I read an article in Kaiser Health News that left me thinking about healthcare in the U.S. There are diseases which only affect a small number of people. Cystinosis, which impacts about 500 Americans, is one such life-threatening illness.
How can a for-profit industry like pharmaceuticals possibly afford the research and development costs for a drug which can effectively treat such a narrow population? Leave it to American ingenuity. Affected families got together and raised the research costs to find the drug. They then convinced a pharmaceutical manufacturer to steer it through the Food and Drug Administration (FDA) approval process – a lifeline for children with cystinosis and their families. The FDA cooperated with extended patent life. Great news!
But, here is where it gets ugly: the drug was priced at $300,000 per year and the original manufacturer, Raptor Pharmaceuticals, was soon sold to another profiteering entity, Horizon Pharma, who in turn has raised the list cost to over $1,000,000 per year. And, the article states, the cost after rebates and discounts to pharmacy benefit managers (PBMs) averages $486,000 per patient annually.
The affected families are relieved to have access to this drug, but astounded at the prices. Not to worry though – these costs are paid by the healthcare system and the manufacturer takes care of any deductibles and copays if the patient can’t afford them.
I can understand that the manufacturer should be rewarded, but to what extent? And who pays for this excessive profit? We all do – through higher insurance rates, taxes and costs to businesses who must increase their prices in order to pay those premiums. And what about that $514,000 average discount and rebate? That soft and non-transparent excess cost is spread around to PBMs, health plans and insurers.
Clearly this innovation should be recompensed, and I advocate doing so in a transparent manner. How about more reasonable drug costs that don’t create a burden to the health plans unlucky enough to acquire one of these cystinosis patients? Manufacturers should receive a federally funded innovation award. And rebates should be outlawed. A simple solution which can improve the U.S. healthcare system.