Friday, April 10, 2015

The Magic Pill

A generation ago, dozens of terrible diseases and medical conditions caused untold suffering that often led to disability or death. Through the miracle of modern science, all of these particular illnesses are now treatable or curable through newly discovered medications. So if you were to succumb to these illnesses today, a pill exists that could alleviate your sickness and disability, and prevent your death. But even though these magic pills exist, if you’re unfortunate enough to need them, you’ll probably be unable to obtain them. Here’s why.

These specialty drugs, as they are called, were developed to treat chronic or complex medical conditions, such as Parkinson’s disease, hepatitis C, multiple sclerosis, cancer, rheumatoid arthritis, and psoriasis, among others. While all drug development entails expensive research and development costs, pharmaceutical companies find it difficult to recover their costs on specialty drugs that are taken for a finite period and alleviate or cure the underlying condition. It is far more profitable to market a drug like aspirin that consumers will take continually over the course of their entire lives. So while the drug companies have created these wonder drugs, they feel they must charge an exorbitant amount to recoup their investment of time and resources.

Notice I didn't say expensive; I said exorbitant. Let’s look at some examples. The drug Soliris, used to treat to specific life-threatening blood diseases, costs patients $440,000 per year. How many of us could afford nearly a half-million dollars a year for the magic pill to stay alive? Solvaldi cures 90 percent of hepatitis C cases – which left untreated can lead to liver damage, cancer, and death. More than three million Americans have hepatitis C. The 12-week treatment costs $84,000.

Granted, some of these specialty drugs may be covered under insurance plans, but those plans rank drugs into tiers. Drugs in the specialty tier require the highest co-pay, often as much as 33 percent. For example, the price of Stelara, a specialty drug developed to treat a disabling form of psoriasis, zoomed out of reach of most patients’ pocketbooks. The co-pay (the amount patients have to pay out-of-pocket that their insurance plan will not cover) first jumped to $1,578 per injection and then to $2,728 per shot, bringing the out-of-pocket cost of the average patient’s treatment to $10,912 per year. That’s the patient share; the insurance company forks over the other 80 percent.

Specialty drugs made up two-thirds of the drugs approved by the FDA in 2013; by 2020, they’ll represent a $400 billion market – about 9 percent of projected total US healthcare expenditures. The pharmaceutical companies have patient assistance programs to help certain qualifying individuals receive discounted medications. But many do not qualify for such assistance, especially those who are often the neediest: the elderly living on fixed incomes. These patients rely on Medicare, which astonishingly forbids drug manufacturers from offering Medicare recipients any co-pay assistance or financial help. Another quirk in the Medicare law also prohibits the program from using the same economies of scale that private insurers use to defray drug costs. In other words, despite the incredible bargaining power of having so many millions of people enrolled in its program, Medicare is forbidden by law from using its strength in numbers to negotiate lower drug prices the way private insurers do. Thus, federal law mandates the government and Medicare patients each pay top dollar for the same drugs.

Congress can change this. Congress can amend the law to allow Medicare to negotiate with drug manufacturers. Congress can repeal the rules forbidding pharmaceutical companies from offering Medicare recipients any co-pay assistance or financial help. And Congress can establish a federal R&D program to defray the research and development costs associated with specialty drugs so that the burden would not fall entirely on the pharmaceutical industry. After all, the primary purpose of government is to promote the health and welfare of its citizens.

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