Blog | Friday, December 7, 2018

Yes, price matters

Two articles in the New York Times health section today reinforce a major message from a recent Annals On Call: Oral Pharmacologic Therapy in Type 2 Diabetes: Choosing Therapy Wisely (Podcast with Dr. Mike Barry)—price matters.

The first article, “Amgen Slashes the Price of a Promising Cholesterol Drug“ refers to their PCSK9 inhibitor.

For years, the drug maker Amgen has struggled to sell its new anti-cholesterol drug, Repatha after insurers balked over the list price of about $14,000 a year.
On Wednesday, Amgen took a new approach: It said it would slash the list price to $5,850 a year in hopes of increasing sales, especially among Medicare beneficiaries who are particularly vulnerable to a drug's list price.

Yesterday President Trump proposed an interesting strategy to decrease the prices that Medicare pays to pharmaceutical companies, in the article “Trump Proposes to Lower Drug Prices by Basing Them on Other Countries' Costs“.

Mr. Trump's announcement came a few hours after his administration released a government study that said Medicare was paying 80% more than other advanced industrial countries for some of the most costly physician-administered medicines.
“The current international drug-pricing system has put America in last place,” Alex M. Azar II, the Secretary of Health and Human Services, said in unveiling the report.
Mr. Trump cited the government's international drug-pricing report in his speech on Thursday, saying he was taking aim at “global free riding” that forces Americans to subsidize drug prices in other countries.
“Americans pay more so that other countries can pay less,” Mr. Trump said.
The report compares prices charged by drug manufacturers in the United States and 16 other countries for 27 drugs that are covered by Part B of Medicare.

The proposed plan:

President Trump proposed on Thursday that Medicare pay for certain prescription drugs based on the prices paid in other advanced industrial countries, a huge change that could save money for the government and for millions of Medicare beneficiaries.
As part of a demonstration project covering half the country, Medicare would establish an ”international pricing index” and use it as a benchmark in deciding how much to pay for drugs covered by Part B of Medicare.

While we have to see more details, the concept seems admirable. Why should we pay more for the same drugs than countries like Germany, England, France, etc.?

Previous proposals have suggested allowing Medicare to negotiate prices. This idea has not gathered enough support previously. The international pricing index idea at face value sounds promising. Of course, we have to await more details.

But the big point is that price matters. In economic terms, recent expensive drugs have demonstrated elasticity. Elasticity means that as prices increase the volume of sales decreases.

We want progress in drug development. We have many exciting new therapeutic approaches. But price does matter. Perhaps Trump's proposal we garner enough data to make pricing more fair for our country. One can only hope.

db is the nickname for Robert M. Centor, MD, MACP. db stands both for Dr. Bob and da boss. He is an academic general internist at the University of Alabama School of Medicine, and the former Regional Dean for the Huntsville Regional Medical Campus of UASOM. He still makes inpatient rounds regularly at the Birmingham VA and Huntsville Hospital. His current titles are Professor-Emeritus and Chair-Emeritus of the ACP Board of Regents. This post originally appeared at his blog, db's Medical Rants.