Innovation vs. access: Experts debate drug pricing

As drug prices have risen in recent years, their corresponding value to patients hasn’t increased at the same rate, said health care policy expert Peter Bach, MD, during a recent keynote address at OMED 2018. In addition, many drugs today, especially medicines for cancer, are out of reach for many patients, Dr. Bach said.

“Drugs should be priced based on the value derived from them,” said Dr. Bach, the director of Memorial Sloan Kettering Cancer Center’s Center for Health Policy and Outcomes in New York City, where he created the Drug Abacus, part of the Drug Pricing Lab, a tool to assess the true value versus the benefit of various prescription drugs.

Healthy debate

Following Dr. Bach’s address, he discussed drug pricing with Jenny Bryant, senior vice president at The Pharmaceutical Research & Manufacturers of America (PhRMA), an advocacy group, who countered Dr. Bach’s position with a call for an understanding of the delicate balance between insurance companies, drug manufacturers and patients.

“Drug pricing is not the problem,” Bryant said.

While Bryant agreed that there is an access issue, she stated that drug pricing is not the biggest concern when it comes to health care costs. “I don’t think the facts bear that out. And I think there is a huge risk in our country of adopting that point of view. You can’t make good policy with fearmongering.”

Innovation incentives

Innovation is often cited as a reason for high drug prices.

In the process of driving innovation, Bryant said, “We are going to have a lot of failures. But if we want to squeeze down the reward for the winners, we have to recognize that there will be fewer manufacturers willing to invest, and then there will be less competition as well.”

Under the current system, innovation is producing drugs that are financially out of reach of many of the patients who would benefit from taking them, Dr. Bach noted.

He pushed back on the outcomes-based contracting model that includes arrangements between manufacturers and payers in which a refund or rebate is linked to the performance of the drug.

“This model says we’ll charge whatever we want for drugs and if they don’t work, we’ll give you a refund.” According to Bach, in the outcomes-based contracting model, prices are “opaque, inconsistent and driven more by market factors than clinical data.”

Q&A

Dr. Bach’s research has led him to support a value-based system based on a drug’s measured benefits that are transparent, reproducible and data-driven. Following is an edited Q&A with Dr. Bach.

What can physicians do to defray the cost of prescription drugs for patients?

It’s a good practice to ensure you’re choosing a cheaper drug when it will work just as effectively as a more expensive one.

What should physicians be doing to encourage better drug policies?

It is difficult for individual physicians to do much about the cost of drugs, but they can push for more sensible policies where drugs cost a reasonable amount based on how well they work.

This is a really pressing policy issue. Physicians should be aware of the challenges that policymakers are currently facing because the pharmaceutical industry is a very powerful lobby, always insisting that they need higher prices to spur research but neglecting the fact that those high prices stand in the way of patients being able to access those drugs.

How do you envision drug prices evolving in an ideal situation?

There’s probably a way to price drugs based on how well they work that not only preserves the incentives for innovation but also improves them because then we create a system where when drugs work better, drug companies get bigger rewards, and when drugs only provide a minimum benefit, the prizes are smaller. That’s how normal markets work, and that’s how this market should work too.

Is there anything else that’s important to know?

The cost of innovation and the cost of drugs is a double-edged sword. We’ve gotten to a point now where we’re paying such high prices for drugs based on the thesis that that will drive innovation, and we’re actually putting those very innovative products out of the reach of patients because they cost so much.

For further reading:

Cancer expert to speak on drug prices at OMED

MS patients who adhere to treatment have higher health costs – and better outcomes 

Dollars and sense: Helping patients understand the cost of health care