The Value of Pharmaceutical Products to Patients and the Healthcare System Versus the Cost

By Dennis Jackman
January 7, 2016

We often hear the question, ‘Why do drugs cost as much as they do?‘ In the U.S., the cost of drugs has become a campaign issue for some Presidential candidates, and Congressional task forces and committees have been exploring this question. Legislation has been introduced in some states to limit drug prices. And in Europe, there are steps toward joint negotiation of prices among some nations.

Young girl in hospital

But what is often missing in statements about the cost of medicines and in proposed solutions is an answer to the fundamental question, ‘What is the value of pharmaceutical products to patients and the healthcare system versus the cost?‘ This is where the focus needs to be placed so that appropriate policy decisions can be made based on patient benefits, savings that drugs provide to the healthcare system, economic value, and the need to sustain valuable biopharmaceutical innovation, rather than a singular focus on drug costs.

The value of therapies is enormous. Patients all over the world are living longer, healthier and more productive lives, thanks to innovative medicines developed by biopharmaceutical companies. In fact, medicines have helped raise the average U.S. life expectancy from 47 to 78 years in the last 100 years.

At CSL Behring, we live our promise to patients in researching, manufacturing, and selling therapies for chronic, life-threatening conditions such as hemophilia, primary immunodeficiencies (PI), hereditary angioedema and hereditary emphysema (alpha-1 deficiency). We know how difficult life can be for patients with these rare medical disorders, and the consequences of not having access to proper care. For example, the failure to diagnose and treat PI can lead to an increase in the number and severity of infections and a lifetime of serious illness including permanent organ damage.

The failure to diagnose and treat PI can lead to an increase in the number and severity of infections and a lifetime of serious illness including permanent organ damage.

Fortunately, innovative medicines are helping to prevent the costly complications of untreated PI, as evidenced by a survey of physician-experts at the Jeffrey Modell Centers Network. The results of this study showed significant reductions in acute and chronic infections, pneumonias, hospital and emergency room visits, days on antibiotics, days in the hospital, and school and work days missed, after proper diagnosis and treatment of patients with PI. It showed that an undiagnosed patient with PI costs the healthcare system, families and society an average of nearly $110,000 per year, which can be avoided with treatment, not to mention the overarching value to patient quality of life and wellbeing.

To put drug costs in further context, the amount spent on medicines is 10% of the overall cost of healthcare, and has remained at a steady level since 1960, according to Pharmaceutical Research and Manufacturers of America (PhRMA), while hospital costs nationally, by comparison, are nearly three times higher than drug costs.

According to the National Hemophilia Foundation, the average life expectancy of a person with hemophilia in 1960 was less than 20 years. Today, the use of factor therapies manufactured by CSL Behring and others to treat hemophilia means that children with hemophilia can now look forward to a normal life expectancy.

The average life expectancy of a person with hemophilia in 1960 was less than 20 years. Today, the use of factor therapies…to treat hemophilia means that children with hemophilia can now look forward to a normal life expectancy.

Another important consideration is the overall benefit drugs provide in reducing costs to the healthcare system. Drugs have affected tremendous reductions in healthcare expenditures that far exceed the costs of medicines. Better adherence to medicines alone could save over $200 billion per year in healthcare expenditures in the U.S. according to IMS Health data. And inventing a drug for Alzheimer’s that would delay onset by five years would save $367 billion in U.S. healthcare services costs in 2050, according to PhRMA.

Policymakers worldwide stress the need for more innovation and high-value jobs. The biopharmaceutical industry is a leader in that regard, employing a large number of people in high-value positions who have a substantial impact on the local economy. In the U.S., it is by far the largest single sector in business R&D funding, accounting for 21% of the total. Software development is the next largest sector with regard to R&D funding at 11%.

The biopharmaceutical industry is a leader in R&D spending globally, and research expenditures just by PhRMA member-companies in 2014 was greater than $51 billion. It is therefore imperative that we maintain a system that encourages rather than impedes investments in high-risk research by pharmaceutical companies and the innovative, lifesaving medicines that result. Developing a new medicine from drug discovery through Food & Drug Administration (FDA) approval takes 10 years on average and costs $2.6 billion on average. Moreover, only 12% of the medicines that make it into phase I clinical trials will be approved by the FDA.

It is imperative that we maintain a system that encourages rather than impedes investments in high-risk research by pharmaceutical companies and the innovative, lifesaving medicines that result.

A system that focuses on the value of therapies and compensates for that value and the need for investment will sustain a culture of innovation, and society will know it is getting value for its purchases. Conversely, a system that focuses only on drug cost and that tries to arbitrarily constrain those costs, without regard to the benefits and value of the innovation, would take large value out of the healthcare system as investment and innovation would slow. Ultimately, the patients and society stand to lose much more than would be gained.

We understand that we need to show the value of the therapies we provide in relation to the prices by generating and providing data that validates the cost. In addition, it is a highly competitive marketplace, and the market also works to keep prices in balance with value while allowing innovation to thrive in market economies. In those isolated incidences where a manufacturer attempts to effect dramatic price increases that are not commensurate with value, the market will respond accordingly.

Let value be the guiding principle in setting the reimbursement of drugs.

Let value be the guiding principle in setting the reimbursement of drugs. If we maintain a singular focus on drug cost outside the context of value and facts, we risk constraining the growth of R&D, effectively derailing the innovation ecosystem that has delivered and holds the greatest promise for patients, and patients should always be our first focus.

Dennis Jackman
Dennis Jackman is CSL Behring’s Senior Vice President of Global Healthcare Policy & External Affairs

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