Tag Archives: Drug costs

Upside Down Incentives in Pharmaceutical Development –Profit over Patients

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A good read on why cheap effective drugs may not be coming to the market in the U.S. –as well as solutions. (Full text: AR Kellermann, NR Desai. JAMA. Published online August 17, 2015. doi:10.1001/jama.2015.10114)

Here’s an excerpt:

In 2003, Wald and Law proposed to combine 3 half-dose antihypertensive agents, an intermediate-dose statin, low-dose aspirin, and folic acid into a once per day polypill for primary and secondary prevention of cardiovascular disease. Based on epidemiological models, they estimated that daily use by individuals aged 55 years or older could reduce the incidence of MI and stroke by more than 80%.

In the 12 years since this report was published,3 versions of the polypill have been successfully tested in several phase 2 (safety) studies and a few modest-sized phase 3 (efficacy) trials. Collectively, these studies demonstrated that the polypill was well tolerated, achieved good adherence, and based on intermediate end points, such as reduction of blood pressure and low-density lipoprotein cholesterol level, is efficacious…

The 4 drugs in the current version of the polypill have long histories of safe use. Although all 4 are frequently prescribed in the United States, the US Food and Drug Administration (FDA) has not approved combining them in a single pill…

Although the polypill could produce substantial public health benefits, people in the United States are unlikely to find out anytime soon. This is because the pill’s price is so low (≤$1 per tablet) and the cost of the large clinical trials required for FDA approval is so high, it is unattractive to investors. The inventor’s dilemma is that creating a product that improves health is not enough; the product must also be able to generate a healthy return on investment. In the United States, the surest way to generate a healthy return on investment is to increase health care spending, not reduce it.

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“Using Drugs to Discriminate”

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A recent commentary (Jacobs DB, Sommers BD, NEJM 2015; 372; 399-402) highlighted a growing problem.  Many insurers are using drug benefit plans to dissuade sicker people from enrolling in their plans.

Prior to the Affordable Care Act (ACA), insurers charged high premiums to people with chronic conditions.  The ACA attempted to address this problem; in fact, the “individual mandate” was necessary to make sure that insurance companies had enough healthy people in their insurance pool to make it financially feasible.

Yet, insurance companies make more money if they can limit insuring sicker, chronically-ill people.  One way this is happening is through “Adverse Tiering” which substantially increases out-of-pocket expenses for individuals with HIV, cancer, diabetes, mental illness, and arthritis. The difference in out-of-pocket costs, for example, with for each HIV drug was more than $3000 (on average) between adverse-tiered plans and those that were not adverse-tiered.  Even for generic drugs, the cost was nearly a $2000 difference.

A few problems with this approach:

  • Insurer’s drug prices are not usually available to public when choosing a plan; thus, these higher out-of-pocket costs are often unanticipated. (*Price transparency could accelerate rather than hinder this process.)
  • If sicker patients flock to plans without “adverse tiering,” this could make these non-adverse-tiered plans lose money and result in similar design to avoid “adverse selection.”

Conclusion: “Preventing [this adverse tiering and] other forms of financial discrimination on the basis of health status — with the attendant risks of adverse selection in the marketplace –will require ongoing oversight.”

Here’s the NY Times Report on this study: Study Finds HIV Drugs Priced Out of Reach

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