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The Alarming Cost of New Drugs

By December 31, 2022Commentary

Most Americans have some form of health insurance that pays for most of their health care.  They are thus insulated from the full cost of health care services and products and in particular may be unaware of the enormous cost of newer drugs.  This is especially true for various biologic drugs, which typically are injected or infused, are often used to treat cancer and carry course of treatment price tags of tens or hundreds of thousands of dollars.  Now we have new cell and gene therapy products which may cost over a million dollars per treatment.  While there may be offsetting cost savings in some cases, this is a shock to the health system.

A entity called the Institute for Clinical and Economic Review has attempted to figure out what the actual value of these expensive therapies is and a new paper reports on much money might be saved if the ICER value were used as the payment for these treatments.  ICER’s values are to some extent subjective, as they are based on the concept of the value of an additional year of life.  But at least they are some attempt to figure out what good, if any, these products do for the health of an individual.

73 treatments were included in the study, which accounted for $110 billion in spending in the US in 2020.  These therapies alone accounted for almost one-fifth of all US drug spending.  Depending on the value of a year of life used, savings from using the ICER method would be in a range from $12 billion to $40 billion, just on these 73 drugs, and that assumed they were allowed to have price increases.  If no price increases were permitted, savings rose to $38 billion to $58 billion.  Just shows how over-priced these drugs are.  And I can assure you they have very high profit margins as well.  (JAMA Article)

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