Drug Costs

How Much Should A Prescription Drug Cost When It Works?

June 27, 2019 12:58 pm

Last week we cited a Boston Globe article in which representatives from the Arnold-funded Institute for Clinical and Economic Review (ICER) admitted the price set for Zolgensma, a cure for children with spinal muscular atrophy, “might be worth it.”


That wasn’t the only line in that story that caught our eye. Dr. Peter Bach, head of the Center for Health Policy and Outcomes in New York, told The Globe that Americans’ spending on prescription drugs increased from $134 in 1980 to $1,025 in 2017.


Hoping those numbers alone would scare readers, Bach – of course – did not give any explanation of what his figures mean, or offer context. Here are some facts he omitted:


-According to the Kaiser-Peterson Health System Tracker, growth in prescription drug spending declined in 2017 (the latest year for which data is available) and was far below increases seen in the 1970s and 1990s. The tracker also clearly indicates out-of-pocket spending for prescription drugs remained flat in 2017, while out-of-pocket spending on hospital and physician services grew.


-IQVIA has found, across all markets, more than half of patients have out-of-pocket spending that amounts to less than $50. About 20 percent of patients had no out-of-pocket costs at all. Less than 9 percent of patients pay more than $500 out of pocket for medication.


-Once rebates and other factors are taken into account, per capita prescription drug spending has dropped 2 percent since 2008, and this has happened even as an explosion of new innovative treatments have come to market.


-The Kaiser-Peterson Health System Tracker also indicates drug spending as a share of all health-care spending has been remarkably stable over the term that Bach cites. The tracker also shows prescription drugs will represent a similar portion of overall health spending in the future.


-According to a Morning Consult poll, 73 percent of Americans who take prescription drugs say it is easy to pay for their medications each month. These findings mirror what the Kaiser Family Foundation found in a separate poll. What could be one reason driving those opinions? Ninety percent of all drugs dispensed in the United States are for lower-cost generic medicines.


In testimony given this past January in the U.S. Senate, Bach asked “how much a drug should cost when it works?”


Before you answer that question, consider this summary of innovation over the last few decades and century: “[M]edical research has become so profound and widespread that there is now an array of treatments for even the most lethal diseases in the world. Only a few years back, cures for these diseases were unimaginable. In the 20th century, the average life expectancy according to the U.S. Census Bureau was 47.3 years. Only 100 years later, this number has rocketed to 77.85 years due in large part to the incredible scientific developments with novel treatments and vaccinations for deadly diseases.”


Three additional decades of life.


We agree with Bach: it is hard to put a price on that.