I’ve spent most of my professional life in the pharmaceutical industry, specifically in drug development of improved versions of existing drugs (the 505(b)(2) pathway). I’ve lived and led through it all: promising programs failing in Phase 2, development budgets ballooning due to unforeseen challenges (and some challenges we absolutely should’ve seen), time and cost-intensive investigations, and so on. Most people don’t see what it takes to develop a drug: the teams of people across each discipline (formulation, manufacturing, nonclinical, clinical, regulatory), the millions of dollars (and it’s always more than expected), and the constant conversations with regulators to ensure the safety of the drug first (and then, the efficacy). They only see what the drug costs, and they are right to be enraged about it. Drugs in the United States largely are priced for profit first (an unnecessarily complicated distribution chain, satisfying shareholder expectations, helping recoup the massive development budget for this drug and other failed drugs, offsetting the low prices paid in other established markets). Today’s #5SmartReads is a look into the three areas that impact the cost of pharmaceutical drugs in the United States: the cost of development, the cost of marketing and advertising, and the role of PBMs. Today’s issue is free for all to read. If you value these deep dives and smart news curations, I would value your paid support of my work. Contribution of NIH funding to new drug approvals 2010–2016 (PNAS) It would not be possible to develop new drugs without the support of the NIH, or without millions of dollars (into the hundreds of millions, actually). Here are two key takeaways from these reports: 210 new drugs were approved by the FDA from 2010-2016, and the NIH contributed to every single one of these approvals. Every new drug application cites hundreds of published journal articles to support the safety and efficacy of their drug. Public research and private drug development need each other to bring new medications to the market AND to continue evaluating the long term safety and new targets for existing drugs. It’s one of the many reasons why the NIH cuts and the HHS downsizing has been so devastating. If you’re developing a new drug today (drug molecule to finished product), it’ll cost you over $100 million. That covers molecule discovery, formulation development, scaling up the formulation to commercial scale manufacturing, animal and human clinical studies (a lot of them), patent filings, multiple submissions and meetings with the FDA, a $4M filing fee, more clinical studies once the product is approved (and the hundreds of people working in each of these areas). In addition to the financial cost, it takes over a decade to develop a drug (and that’s if everything goes as planned, which never happens). If you factor in the costs of failures and capital, the cost of developing a new drug balloons to over $800 million. It is exorbitantly expensive - financially and time-wise - to develop a new drug. It is much faster and cheaper to develop a supplement, which doesn’t have to demonstrate its safety, effectiveness, or quality that a pharmaceutical product does. If our industry only cared about making money, we would’ve gone into the supplements business. Drugs aren’t expensive just because they’re expensive to develop. Preying on Prescribers (and Their Patients) — Pharmaceutical Marketing, Iatrogenic Epidemics, and the Sackler Legacy (New England Journal of Medicine) We don’t talk nearly enough about the cost of marketing a drug. But we should be. In addition to launching one of the worst drug epidemics in recent history, the Sackler family is responsible for another ‘this is why we can’t have nice things’ issue in American healthcare. Arthur Sackler pivoted from clinical psychiatry into creating modern pharmaceutical marketing, starting with the launch of Pfizer’s Terramycin. What he introduced —large sales forces and aggressive physician detailing, print advertising, and free samples—continue today, and have expanded into the direct-to-consumer realm as well. It’s a uniquely American matter, as DTC advertising for prescription drugs isn’t permitted in Europe, and is not in practice anywhere else. Meanwhile, biopharma is expanding their reach with influencer partnerships (as someone who works in both sectors, I can’t think of a worse idea). The cost of marketing a drug in the United States is higher than the rest of the world, and this is a key factor why. As if the Sacklers’ haven’t done enough damage to the health of the United States. PBMs are driving up drug prices through fees, PhRMA report claims (Healthcare Finance) Something to know about the commercial sector of healthcare—each group loves to blame the other, and publishes lengthy reports as to why they’re to blame. Pharma manufacturers vs PBMs (pharmacy benefit managers) is the biggest, beefiest rivalry. I am admittedly biased towards the former, given my own job. But we’re not alone in directing attention to PBMs’ major role in high drug prices. Mark Cuban is using his wealth to screw them over (which we’ll get to in a bit) Let’s start from the beginning. A pharmacy benefit manager is an indirect member of the drug supply chain They’re not physically moving drug product from one area to another (like distributors to pharmacies). Rather, they manage the financial logistics between manufacturers, insurers and major payers, and pharmacies (by negotiating prices, determine coverage for insurance plans, work with pharmacies and process prescription drug claims). PBMs generate revenue through fees they charge to the stakeholders they work with: the manufacturers, pharmacies, insurers, and employers & payers they serve. These fees have only increased, and PBMs have further muddled the logistical supply chain in creating ‘group purchasing organizations’ and other obscure entities. PBMs are profitable and powerful, and they control over 80% of all prescription drug purchasing (especially in branded drugs with patent protection). Enter Mark Cuban, who has done more for drug pricing transparency than anyone else in our industry. Cost Plus Drugs is a PBM (in structure only) and virtual pharmacy, selling generic drugs at cost + 15% administrative fee. It’s the right thing to do. Cuban is basically a Robin Hood of drug affordability and accessibility (and a delightfully petty one):
Regulating (or eliminating) PBMs would go a long way in creating transparency and lowering drug prices to the consumer. The Inflation Reduction Act took a significant step in lowering prices for branded drugs, with CMS (Center of Medicare Services) entering negotiations with drug manufacturers for 10 widely used branded drugs to establish a maximum fair price. It’s one of the biggest measures our government has taken to reduce the patient price for branded prescription drugs, and one that should be further invested in.
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why do drugs cost so much?
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