“The divided private market makes that kind of pushback harder,” said Dr. Aaron Kesselheim, assistant professor of medicine at Harvard Medical School.
Payers are using higher patient cost-sharing as one strategy to limit their costs. Tufts researchers found that the coinsurance rate for biologics has doubled to about 30% over the past decade. Prior authorization, quantity limits and step therapy—a policy that requires patients to first try a less costly drug—are other examples of payer pushback.
“As new therapies are developed for limited patient populations based on individual genetic variants, the market for each product will become smaller and smaller; accordingly, prices may become higher and higher,” Dr. Brian O'Sullivan, a pediatric pulmonologist, wrote Oct. 2 in the Journal of the American Medical Association. “The cumulative effect will place strain on the healthcare economy.”
Last year, O'Sullivan and about 25 other clinicians sent a letter to the CEO of Vertex Pharmaceuticals, which manufactures Kalydeco, a drug that treats a subset of patients with cystic fibrosis, requesting that the company lower the price of the $295,000-a-year drug. Dr. Jeffrey Leiden, Vertex's president, CEO and chairman, met with some of the physicians and listened to their concerns. However, “nothing substantial happened,” O'Sullivan said. The drug, which was approved in January 2012, now costs $311,000 a year.
Most manufacturers of pricey drugs provide patient-assistance programs. Kadcyla, a new oncology drug that treats patients with HER2-positive, late-stage breast cancer, costs about $94,000 for a roughly 10-month course of treatment. The company provides financial support to people who make less than $100,000 a year.
About 80% of the drug pipeline has been developed by smaller companies, Cohen said. Experts expect orphan drugs to make up a larger portion of drug approvals during the next several years.
Some traditional drug companies also have turned out targeted new drugs, with GlaxoSmithKline getting three orphan drugs approved by the FDA in fiscal 2013. On Oct. 1, Merck said it was shifting to a “more agile operating model,” sharply reducing costs to focus, in part, on developing drugs for unmet medical needs.
In the JAMA article published this month, O'Sullivan wrote that drug companies should become more transparent about pricing. “A model of reduced profitability, particularly for lifelong therapies, is ethically responsible and institutionally plausible but will require pharmaceutical companies to develop new models and educate investors about the long-term advantage of regaining the trust of the public,” he wrote.