.
In the complex U.S. healthcare system, the pharmaceutical supply chain is lined with gatekeepers who control access to medicines. Each is motivated by its own unique, typically near-term and often perverse, financial incentives which favor the use of higher priced medicines, as revenues are generally calculated as a percentage of the list price of a drug. Flying in the face of any conceivable logic, lower-priced drugs are not welcome within the supply chain, which creates strain on the health care system — Medicare spending is expected to double over the next 10 years — and, in particular, on the patients it serves. In fact, in the current model, often patients with the most critical care needs, whether acute or chronic, face the most unaffordable costs.
This approach to access is unsustainable for patients and health systems, and if left unchecked by the free market, may be addressed by forces outside the ecosystem — namely, in the form of regulations that could set off wide-spread repercussions to innovation and competition. Without a market-driven solution, we shouldn’t expect anything less than policy solutions or regulatory actions that aim to lower cost but ultimately result in more limited access for patients.
We’ve seen this exact scenario play out in recent years in the financial services industry. Left unchecked and without self-regulation, profit-seeking by many large financial institutions hurt millions of consumers. As a result, government intervention ensued leading to sweeping regulations, increased bureaucracy, higher operating costs and stifled innovation in the sector. The life sciences industry should let history be our guide.
We look to science to develop life-saving drugs — and science does its part. But to ensure patients have access to those medicines, we have to address the cost problem at its root: incentivizing efficiencies.
Drug innovators and necessary “demand” stakeholders across the drug development and delivery chain rarely communicate, let alone collaborate, and minor changes can cause a ripple effect down the supply chain. Imagine if these adversaries became unlikely allies, working together to identify synergies and address some of the largest cost burdens in the healthcare system. Imagine if prescribing a lower cost drug to the patient didn’t negatively impact the prescriber, the formulary decision-maker, the distributor, the employer, and the pharmacist as it does today — how quickly would price competition take hold?
Strategic collaboration of this ilk, where supply is connected to demand, already happens in other industries. Consider aviation: aircraft manufacturers don’t spend a decade secretly building a new plane, and then suddenly ask the world, “who wants one?” From the outset, they work closely with buyers to develop a product that meets the needs of the market.
In health care, this kind of collaborative approach would benefit everyone. Drug developers would minimize the risk in bringing innovative, breakthrough medicines to people. Such efficiencies would create a ripple of cost reduction throughout the supply chain, ultimately passing those savings along to patients. And most importantly, patients would have increased access to treatments that would result in better outcomes — helping them live longer, healthier lives.
The challenge of addressing drug pricing will persist once the pandemic is behind us. We can’t continue to push the system to the brink and expect that siloed solutions will solve the bigger problem — it’s simply not sustainable. We need to radically rethink the broad ecosystem that delivers life-changing medicines to people who need them. It’s time for stakeholders in the business of drug development and patient access to open themselves up to unlikely partnerships to fulfill the promise of modern medicine in the service of humanity.