Blog July 26, 2016

Not Quite What the Headlines Suggest: Some Comments on Drug Pricing Issues

We recently had the opportunity to participate in an industry roundtable discussion on pharmaceutical pricing, organized by the editors of Life Science Leader. The discussion included perspectives from members of the pharmaceutical and biotech industry, patient advocates (from FasterCures and the National MS Society) and payers (CVS Health), as well as input from
a Harvard Health Policy academic and that of Bob Easton, from our Bionest team.


Clearly drug pricing is perceived by many as a problem. And indeed there are pockets of patients affected by serious diseases who are facing big bills — even if they have insurance, due to the often high co-pays required. This is especially true in areas like advanced cancers, where new treatments are providing hope, whereas 20 years ago none existed — and for diseases like hepatitis C, where truly innovative new drugs offering, for the first time, absolute cures have recently emerged. In these areas, drug developers must clearly demonstrate the value of their therapies, in order to justify the sort of pricing required to cover the costly development of such drugs and spur similar investment. At the same time, drug developers should also work — perhaps with payers — to find new ways to help patients afford their treatments — such as “disaster insurance” or other forms of co-insurance that help protect those who need costly but life-saving drugs from financial ruin.


But in fact, for most drugs, we do not have a “pricing” problem in the United States. The cost of many of the most widely used drugs in our country has decreased dramatically over the last 30+ years.




In 1978, the most valuable drug in the United States was Inderal© (generic: propranolol), the best drug to treat hypertension — which at the time was the most serious medical problem we faced as a society. The cost of this drug was $30.49 per gram, equivalent to the cost of 254 cans of regular Coca-Cola©.


In 2015, the most widely prescribed therapy for hypertension in the world was propranolol, and its cost per gram was $19.45 in the United States, equivalent to 12 cans of Coke.


So the cost of controlling hypertension, our biggest underlying healthcare problem, has declined for most patients almost 91% as compared to common consumer goods.


Most of the important chronic care drugs that have lost patent protection in recent years have seen price declines of 85% to 98%.


Brand Name Medicine Year of Patent Expiry Brand Price Then Generic Price Now % Price Change
DIOVAN HCT® 2010 $87 $15 -85%
LIPITOR® 2010 $85 $5 -95%
PLAVIX® 2011 $166 $8 -97%
SEROQUEL® 2010 $87 $7 -97%
ZYPREXA® 2010 $393 $12 -98%


For older drugs that work well, drug prices in the United States are extremely low, with little if any financial benefit going to those that developed them.  At the same time, the cost of developing an innovative new therapy is extremely high, with every drug that makes it to market requiring an investment of $100+ million dollars that must be recouped in some way. Thus if we wish to keep the pipeline of innovative drugs flowing, those new products need to be priced highly for a reasonable amount of time.


In summary, we do not have a pricing problem in the United States. We have a distribution of co-pay problem. In our opinion, an insurance scheme that covered the tiny minority of prescription drug patients from onerous co-pays would dilute the vast majority of drug pricing complaints, and shift the discussion to the real heart of the cost problem — our perverse healthcare insurance system.