The three-card monte game that a young Peter Bach, MD, observed on the streets of New York City was never designed for the player to win. While the unsuspecting player searched for the card he’d chosen, the dealer had long removed that card from the options on the table.
“That insight helped me understand what is wrong with pharmaceutical pricing,” says Dr. Bach, a University of Chicago-trained physician who will provide a keynote address during OMED 2018 in which he will outline a data-driven, value-based response to exorbitant drug prices. The conventional wisdom that rising drug prices spur innovation has led to drugs so expensive that they’re out of reach of those who need them, Dr. Bach notes.
“People who have the ability to work on these things that matter, that affect people’s lives, should. That’s why I became a doctor,” he says.
Dr. Bach is the director of Memorial Sloan Kettering Cancer Center’s Center for Health Policy and Outcomes in New York City and his approach is simple. Drug costs should be tied to their actual value to the patient.
The current system, where prices reflect “what the market will bear,” has been plagued by price hikes and a disconnect between the price of drugs and their benefits, Dr. Bach has noted.
A step toward value-based pricing
Dr. Bach created the Drug Abacus, part of the Drug Pricing Lab at Memorial Sloan Kettering, to start providing transparency on drug costs vis-a-vis their benefits. The interactive tool is designed to calculate appropriate prices for cancer drugs according to what experts list as possible components of a drug’s value. It allows comparison between the company’s price for the drug and the actual value of the drug based on eight variables including: dollars per year, toxicity discount, novelty multiplier, rarity multiplier, population burden of disease, cost of development, prognosis and unmet need.
Another step Dr. Bach has made toward reducing drug costs includes the time when he and his colleagues at Memorial Sloan Kettering Cancer Center refused to administer an overpriced cancer drug. In 2012, the team wrote about their intent to reject the drug in a New York Times piece. In an unprecedented move, the pharmaceutical company lowered their price on the drug.
“It’s unfortunate that the only player in the health care system that was willing to say no was the provider,” Dr. Bach says. “That’s not the optimal solution. We should have a system where pricing makes sense in the first place.”
In a perfect world, Dr. Bach says, “We should have access with no out of pocket costs for drugs. The way to do that is to have the price based on the data that supports that price. And we should have a single price for U.S. drugs across all marketplaces.”
Policy change as a solution
American patients have struggled under a drug-pricing system that provides generous incentives for innovation, but frequently can’t deliver medications at an affordable cost, according to a report by the U.S. Department of Health & Human Services.
During his OMED address, Dr. Bach will talk about how the reward system associated with the pharmaceutical industry is a product of policies that need to change—and how data and transparency are the first steps toward policy reform.
“We can change policy and create an environment where companies can succeed and make profits, but patients can also afford their medications,” he says.
Despite the reach of his message and the response to his efforts, Dr. Bach does not consider himself an advocate. “I am simply seeking answers by using research and data. Those answers are telling us what changes are needed,” he says. “We didn’t start with value-based pricing, we ended up there based on looking at the marketplace and trying to sort out the available options.”
Dr. Bach will speak on Saturday, October 6, at 5:00 p.m. PST at the OMED 2018 Conference at the San Diego Convention Center. Immediately following, the Centers for Medicare and Medicaid Services (CMS) and PhRMA have been invited to participate in a panel discussion to provide industry and payor perspectives on the topic.