**Newly launched U.S. drugs head toward record-high prices in 2022**
**By Deena Beasley, Reuters, August 16, 2022**
**Median annual price for new U.S. drugs this year is $257,000. Last year, the median annual price rose to $180,000 for the 30 drugs first marketed through mid-July 2021. Eight of 13 drugs launched in 2022 were priced over $200,000 per year....**
**The pharmaceutical industry says that prices for new drugs, many of which now treat rare diseases for which there are no therapies, reflect their value to patients, including the ability to prevent costly emergency room visits and hospital stays.**
**Drugmakers also stress that they do not determine what U.S. patients end up paying for the medicines. "Each person’s individual (health) insurer and plan will determine the out-of-pocket costs..."..**
**Discounts and rebates are often demanded by payers for new drugs once competing treatments become available. As patents expire, lower-cost generics also mitigate prescription drug price inflation, which in the 12 months through July has grown by 2.8%, according to the Bureau of Labor Statistics....** [end quote]
Let’s unpack the issues.
Big Pharma’s main argument for high drug prices in the U.S. is the cost of research and clinical trials for approval of new drugs. They claim that reducing the price of drugs will inhibit new research which they claim is mostly done by U.S. pharma companies. This may be true in the case of new drugs that are developed for rare diseases since there will never be a mass market to cover the R&D/ approval costs.
The article says that new drug prices “reflect their value to patients, including the ability to prevent costly emergency room visits and hospital stays.” A company I worked for called this “Value Pricing.” Product managers (like me) were taught to calculate the cost to the customer of NOT having the product. We then based the price at more or less the same level. Under no circumstances were we to price the product based on the production cost. (Although, of course, we had to know the cost to be sure the company would make a profit.) Often, the price was multiples of the production cost if the value to the customer was high.
Drugs for which older, less expensive but effective treatments already exist may be ignored as the new, more expensive drugs are pushed by sales reps, advertising to consumers and doctors.
The drug pricing “system” in the U.S. is the very definition of “FUBAR.” One gleam of hope is the new law (which has passed both houses of Congress and will be signed this week) that limits the annual price of drugs to Medicare patients to $2,000 starting in 2025. Of course, that doesn’t limit the cost to the government which will have to pick up the tab. (I don’t know whether that will come out of the Medicare budget or general revenues.) Medicare will be allowed to negotiate drug prices according to some arcane scheme starting in a few years. Everyone else is on their own.
As investors, we can hop on the gravy train. Pharmacy Benefit Managers, including CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc. are listed. (I bought CVS a while ago.) Their power over drug pricing is so notorious that the Federal Trade Commission announced in June 2022 that it will launch an inquiry into the prescription drug middleman industry, requiring the six largest pharmacy benefit managers to provide information and records regarding their business practices. But we all know how Washington, DC works. I will be the most surprised girl in the room if the inquiry results in changes that will significantly reduce their profitability.
As patients, we need to be aware that many drugs only benefit a few patients and the benefits may be small and short-lived. This puts patients and their families in a real bind when a doctor prescribes a ruinously expensive drug (or surgery or treatment) with the HOPE that bankrupting the family will help the patient. We all need to do our own research. Read the book, “Ending Medical Reversal: Improving Outcomes, Saving Lives,” which describes the lack of evidence-based medical care in drugs, procedures and devices. Also www.thennt.com which describes evidence-based medicine in terms of Number Needed to Treat (NNT) to obtain the desired outcome. In many cases, the NNT may be a ratio of 1000 patients treated to benefit one. The NNT web site classifies many widely practiced medical procedures in the “Red” (unacceptable) category because the harms outweigh the benefits.
We all need to think carefully about the very unpleasant choices that may arise. A member of my breast cancer survivors’ group was recently diagnosed with Stage 4 metastatic breast cancer. In addition to tumors in her bones and lungs, she has a 4" x 2" x 2" inoperable tumor behind her breastbone, wound around blood vessels and pressing on her heart. She is currently undergoing radiation therapy and will then receive daily chemo for the rest of her life. Everyone makes their own choices, but in her place, I would contact hospice and then spend the rest of my life taking all the illegal drugs I avoided and eating filet mignon and lobster for the rest of my life. Cheaper, more enjoyable and probably not much difference in the life expectancy.