Wanted: A Balanced Discussion on Health Care Costs

Why are medicines expensive? As we’ve noted previously, it’s a good question that deserves a thorough, balanced discussion.

Headshot of Robert Zirkelbach
Robert ZirkelbachJanuary 15, 2015

1-26-15 UPDATE: In response to the op-ed referenced below, The New York Times posted a Letter To The Editor from PhRMA President & CEO John Castellani.

Why are medicines expensive? As we’ve noted previously, it’s a good question that deserves a thorough, balanced discussion. 

Still, a recent op-ed by Peter Bach of Memorial Sloan Kettering Cancer Center shows we’re not quite there, yet.

There’s no question that you need to invest to create good health care – something the American people demand and deserve. But it’s also important to remember that discovering, developing and manufacturing new medicines – getting them from lab to patient – is long and costly. A new Tufts study shows it costs more than $2.6 billion and takes more than 10 years to investigate a new drug and test its safety. These costs reflect the fact that success typically only comes after many failures: only 12 percent of drug candidates that enter clinical testing are eventually approved for use by patients.

And yet, despite these challenges, prescription medicines continue to make up just ten cents of every dollar spent on health care in the U.S., the same share as it was in 1960. 

This is due in part to the fact that insurers and pharmacy benefit managers aggressively negotiate medicine prices – a point that is largely ignored in public discussions of prescription drug costs. And insurers utilize a variety of tools to limit spending on medicines, including narrowing formularies, mandating prior authorization before a doctor can prescribe certain medicines, or requiring patients to fail first with medicines the insurer prefers before covering the newest, most innovative medicines – tactics that can create barriers for patients trying to access the medicines they need. 

The market for prescription medicines is also unlike any other health care sector in the United States. It is the only sector with built in cost-containment that leads both to pioneering advances through new medicines, and over time, to generics that consumers can access at low cost for many years. In fact, the share of dispensed generic prescriptions continues to increase, and 4 out of every 5 prescriptions are now filled with a generic.

Contrary to much of the recent rhetoric on health care costs, the federal government recently lowered their projections for future spending on prescription medicines and forecast that spending on medicines will grow at the same rate as overall health care spending for at least the next decade.  

Over the past 15 years, biopharmaceutical companies have brought more than 450 new medicines to patients. And the biopharmaceutical pipeline is more promising than it has ever been with more than 6,800 medicines in development worldwide – offering hope to patients fighting cancer, Alzheimer’s disease, and many other debilitating diseases.  We look forward to continuing a thorough, balanced conversation examining the cost and ultimate value these medicines provide to patients.

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