In nearly all areas of the economy, innovation provides better products and lower costs for consumers. Drug companies, however — responding to marketplace incentives — are linking pharmaceutical innovation with higher prices for important specialty drugs.
This is becoming a troubling trend, with no better example than Sovaldi — a hepatitis C treatment that costs $1,000 a pill.
Sovaldi is a “specialty drug”— a typically high-cost medication created to treat a complex, chronic and life-threatening condition. Specialty drugs usually need special storage, handling and administration, as well as extra patient education and monitoring.
Sovaldi represents great pharmaceutical innovation with exceptional results. Unfortunately, the drug’s maker — taking advantage of a lack of competition fostered by patent protection — has priced it so high, it’s a major threat to health care affordability.
Bloomberg News has noted that if everyone in the U.S. with hepatitis C were treated with Sovaldi at its list price, it would cost $227 billion, compared with the $260 billion spent for all other drugs each year.
Sovaldi is just the first of a large number of similar high-cost prescriptions beginning to enter the market, holding great potential but priced out of reach for most Americans.
The threat is not just to privately insured patients. State and federal Medicaid budgets will be depleted rapidly by the inflated pricing of specialty drugs, unless this trend is reversed.
Before we reach that point, we need to find new solutions that ensure important drugs are priced at sustainable levels, so that we can all benefit from continued life-saving innovation. The problem is serious enough to merit a national conversation in which we call on policymakers to get creative with measures that alter industry incentives.
For instance, some thought has been given to shortening patent protection to allow earlier free-market competition.
Another idea put forward is assigning perpetual royalties to the company that invents a drug, so that it can continue to reap revenues long after today’s patents would lapse. This would give drugmakers a longer time to recoup research and development costs and relieve the pressure to inflate pricing artificially over the short term.
These are just two illustrations of the creative thinking that could and should be applied to this pressing problem. Only collective wisdom will produce the ideas that could lead to workable solutions.
We need to get back to the collective ingenuity our country has displayed in earlier times of crisis. We need a national will to work together, seek and apply the right measures. I sincerely hope that we can begin this meaningful conversation before it’s too late.
I’m betting we can. And I’m betting that members of the pharmaceutical industry will be at the table with the rest of us.
president and CEO, Blue Cross and Blue Shield of Louisiana