Four Facts: Value and Cost of Medicines

Any discussion of prescription drug costs needs to consider the value new innovative medicines provide to patients, society & U.S. health care system.

PhRMA StaffMay 21, 2014

The Atlantic today led a discussion around the value and cost of medicines.  This is an important topic and one that all partners in the U.S. health care system must continue to discuss.  Most importantly, patient voices need to be a part of any discussion around the value of innovative medicines.  As this debate moves forward, here are some additional facts that need to be a part of the discussion.  

1. Any discussion of prescription drug costs needs to take into account the value new innovative medicines provide to patients, society and the U.S. health care system as a whole.

  • A short time ago, HIV/AIDS was considered a death sentence. Some said that treatments for it would break the economy. But the opposite happened. Thanks to scientific advances, HIV/AIDS is now considered a chronic, manageable disease. And that, in turn, has averted the predicted health and economic crisis.  The same progress is possible in treatments for a number of cancers and other diseases.
  • In 1964, one in every 300 patients died of cancer.  Today, that rate has been cut nearly in half, thanks in large part to innovative medicines. 
  • In 1964, only 34 percent of cancer patients were surviving five or more years beyond their diagnosis.  Today, that number has almost doubled to 66 percent.  Treatment is the main reason. 
  • One of the most complex and deadly cancers – leukemia – can now be treated with groundbreaking medicines, which have nearly tripled the five-year survival rate for patients. In 1999, this was unheard of due to a lack of effective treatment options.

2. In recent years, spending on prescription medicines has grown at historically low rates – and more slowly than total health spending. 

  • For the past five years, drug spending has grown an average of 3.3 percent annually.  In 2012, retail drug spending grew 0.4 percent, while overall health spending grew 3.6 percent.
  • Future growth is expected to remain low; cost projections have been lowered repeatedly.  IMS Health estimates drug spending will grow at 1 to 4 percent annually through 2017 – and continue to growth more slowly than overall health spending.
  • Medicines only represent 20 percent of cancer spending for commercially insured individuals, whereas inpatient spending accounts for 43 percent and physician visits, hospitalizations and other services represent 37 percent.
  • Specialty medicines are not a main driver of health costs. From 2000 to 2009, specialty medicines were used, on average, by just 1.6 percent of privately insured, non-elderly patients. Additionally, average per member, per year spending on specialty medicines by insurers was small—only about $112—and average spending on specialty medicines represented only 2.7 percent of total health care spending and 9.3 percent of all pharmacy spending.

3. Recent Advances in the treatment of Hepatitis C offer great long-term value to patients and society.

  • Until recently, available therapies used to treat HCV infection cured only about half of patients, but with debilitating flu-like side effects.  For those who failed to respond to treatment, there were no alternative medicines to treat the disease.
  • With the recent introduction of direct‐acting antiviral (DAA) medicines, cure rates have reached 90 percent or higher, treatment duration has been cut from 48 weeks to as low as 12 weeks, and side effects have gone from debilitating to few.
  • The availability of more effective treatments provide the opportunity to improve outcomes for HCV patients who are frequently unable to work or have significantly more lost work days per employee than other workers, including sick leave, short-term disability and long-term disability.
  • Finally, improved health outcomes are especially important to help avoid substantial future use of health care services and related costs given the serious and expensive complications associated with the disease. In the U.S., average annual treatment costs for patients with chronic HCV infection is estimated at $24,176 per year.  For HCV patients with end-stage liver disease average treatment costs are an estimated $59,995 and those with liver cancer have an estimated $112,537 in treatment expenses.

4. Patients are being forced to pay far more out of pocket for their medicines than for other health care interventions. 

  • In the current marketplace, patients are required to pay more out of pocket for the medicines they need – to help manage disease and prevent complications – than for hospital and physician visits.
    • Commercially insured patients are typically required to pay on average 20 percent of the cost of their medicines compared to 4 percent for other health care services such as inpatient hospital care.
  • High cost-sharing for prescription drugs in the Exchanges reduces patients’ access to life-saving medicines and drives up health care costs. 
    • According to new research from Milliman, Silver plans, the most popular coverage in the health insurance exchanges, are four times more likely to require patients to meet a combined deductible – often exceeding $2,000 – before any prescription drug coverage takes effect.
    • Moreover, Silver plans require patients to pay on average more than twice as much in out of pocket for prescription medicines than they would under a typical employer plan.

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