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Author: Jean-Claude Muller, 穆卓Executive Editor at BtoBioInnovation  jcm9144@gmail.com

SPECIAL REPORT #41

US Drug Pricing (Part 2)

Healthcare costs containment and particularly drug pricing is becoming a major issue in all countries. Although the costs of drugs only represent five to seven percent of overall healthcare costs, prescription drug prices have increased at a faster pace than other healthcare related expenses. One of the main underlying reason of this comes from the recent approval and the worldwide launch of many new specialty care treatments such as oncology and rare diseases.

To illustrate the point, we wish to focus on the recent US FDA approval, since October 21, of five new drugs all with list prices of more than $100,000 per year. Before discounts, Trikafta, a new treatment for patients with the most common cystic fibrosis mutation, will cost $311,503 annually,  Brukinsa, a drug developed in China for the treatment of patients with mantle cell lymphoma will cost $12,935 for a 30-day supply, Adakveo, a treatment for sickle cell disease treatment, will cost between $7,000 and 9,500 per month ($84,000 to 114,000 per year), Oxbryta, another sickle cell drug, will be priced at $125,000 per year and finally Givlaari, for acute hepatic porphyria (AHP), will come at a price of $575,000 per year.

For the Biopharmaceutical industry this type of product represents a major new source of revenue. For patients, that means better treatment, longer survival and in some cases a potential cure. But all these treatments come at a very high price for most patients and in some dramatic cases they may trigger personal bankruptcy.

In October 2018, a group of US researchers published in The American Journal of Medicine a study aiming at evaluating the impact of cancer upon a patient’s net worth and debt. The results of the 9.5 million patients they reviewed over the 1998-2014 period are striking. Within two years of diagnosis of the disease 42% of cancer patients exhaust their savings.  After four years of therapy, 38,2% were insolvent. After therapy, 62% of subjects were in debt, with 40% to 85% who had to quit their work due to the disabling disease  The financial impact which the authors named “Financial toxicity” go beyond socioeconomic factors and have called out the politicians to take action. In a previous report (# 34) we had raised the question: Will there be an action on US drug pricing before year end?

A recent report by Vital Transformation, a consultancy group, suggests that the implementation of the proposed Lower Drugs Costs Now Act H.R.3 sponsored by US House Speaker Nancy Pelosi may cut revenue by more than half for companies affected medicine and the report goes as far as claiming that the plan could results in at least 56 fewer medicines over 10 years. The report which was commissioned by BIO, the Pharmaceutical Research Manufacturers of America and the Council of State Bioscience Associations is clearly biased and does not consider discoveries made in Europe, Japan and even China and brought to the US. In our view, a more stringent drug pricing policy will not induce a significant decrease in new drug launches, but will certainly strongly affect the valuation of start-up and emerging biopharmaceutical companies when they are raising funds or filing for an IPO.

In a statement made by Democratic Presidential candidate Elisabeth Warren,  she now also proposes using compulsory licensing and antitrust actions to break biopharmaceutical control of drug pricing and she has already targeted a list of blockbusters.

More surprisingly, the ongoing clash between Health and Human Services (HHS) Secretary Alex Azar and Medicare Chief Seema Verma has shaken up parts of President Donald Trump’s own agenda, going as far as reversing his previous position to importing cheaper drugs from Canada (see Special Report# 34). Azar, who fully supports the traditional sceptical view of Republicans on controlling drug pricing dismissed the proposal in calling it “a gimmick”.

Undoubtedly pricing of drugs will be high on the list of all 2020 US Presidential candidates’ agenda. They would be well advised to benchmark overall healthcare performance in other highly developed countries when proposing reforms.

November 29,2019

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