Tag Archives: Drug costs

Reducing Financial Toxicity of New Drugs

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PA Ubel et al. NEJM 2025; 392: 729-731. Out of Pocket Getting Out of Hand — Reducing the Financial Toxicity of Rapidly Approved Drugs

Key points:

  • In 2023, the median list price of new drugs was $300,000 per year. The FDA does not consider drug cost as part of its approval process.
  • Many new drugs have uncertain benefits despite FDA approval. “Since the FDA is authorized to approve drug labeling, it could consistently require that labeling indicate when a drug’s approval was based on results from uncontrolled trials or from trials with surrogate measures…might reduce the chances that patients, seeing that a drug has FDA approval, will mistakenly assume that it has been proven to provide substantial benefits..[however] . In the face of serious illness, people frequently prefer action to inaction, even when they would ultimately be harmed by taking action.”
  • Optimally, “congress would need to pass legislation giving the agency authority to consider financial harms when making decisions about drugs with unclear benefits, and the FDA would need to gain expertise in evaluating the budgetary implications of new drugs.”

My take: The financial burdens of newer medications leave patients unable to afford other necessary medical and non-medical expenses. This is especially problematic when a new medication offers minimal benefit.

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NPR: Drugmakers Claim to Lose Money in US In Order to Avoid Taxes

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NPR 4/15/24: Drugmakers’ low U.S. taxes belie their high sales

Some excerpts:

Corporations are supposed to pay a nominal tax rate of 21%. But in recent years, the biggest pharmaceutical companies had an average effective tax rate of less than 12%, according to an analysis by the Senate Finance Committee….

An NPR examination of financial records for the top five drug companies in the U.S. showed that in 2023, all but Eli LIlly reported losing money in the US.

However, drug companies make most of their sales in the U.S., thanks in large part to its unique health care system and the higher prices Americans pay for drugs. The top five American pharmaceutical companies all had more drug sales in the U.S. than they did in all the other countries in the world put together…

“How do they do it? You license your intellectual property to an offshore subsidiary,” Setser tells NPR. “You produce the high value-added active ingredients in a factory in Ireland or Singapore, and you pretend like the profit is accrued to these offshore subsidiaries, even though the sales are back to the United States…”

The drug industry isn’t the only one that moves its income around to pay lower taxes, but the U.S. market’s role in driving the drug industry’s overall revenue makes the tax strategy stand out, says Ameet Sarpatwari, assistant director of the Program on Regulation, Therapeutics and Law at Harvard Medical School.

“These findings are striking because they show that the companies want to benefit from the high prices and the high sales in the U.S. market, but are doing everything possible to not contribute to the taxes that make that system and market function” 

My take: Despite earning top dollar and receiving all sorts of research support, the pharmaceutical industry (like other industries) are taking advantage of US tax laws and not paying their fair share. Yet, I doubt there will be legislation passed in the near future to address this. “The pharmaceutical and health product industry spent $381 million lobbying Congress in 2023 – more than any other industry that year”.

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Recently I went to the Piedmont Arts Festival.
This piece by Laura Gutzwiller was done completely with felt.

For Policy Wonks: Bayh-Dole Act and Reducing Pharmaceutical Costs

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AB Engelberg et al. NEJM 2022; 386: 1104-1106 (Commentary). A New Way to Contain Unaffordable Medication Costs — Exercising the Government’s Existing Rights

This commentary notes that the National Institutes of Health (NIH) spends more than $40 billion each year to fund biomedical research. “We believe that medicines discovered at public expense should be affordable.”

A Few Excerpts:

  • “Existing laws provide two paths for achieving this result. First, the Bayh–Dole Act of 1980 gives the government a royalty-free license to use patented inventions that were discovered using federal funding. The government has never exercised its Bayh–Dole license”
  • “Second, 28 U.S. Code §1498, which dates to 1910, gives the government immunity from being sued for patent infringement in federal courts, while giving patent owners the right to receive reasonable compensation when the government makes or uses a patent-protected product”
  • Case in point: “Recently, the government signed a contract with Merck to purchase molnupiravir (Lagevrio), an oral antiviral drug that reduces the severity of Covid-19. The contract price of $712 per treatment is estimated to be more than 35 times the cost of producing the drug at a reasonable profit. Molnupiravir was discovered at Emory University using government funding, and Emory’s patent applications acknowledge the government’s Bayh–Dole license.5 Molnupiravir payments for Medicare, Medicaid, and VHA patients could cost the government billions in 2022. This amount could be reduced by more than 90% if the government exercised its license and allowed a generic manufacturer to supply the drug for patients in government-supported programs.”

My take: U.S. taxpayers should get a return on their investment when new medications are developed with government funding rather than paying more for these medications than any other country.

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Ravenel Bridge, Charleston SC (blue skies -no filter)

Insulin: “Poster Child For Everything That’s Wrong” with U.S Drug Costs

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Fortune Dec 2021-Jan 2022: Insulin’s Deadly Cost Thanks to Stan Cohen for sharing article.

Some excerpts/key points:

  • “Insulin in the U.S. costs on average some 800% more than in other developed economies. And yes, people die for lack of it, sometimes within days or even hours of missing their dose. No one knows how many; data suggests that in the U.S. it’s at least a few every day. Far more may suffer other ravages of diabetes—blindness, heart attacks, loss of limbs.” In addition, 40% of Americans who have died from COVID-19 were diabetics.
  • “Manufacturer’s compete not by cutting prices but by raising them.” This is often due to pharmacy benefit managers (PBMs), the middleman between manufacturer’s and insurers. PBMs negotiate drug prices and establish formularies. PBMs make more money if they able to discount higher rebates on the list cost; hence, to influence PBMs to choose their products, manufacturer’s are incentivized to raise drug costs, even if the average price is unchanged. Higher list prices affect those least able to cover the costs, namely those without insurance as well as many with high deductibles.
  • List price for Humalog (Eli Lilly) more than doubled from 2013 to 2018, Lantus (Sanofi) more than quadrupled from 2005 to 2016
  • Some patients have obtained insulin in Canada where costs for a vial could be more than 10-fold less (though this is illegal). There are also more than 12,000 GoFundMe.com listings with “insulin” in the title.
  • For the insulin market, some recent changes include the emergence of GLP-1 analogs for Type 2 diabetes (~90% of diabetes in U.S.). Trulicity is now Eli Lilly’s bestselling medication. In addition, the FDA recently approved Semglee, an interchangeable biosimilar for Lantus which is reducing costs.

My take: “The story of insulin is a poster child for everything that’s wrong with a free-market approach to drug availability,” says Arthur Caplan…”It’s almost inexcusable morally.”

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Is An Unproven Medication Worth More Than the EPA or NASA?

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For those who have not followed the FDA’s controversial decision of approving Aducanumab for the treatment of Alzheimer’s disease, the NEJM has two useful commentaries:

Key points -from 1st article:

  • “Biogen…has announced a list price of $56,000 –10 times the evidence-based benchmark recommended by the independent Institute for Clinical and Economic Review…if even 10% of U.S. patients with Alzheimer’s disease were prescribed aducanumab, drug spending for Medicare Part B would increase from $37 billion to $69 billion per year”
  • The authors note that Medicare Part B payments rely on average sales price (ASP) from private insurers rather than a direct negotiated price; thus, the higher the price for private plans (even if poorly covered), the higher the Medicare rate
  • Hospitals and physicians are incentivized at higher prices due to receiving a 4-6% reimbursement price over the acquisition price
  • “The $56,000 price for aducanumab is a rational manufacturer response to an irrational insurance system.”

Key points -from 2nd article:

  • By one estimate, the potential cost will exceed the budgets of agencies such as EPA or NASA
  • “In granting accelerated approval to aducanumab, the FDA concluded that the drug’s ability to reduce amyloid plaques was reasonably likely to translate into clinical benefits. But this claim is hotly contested and was not presented to the FDA’s advisory committee, which voted against recommending approval of the drug because of the lack of a demonstrated clinical benefit”
  • If Medicare refuses to cover medication, this would leave a burden to state budgets. “As a legal matter,…state Medicaid programs are required to cover nearly all FDA-approved drugs.”
  • “Congress could adopt new legislation specifying that state Medicaid programs need not cover aducanumab…Protecting state budgets shouldn’t require Medicare to cover an expensive drug with unproven clinical benefits.”

My take: This type of huge fiscal burden may provide the rationale for Medicare and Medicaid to reexamine whether/how they cover expensive FDA-approved medications.

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Exorbitant Medicine Costs -Generics Discounts Often Minimal

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A recent story in the NY Times (Patients Eagerly Awaited a Generic Drug. Then They Saw The Price. ) shows that the availability of a generic drug does not guarantee that exorbitant pricing will be remedied.

An excerpt:

Syprine, which treats a rare condition known as Wilson disease, gained notoriety after Valeant Pharmaceuticals International raised the price of the drug to $21,267 in 2015 from $652 just five years earlier…

In promoting its “lower-cost” alternative to Syprine, a Teva executive boasted in a news release that the product “illustrates Teva’s commitment to serving patient populations in need.”

What the release didn’t mention was the price: Teva’s new generic will cost $18,375 for a bottle of 100 pills, according to Elsevier’s Gold Standard Drug Database. That’s 28 times what Syprine cost in 2010, and hardly the discount many patients were waiting for.

Nearly three years after Valeant’s egregious price increases ignited public outrage, the story of Syprine highlights just how hard it can be to bring down drug prices once they’ve been set at stratospheric levels.

My take: This type of excessive drug cost is why critics demand additional regulation be placed over the entire pharmaceutical industry; it can occur only in a system which has limited competition and indirectly shares the cost across the entire system by having insurance companies foot most of the bill.

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Bright Angel Trail

Turning Liquid into Gold: A Pharmaceutical Rumpelstiltskin Story

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A recent letter to the editor (LA Probst, TR Welch. NEJM 2017; 376: 795-6) provides a sad tale of how well-intended legislation to promote safety and efficacy of pediatric liquid medications has led to both an increased number of liquid formulations approved by the FDA but with a much higher cost than previous extemporaneously compounded formulations.

The liquid version of lisinopril is priced 775 times the cost of the equivalent tablet.  Other medications with high liquid to tablet cost ratios include enalapril (21 times), indomethacin (49 times), glycopyrrolate (14 times), and pyridostigmine (11 times).

The authors note that there are additional costs for developing/manufacturing these liquid formulations.

My take (borrowed from the authors): “there must be a better way to support the costs of developing the drug formulations that many children and some severely impaired adults desperately need.”

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Chattahoochee near Azalea drive

Chattahoochee near Azalea drive

Orphan Drugs –Very Profitable

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Did you know that Remicade and Humira are orphan drugs?  For those concerned about pharmaceutical costs, a recent NPR article is a must.

From NPR: Drugs For Rare Diseases Have Become Uncommonly Rich Monopolies

Here’s an excerpt:

Lucrative financial incentives created by the Orphan Drug Act signed into law by President Reagan in 1983 succeeded far beyond anyone’s expectations. More than 200 companies have brought almost 450 so-called orphan drugs to market since the law took effect.

Yet a Kaiser Health News investigation shows that the system intended to help desperate patients is being manipulated by drugmakers to maximize profits and to protect niche markets for medicines already being taken by millions. The companies aren’t breaking the law but they are using the Orphan Drug Act to their advantage in ways that its architects say they didn’t foresee or intend. Today, many orphan medicines, originally developed to treat diseases affecting fewer than 200,000 people, come with astronomical price tags…

More than 70 were drugs first approved by the Food and Drug Administration for mass market use. These medicines, some with familiar brand names, were later approved as orphans. In each case, their manufacturers received millions of dollars in government incentives plus seven years of exclusive rights to treat that rare disease, or a monopoly…

When a drugmaker wins approval of a medicine for an orphan disease, the company gets seven years of exclusive rights to the marketplace, which means the FDA won’t approve another version to treat that rare disease for seven years, even if the brand name company’s patent has run out. The exclusivity is compensation for developing a drug designed for a small number of patients whose total sales weren’t expected to be that profitable…

Industry-wide, orphan drug tax credits cost the federal government $1.76 billion in fiscal 2016

My take: Any objective observer would recognize that the goals of the Orphan Drug Act are being subverted by current practice and changes are needed to achieve the goals of targeting rare diseases and reasonable medication costs.

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