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Why are affordable drugs so expensive?

Peter Ubel, MD
Meds
May 1, 2015
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In the old days, blockbuster drugs were moderately expensive pills taken by hundreds of thousands of patients. Think blood pressure, cholesterol and diabetes pills. But today, many blockbusters are designed to target much less common diseases, illnesses like multiple sclerosis and rheumatoid arthritis or even specific subcategories of cancer. These medications have become blockbusters not through the sheer volume of their sales, but as a result of their staggeringly high prices. Tens of thousands of dollars per patient, per year.

The high cost of such blockbuster specialty drugs creates significant financial burden for many patients. When a drug costs $90,000 per year, and a patient pays 10 percent of that cost, we are talking about a serious chunk of change. Not surprisingly, as these out-of-pocket costs rise, so too do the rates of “non-adherence,” medical lingo for “the patients didn’t take the medicines that I, their doctor, thought they should take.” Non-adherence used to be called noncompliance, which sounded too paternalistic. Now some experts are shifting to an even less judgmental language of “medication abandonment.” Indeed, here is a picture of the likelihood that patients will stop taking specialty drugs as a function of their out-of-pocket costs:

The-High-Price-of-Afforable-Medicine-Figure-1-NEJM

What can we do to help patients afford these medications?

Well, drug companies have come to the rescue by offering financial assistance to patients. For example, as described by David Howard in a New England Journal article, the Dendreon company “covers up to $6,000 of patients’ copays, coinsurance and deductibles for its $93,000 prostate therapy,” Provenge. The company boasts that 75% of patients receiving Provenge are expected to have minimal to no out-of-pocket costs.

Howard lays out a sampling of drug assistance programs covering up to $24,000 of out-of-pocket expenses:

The-High-Price-of-Afforable-Medicine-Exhibit-3-Health-Affairs

Why would companies do this? For starters, they want to help needy patients much the way expensive colleges help lower-income students by giving them financial assistance. In addition, the companies make money despite offering these discounts, because the insurance portion of their payments still add up to a tidy sum. Moreover, helping patients is good public relations, and with all the concern about high drug costs, these programs are a necessary part of being able to justify high prices.

But most importantly, these assistance programs enable companies to get away with charging higher prices.They make medications artificially cheap for patients, thereby increasing the demand for their products. What’s more, these programs distort the health insurance market. When a patient chooses an insurance plan with low monthly premiums but high out-of-pocket costs, the insurer justifies these premiums in part on the expectation that the high out-of-pocket costs will reduce patient demand for services. If pharmaceutical company drug assistance programs reduce out-of-pocket costs, patients win on both ends of that bargain – they get lower premiums and lower out-of-pocket costs. But that will ultimately force insurance companies to re-price their products. The market has been distorted.

Keep your eyes open for legal developments regarding drug assistance programs. According to Howard, the Office of the Inspector General is scrutinizing such programs. I expect this will come to a head soon, and we will see restrictions placed on companies giving people such assistance.

After all, when pharmaceutical companies make expensive drugs affordable for individual patients, the rest of us pay.

Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel.  He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices Together. This article originally appeared in Forbes.

 

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