The High Cost of Highly Effective New Drugs

The Affordable Care Act’s trials and tribulations may be attracting the most attention, but increasing drug costs are starting to concern experts.

Extraordinarily expensive new drugs may be effective, but their prices may be reaching new heights, David Blumenthal, MD, and David Squires, wrote on the Commonwealth Fund’s blog.

Solvadi, for hepatitis C, is one of the drugs currently in the middle of this controversy. The drug costs $84,000 per course, which means that treating all infected Americans would cost $250 billion, or nearly as much as what the country spends on all other drugs combined ($263 billion).

Drug spending levels were diminished in recent years with blockbuster drugs going off patent and a decrease in new products, they wrote, but the new focus on personalized medicine is going to change that.

“The clinical results can be dramatic, enhancing both length and quality of life, but the costs are also eye-popping,” Blumenthal and Squires wrote.

New treatments are targeting the many genetic abnormalities that may make up diseases such as cystic fibrosis, which means developing drugs for the specific problems created by each defect.

A new cystic fibrosis drug, Kalydeco, will cost $294,000 a year for each patient. However, the drug only benefits 1,200 of the 30,000 people in the United States with the disease, because Kalydeco targets a specific underlying genetic defect.

“The obvious question is why drug companies are charging such seemingly exorbitant amounts for these new products,” the authors wrote. “One reason is because they can. Their patents grant them a monopoly on life-saving treatments.”

However, they add that the other reason drug companies charge so much is because the drugs are so precisely targeted that they may only benefit a small number of patients. As a result, they charge more per patient to offset the costs of drug development.

Critics point out that they aren’t just recouping the cost of development, they are also making a healthy profit. Gilead Science’s net income for the first half of 2014 is 4 times the same period a year ago.

“In any case, if more and more of these drugs come on line, the aggregate expense of providing them to eligible patients seems likely to skyrocket,” Blumenthal and Squires wrote. “This would create huge new challenges in balancing high healthcare costs against other pressing societal imperatives, such as education, housing, transportation infrastructure, and the very research and development that has spawned the new treatments.”

They came up with 4 options to prepare for the challenges of these expensive new treatments:

1. Comparative effectiveness research to assess the added value of new agents

2. Make new treatments affordable and prevent drug manufacturers from earning extraordinary profits because of the monopoly they have under current patent law.

3. The US Food and Drug Administration needs to ensure less expensive alternatives are available quicker.

4. The US health system must increase efforts to eliminate wasteful practices that drive up health spending and make it difficult to afford new treatments.

“Tough as it is, having highly effective but expensive new treatments is a good problem to have,” they concluded. “These drugs mean longer, better lives for humans the world over. We need to foster competitive markets and public policies that enable us to benefit from the research triumphs that are finally coming our way.”