At the beginning of each new year when price increases are implemented, we have a “discussion” about how drugs are priced. However, it’s often not rational, nor is it a particularly productive discussion. Why hasn’t it been productive? We seem to be stuck in a perpetual cycle of talking at each other rather than to each other, and I’d like to consider some of the reasons why.
A primary criticism of articles that highlight the rising cost of pharmaceuticals is they usually cite list prices, which are not reflective of the prices anyone actually pays for the drugs. So, why do we keep going back to that? My hypothesis is that it’s both clickbait and a lack of understanding. In terms of the latter, I’d be hard pressed to find anyone who would argue that the US healthcare system is not extremely fragmented and complicated. Given the complexity, it’s understandable that most consumers don’t have a full grasp of how the healthcare system works or the intricacies of drug pricing, but why do academics make the same “mistake” repeatedly? It could be as simple as them using pricing data that is publicly available, easiest to access, and/or least costly. However, just because data is easier to access, that shouldn’t drive the decision to use it if the outcomes and insights are going to be flawed or erroneous. But this is just one reason, and not the most important one, for why we cannot have a productive conversation about pricing. So, what are the other reasons, and how do we have a more productive discussion about pricing?
A meaningful discussion about the cost of healthcare requires an in-depth understanding of value-based pricing, discounts and rebates, the role of PBMs (other intermediaries), etc. However, from a consumer’s perspective, it is extremely challenging to have a rational discourse for two simple reasons. First, pharma makes A LOT of money from the sale of pharmaceuticals as can be seen in the chart below. The second reason is financial toxicity. “Financial toxicity refers to the problems a patient has related to the cost of treatment; simply put, it is the concept that the costs of diagnosis, treatment, and survivorship can drive negative side effects and manifest like any other adverse event.1” Pisu & Martin cited a few more alarming statistics:
According to a recent study, it is estimated that financial toxicity affects approximately 137 million (56%) adults when considering all its aspects across diseases 2
Psychological burden, such as concern about costs of care, was reported by 43%.
An objective burden, such as not being able to pay medical bills, was reported by 26%.
Financial toxicity was reported by 54% of adults with atherosclerotic cardiovascular disease and 41% of adults with cancer.
Financial toxicity is clearly a problem that affects the many rather than the few. When combined with the revenue generated by pharma companies, the optics for the pharma industry are not great, which makes it incredibly challenging to have a rational discussion regarding pricing of drugs.
We first need to consider how controversial the cost of healthcare is in the US. From a relatively young age, we learn to avoid discussing religion, politics and to a lesser extent sports. In my opinion, cost of healthcare should be added to the list. Each of these topics are simultaneously galvanizing and polarizing, which is why we’re also advised to avoid them in a business setting. They often elicit an emotional rather than a rational response.
Communication is one of the keys to bridging the gap and having a more meaningful conversation about pricing. Pharma needs to be more transparent and do a better job of educating the public about the development process and its impact on pricing. Additionally, a more holistic and empathic view from all parties would also help to advance the discussion on this topic. But it cannot fall entirely on the pharma industry. Yes, just like any other industry, pharma has its bad actors and flaws. We have seen that simply bashing pharma, often without merit, does not translate into desired outcomes. I’d like to emphasize that I’m not in any way absolving pharma of all blame for the current predicament. I am suggesting that maintaining the status quo is not going to solve this problem. I cannot offer a simple solution, but I can definitively say that while extremely challenging, we need to have difficult conversations regarding pricing in a rational manner. The pricing landscape is not going to become any simpler with dozens of cell and gene therapies and combination products on the horizon.
Clearly, this is a topic that has a ton of complexity and requires a much more in-depth assessment to do it justice. However, there are some things that we can consider moving the discourse on this topic forward. For example, how can education regarding the development process be improved? What can manufacturers do to more accurately capture the value of their assets while having a more holistic view of their pricing actions? Lastly, how well do manufacturers understand payers’ approach as well as the pressures that they face in managing all available drugs?
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