According to a new report by the IQVIA Institute for Human Data Science, spending on cancer therapies has doubled over the past 5 years. And the retail price tag on these drugs is up, too. The average retail price of the 2017 launches was over $150,000, compared to $79,000 for those launched in 2013. You know, when they were practically garage sale prices. But before we get our knickers in a twist, IQVIA reports the average annual out-of-pocket spend for someone with commercial health insurance was just $500. With 1.7 million cancer diagnoses and over 600,000 deaths in the US alone forecast for 2018, that doesn’t seem like such a bad deal.
What is “it,” you ask? Spark Therapeutics’ new gene therapy Luxturna which can cure blindness in a single treatment. The condition causing the blindness only affects a few thousand people, so the FDA has designated it as an orphan drug. The single dose and orphan drug aspects of this gene therapy combine for a rather expensive R&D bill, and translate into a bit of sticker shock at the selling price: $425,000 per eye. Spark is trying out some interesting commercialization practices to get the drug to patients, like giving rebates to patients whose eyes don’t see better over time. They’re also considering selling the therapy directly to insurance companies so that health care providers don’t have to pay and store the treatment without a guarantee it’ll ever be used.
Replacing President Trump’s initial pick to lead the US Health and Human Services department is recent Eli Lilly alum Alex Azar. Trump expects that experience will give him a good grip on how to better deliver healthcare and lower drug prices. However, some critics are unhappy about the appointment of a “Big Pharma” figure to run the US’ most well-funded department. Eli Lilly and other large drug makers like Johnson & Johnson and Merck have actually made some advances in drug pricing transparency recently. Earlier in 2017 they released high-level reports explaining price hikes, and shifted the blame for high healthcare costs to other players like PBMs. However, these too were criticized for not being granular enough. Well, you can’t please everyone.
Hepatitis C is expensive to treat, which is why a lot of patients don’t get treated for it, and that possibly contributes to why it’s the deadliest infectious disease in the US. It’s gotten to the point where states are considering legal challenges to those precious patent laws that pharma typically spends a lot of money on to make sure no one touches. So, in the fight to increase Hep C treatment, in one corner we have legal challenges, and in the other we have good ol’ market forces. Abbvie’s new Mavyret costs well less than half the amount of some existing treatments, and it can treat all six strains of the infection. Your move competition, may the markets be ever in your favor.
Have you ever looked at the online sex offender registry for your neighborhood? Not reassuring, right? Well, it looks like the state of California may soon have a similar system for drug makers. On Governor Jerry Brown’s desk is a law that would require drug manufacturers to give the state notice of price increases so that these can be posted on the internet. Even the slightest of cynics would wonder if this is being done simply to increase public (and media) pressure on a drug company that might otherwise be tempted to act like a total Shkreli. While this seems like a slam dunk for a left-leaning state like California, recall the ballot initiative that failed last November that would have capped the cost of certain drugs at the price paid by the US Department of Veterans Affairs. Strange days.
You gotta love the pharma industry. For a bunch of smart people, we are pretty dumb sometimes. All it takes is one study published on drug development costs and suddenly everybody’s up-in-arms. The study, released in JAMA (The Journal of the American Medical Association) attempts to debunk the widely held notion that it costs ~$2B to bring a drug to market–at least that is how the media is picking up the story. The study says it more like $750M, a big difference. Know what else makes a big difference? Your sample, that’s what. In this most recent assessment the authors looked at 10 small companies that had successfully commercialized a cancer product. Knock knock. Who’s there? Bias, that’s who. Let’s count the ways: (1) only selected 10 companies, (2) only selected cancer compounds, (3) only selected small companies, and (4) only selected companies that won the drug development lottery and successfully brought a cancer drug to market. According to BIO, 95% of cancer drugs fail to make it to market. Where are those R&D costs included? Thought so.
Just to be clear, we have no idea what it costs to bring a drug to market, and to some degree we do care what the number is, but only a little. The point is, don’t publish a clearly biased study. What we won’t discuss is that the article goes on to state how profitable those companies were/are. Super. The same day the study was released, Dr. Scott Gottlieb (FDA Commissioner) spoke at the RAPS 2017 Regulatory Convergence Conference and said “There’s been criticism of the various estimates of how much it costs to develop a new drug. But we know some drug programs can easily top $1 billion, just in direct outlays.” Correct.
The industry and the public may not want to go crazy over drug development costs or pharma profits or drug pricing or CEO pay, because it all comes down to innovation. We probably want our best and brightest looking for new treatments, right? If so, then the reward has to be big enough to make up for the risk of failure. Like it or not, a lot of the innovation (we don’t know exactly how much) in the pharma industry is coming from smaller companies like the ones analyzed in the JAMA article. Again, it comes back to economics; risk, reward, supply, and demand. It’s why you don’t see hundreds of new automobile companies starting (and failing) each year, because single-digit returns on capital aren’t worth the risk of failure.
To sum this up, InsightCity asks; Why does R&D expense have to be linked to drug prices or to corporate profitability? We don’t care what it costs Ford to design, make, and market a car, we just know that it costs about $35,000. Buy it or not. Until the healthcare market says “no,” treatment costs will rise – that’s the consequence for living in a free market. Deal with it. Again, we don’t support high drug development costs, but drug development is the ultimate game of portfolio theory. As the great Ebby Calvin “Nuke” LaLoosh said “sometimes you win, sometimes you lose, and sometimes it rains.”
Generic company profits are eroding and, according to an article in Bloomberg, this can be traced to the upstart of family-owned drug manufacturing facilities in India. While “family-owned manufacturing facilities in India” might raise both eyebrows for people in drug markets around the globe, India’s Union Health Ministry has proposed new quality checks on its drug manufacturers. The increase in generics competition has caused downward pressure on prices, giving fits to giants like Teva, Mylan, and Sun—all of whom are feeling the squeeze. The editors at InsightCity are pleased the low-cost regions aren’t driving down our earnings. Maybe our $0 (USD) in revenue explains their lack of interest. Nah, they just couldn’t compete.
Last week, Merck CEO Kenneth Frazier was among the first of many business leaders who left the White House’s American Manufacturing Council. The manufacturing heads cited President Trump’s comments following the protests and violence in Charlottesville, VA as the reason for their departure… and it snowballed from there with more CEOs resigning until Trump just dissolved it. Frazier’s presence on the council demonstrated the importance of drug manufacturing to the larger US manufacturing economy, and some lauded him for generating Positive Pharma Press™ by giving up his seat at that table. What’s Frazier up to next? Well according to the president, “Now that Ken Frazier of Merck Pharma has resigned from President’s Manufacturing Council, he will have more time to LOWER RIPOFF DRUG PRICES!” Ouch, Mr. President.