imageThis past weekend, 60 Minutes’ Leslie Stahl asked John Castellani, the president of PhRMA, the pharmaceutical industry’s advocacy (lobby) organization, why the cost of Gleevec, from Novartis, dramatically increased over the 13 years it’s been in the market, while other more expensive competitors have been launched in the period. (Here is the FDA’s announcement of the Gleevec approval from 2001).

Mr. Castellani said he couldn’t respond to specific drug company’s pricing strategies, but in general, these products are “worth it.”

Here is the entire transcript of the 60 Minutes’ piece.

imageToday, Health Affairs, the policy journal, is hosting a discussion of the publication’s analyses into specialty pharma — including policy initiatives, the role of coupons, and specialty Rx as driver of health costs. I’m observing the tweets while traveling to a client via Amtrak, and have read 3 of the articles to gain insights into the latest thinking on this very important topic for individual and public health.

First, a definition to set us on the same playing field: specialty pharmaceuticals are novel drugs and biologic agents that require special handling and ongoing monitoring, are administered by injection or infusion, and are sold in the marketplace by a small number of distributors, according to Bradford Hirsch and  colleagues at Duke University, who penned one of the three seminal research articles in the October 2014 Health Affairs issue called The Impact of Specialty Pharmaceuticals As Drivers of Health Care Costs.

Hirsch et al note that there’s no clear definition of “specialty pharma,” but that all roads lead to one key differentiator: that these products cost payers and patients $600 or more per treatment (dose). They are “special” in that they are very expensive relative to other general pharma products, such as those proferred to deal with diabetes, heart disease, and respiratory conditions. As the chart from Express Scripts shows, therapy classes for specialty pharma include inflammatory conditions, MS, cancer, HIV, Hep C, and other high-cost conditions. Express Scripts’ data here also charts the growth of specialty drug spending to 2015 by category.

imageHirsch and his team lay out the big picture in terms of macro health costs: specialty pharmaceuticals could account for 50% of drug spending by 2019. In oncology, every product approved by the FDA in 2012 was priced over $60,000 for one year of therapy. These products included Zaltrap, the highest-cost treatment exceeding $120,000 for a year; Kyprolis, also, over $120K, Stivargo just aroudn $120K; and, 9 others ranging from nearly $70,000 to just under $120,000 for a year’s treatment.

A third article in Health Affairs talks about the role of coupons for discounting patients’ out-of-pocket costs, which can improve adherence (that is, patients’ sticking to a treatment) by shielding them from higher costs. At the same time, Catherine Starner and her co-writers point out, couponing can also incentivize patients to use higher-cost drugs when a lower-cost alternative could work at least as well.

Health Poupli’s Hot Points: Consider the prices for the 2012-approved oncology products in the context of overall health spending. At these prices, the $120K price tag is at least 60 times the cost of a day’s stay in an inpatient hospital bed, averaging just over $2,000 in 2011 according to Kaiser Family Foundation statistics.

This begs the question, then, how to re-allocate the health care dollar across inpatient, outpatient, home care, pharma and other health cost line items in the era of expensive specialty drugs. And, how to ensure that patients can access these “financially toxic” costs, as coined by Dr. Leonard Saltz of Memorial Sloan-Kettering, interviewed by Stahl in the 60 Minutes story.

Put another way, what is the value of human life at what might be the end-of-life, when some of these products might add one or two additional months of life?

As patients continue to morph into health care consumers, responsible for paying for 20, 30, 40 percent or more of the retail price of specialty drugs, the patient and her family are faced with spending very real money by any definition. This isn’t your father’s co-pay for an unbranded brand of an inhaler for COPD for, say, $60. This is, on an annual basis, a downpayment on a house, a couple of years of college tuition, or a parent’s financial legacy in an estate to his/her children.

At the same time, as  James Robinson and Scott Howell observe in another Health Affairs article on policy initiives for pricing specialty drugs, “physicians play a central role in determining the value of specialty pharmaceuticals.” This calls for doctors to play a part-time but crucial role in shared-decision making with patients, wearing the new hat as a health economist-cum-personal-financial-planner (a topic about which I frequently write, such as here in Health Populi).

Thus, the AMA has begun to offer guidelines and training to teach physicians to weigh the costs of care, in order to become better stewards of medical resources.


1 Comment on Specialty pharmaceuticals’ costs in the health economic bulls-eye

e-Patient Dave said : Guest Report 8 years ago

Boy, no kidding. Does it get more "Maslow fundamental" than offering a product that hangs you over a cliff? The treatment I got in 2007 (high-dose interleukin 2) showed up on my EOBs at something like $3,000 a dose, 3x a day. (I'm too lazy to go dig out the actual numbers; it turns out there was one number for the drug, and what I was billed included the cost of administering it, plus I'm sure an 8x markup for being Spiffy Providers or something.) In any case it was thousands per dose, and had to be administered in a semi-ICU environment. I "only" received 36 doses, spread over 4 one-week in-patient stays. But it was easy for me to imagine being in a situation where something could keep me alive forever at a cost of $10,000/day. (Or $100k, or pick a number.) What a dilemma. And the dilemma gets a lot nastier when you imagine it as "keep your mother alive at a cost of" or "keep your child alive." And in a way that leads to the elder-boom dilemma: because medicine has gotten so good at saving us from dying in our 50s and 60s, we have a LOT more elders. Almost 2 years ago surgeon Jon White (not the AHRQ Jon White) posted that 65% of all the humans who've ever been 65 are alive today ... medicine is saving us so a LOT of us are going to be old. And the more they save us the more we'll face the dollars-per-day-times-many-many-days decisions. No easy answers... did you see Susannah's recent post about the boomers reaching 85?

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