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U.S. Drug Cost, A State of Emergency?

By: | Tags: , , , , , | Comments: 0 | January 6th, 2016

This blog follows the prior blogs regarding pharmaceutical costs. This will be the last blog on this subject for now. We want to talk about the exiting things 2016 holds for healthcare and technology and, it is possible to write about the pharmaceutical issues in the U.S non-stop.

We have previously discussed the incredibly innovative, lifesaving and life extending drugs, typically originated on American soil. The facts are, as mentioned in the previous blog, the U.S. government/taxpayer, insurance company and patient, pay more for most pharmaceuticals than in any other nation on earth. The extraordinary price for our pharmaceuticals is what funds the amazing medical R&D effort. My own research pertaining to this is in the following information, which was obtained from four sourced articles listed below.

In 2014, the U.S. Food & Drug Administration approved 41 new drugs, the most in nearly two decades. That is remarkable news, and even more so for the many lives that will be saved. However, there is a catch, and that is; many of these new drugs are extremely expensive.

As we have noted, some of the most expensive drugs deal with hepatitis C, while several others deal with cancer. Many of these drugs cost $100,000 or more per year and some extend lives by days, not months, and can cost more than the total annual salary of the average American. Drug spending went up by 12.2% in 2014, which is 5 times the growth of 2013.

To prove my point, let me name a few new and old cancer drugs and their annual/monthly cost: Avastin $5,000/month; Zaltrap $11,000/month; Provenge $93,000/course of treatment; Erbitux $8,400/month; Gleevec $122,804 per year; Tasigna $115,000/year; and Sprycel $123,000/year. Some of these drugs extend lives for two months in clinical studies. Others, like Gleevec and Sprycel, which treat a form of Leukemia, extend life by effectively putting the leukemia in remission. These later two are the definition of miracle drugs.

The challenge with most of these noteworthy drugs is the research and development is primarily funded by the 300 million U.S. consumers via direct payment, insurance companies, or government programs. The only ROI to these “investors” in this research and development, is the drug itself, which may be priced out of reach in the U.S. Can this subsidy continue, where the U.S. pays generally more than 85% of the cost to the world for lifesaving drugs?

What we find is, in most of the developed world, and for sure in Europe and Canada, maximum drug prices are often set by government health systems. Furthermore, they can still drop over time as government demands lower prices, more new drugs compete with older drugs, or alternatives are found. As we have noted in the U.S., drug companies set their own prices, and most of the time, can raise prices over a certain period.

For example, the drug Gleevec listed above, a true miracle drug, was priced at $32,000 in 2001, and has increased in price. In 2013, the price in the U.K was still around $34,000; last reported in the U.S., was $122,804.

As we have mentioned before, Medicare is prohibited from negotiating prices directly with drug companies. Private insurers and benefit managers strike their own rebate deals with drug companies, and details of these contracts are almost never disclosed.

So, here is an idea! Here in Florida, where we are subject to hurricanes, and there are many laws that prohibit price gouging following an emergency. What if we apply the same principle to drug prices?

As mentioned in the previous blog, many of our more industrious pharmaceutical companies are moving their headquarters’ operations to foreign companies, such as Ireland. The advantage is more favorable corporate taxes and as such, become foreign corporations.

What if we create a regulation that no foreign or domestic drug company can sell a drug in the U.S. to an individual, insurance company or government payer for greater than 10% of the price sold and paid in any other developed world country?

– Noel J. Guillama, President

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