MESSAGE
| DATE | 2015-11-08 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [Hangout-NYLXS] Who is paying for what drugs
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I Am Paying for Your Expensive Medicine
NOV. 7, 2015
[Ezekiel J. Emanuel]
Ezekiel J. Emanuel
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YOU may not know it, but you could be on the hook to pay at least $124
this year for a drug you probably don’t take.
The drug is a new class of cholesterol-lowering agents called PCSK9
inhibitors. Its cost and how we are paying for it illustrate why we all
need to care about not only our own health care bills but also those of
our neighbors. And it helps focus the debate about drug prices on two
questions: What is the value delivered by the drug, and can that be
linked to its price? And how should such value-based prices be implemented?
In July, the Food and Drug Administration approved the first of two new
PCSK9 inhibitors that lower the bad type of cholesterol, LDL. Studies
suggest that they can reduce it by up to 60 percent, compared with a
placebo, and reduce it up to 36 percent more than statins and a drug
called ezetimibe. However, there are no definitive data on how much
these drugs actually reduce heart attacks, strokes and deaths from heart
disease. Researchers suggest they might decrease the likelihood of such
bad outcomes. For example, one preliminary study found that taking the
drug lowered the overall chances that a patient would experience a heart
attack or stroke, or hospitalization or death from heart disease, to 1.7
percent from 3.3 percent. The definitive studies will be out in 2017.
Drugs like these can help us lead longer, more productive lives. The
problem is that the companies producing these drugs — Amgen, Sanofi and
Regeneron — announced that the retail price for a prescription would be
more than $14,000 per patient per year. The price is particularly steep
given that these drugs may need to be taken for the rest of the
patients’ lives. How much patients pay directly would depend on their
insurance plan.
But the high prices insurers will have to pay will eventually be
reflected in higher premiums for all of us. According to a recent
article in The New England Journal of Medicine by Kevin A. Schulman and
his colleagues at Duke, even if the price came down to about $11,000 per
patient per year, and only 1.1 million of the roughly 23 million
middle-age Americans with high cholesterol actually took these drugs,
the bill would be so high that for a typical insurance plan, “annual
insurance premiums would increase by $124 for every person” in the
insurance plan. The authors point out that “taxpayers will have the
additional burden of paying for similar increases in” the costs for
Medicare to cover such drugs. The same is true for Medicaid and the
Veterans Affairs department.
To protect patients, many policy makers and academics are proposing
various changes in drug benefit arrangements such as separating out
deductible limits for drugs from deductibles for other health benefits
and limiting co-pays for these drugs to $100 to $250.
These proposals are a good start and necessary, especially for
low-income Americans who struggle the most to pay out-of-pocket medical
costs. But they will not solve the systemic problem of super-high drug
costs. Someone — even if it’s a less than sympathetic insurance company
— still has to pay the full bill. A growing chorus is arguing that we
should start paying for value in health care. Paying for value is the
common-sense idea that prices should be linked to benefits; high prices
would have to be justified by high health benefits.
What would paying for value look like in the case of PCSK9 inhibitors?
We have estimates of the benefits in terms of lowering risks from
cardiovascular disease. At what price would those benefits be a good value?
In the rest of the economy we let individuals determine value. They
decide whether a new gadget is worth the expense when they spend their
own money on a television, a car or a smartphone. And in health care
many want only patients to determine value.
But as these PCSK9 inhibitors make clear, it is not just patients’
perspectives we need to take into account. Patients get the benefits,
but all of us are paying the bill. As Dr. Schulman and his colleagues
show, the nature of the way we pay for health care — through private and
public health insurance pools, which spread financial risk and costs
among large populations — means we all pay for an exorbitantly priced
high cholesterol drug even if we don’t have high cholesterol and we
don’t take the drug. The high costs are hidden in our ever-increasing
insurance premiums and taxes. Because we all pay, all Americans have to
have a voice in determining value.
As the PCSK9 story is making clear, the drug cost debate is now
beginning to focus on two questions that are currently unresolved:
First, how do we determine value so the perspectives of all Americans
are considered? Second, how do we implement and enforce that
determination of value?
The traditional answer to the first question is to determine the
cost-effectiveness of the new drugs by assessing how much they improve
the lives of patients measured by quality-adjusted life years (QALY).
This is certainly an important measure for patients. The controversy
centers on how much we should pay for each additional year of life. Is
it $50,000? $100,000? More? In England they have a flexible target,
wherein above $45,000 per QALY drugs require an increasingly stronger
case for coverage. But even if we use a much higher target in the United
States — say, $150,000, which is about three times the median household
income — it turns out these PCSK9 inhibitors still fail the value test.
The drugs would cost patients as much as $300,000 for every
quality-adjusted life year they add. Their price would have to shrink by
more than half, to roughly $5,000 per patient per year, to make the
$150,000 level.
The answer to the second question is just as unsettled. Many people hope
that the drug industry will self-regulate, using value-based pricing of
its new drugs. But if past experience is any indication of future
behavior, self-regulation may be a pipe dream. Recent price increases
for generic drugs long off patent and patented drugs in which there is
no additional research aren’t encouraging signs.
In the United States, government regulation is usually a solution of
last resort when industry self-regulation fails. But if insurance
premiums keep going up $124 per person because of a single drug,
Americans may find it more appealing.
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