MARK DANTA, CHUN MA, RICHARD DAY, DAVID MA. Dealing with the spiraling price of medicines: how “low” can it go?

New medications are increasingly expensive. In Australia, where the Pharmaceutical Benefits Scheme (PBS) covers the vast majority of prescription medications, the spiraling cost of medicines has a significant impact on the sustainability of our health system.  In countries where patients are required to contribute substantially to the medicine cost, high prices can negatively influence their health outcomes. 

The term ‘financial toxicity’ has been used to describe the patient-level impact of the high cost of cancer medicines.1 Modern science has led to an explosion of biological and targeted medicines and they are invariably expensive. This has resulted in an increase over the last decade in the expenditure of the PBS on cancer medicines from $65 million in 1999-2000 to $466 million in 2011-2012.2 Some medications are highly efficacious, for example, the new direct acting antiviral (DAAs) hepatitis C treatments with cure rates of 95%, however, the cost estimated at $30-60K per 12-week course has meant this is prohibitive for many countries. Other medications, however, have only incremental benefit at great cost. A review of new anti-cancer treatments in Europe estimated that only 16% of 134 approved oncology treatments in Europe between 2009-2016 showed a survival benefit of greater than three months.3

The justification of the high price of these medications is often attributed by pharmaceutical companies to the research and development costs incurred to bring new medicines to market. A cost of US$2 billion per medication has been estimated but this is contested.4 It is clear, however, that significant unaccounted contributions are made by the public purse through tax credits and the publicly funded universities, where the research often originates. It has been estimated that publicly funded research accounts for more than 84% of the basic research that leads to discovery of new medicines.5 It is also becoming clear that medication costs are also being driven by market demands with large variation between countries. In South Korea, for example, imatinib to treat chronic myeloid leukaemia costs 61% of the Australian price and 20-30% of the USA price, due to the availability of a competitor.6

Several strategies and system features contribute to establish and maintain high drug prices. Critical to innovation and drug development is the patent system. While the patent system protects intellectual property and is designed to reward innovation, it is also anticompetitive. Getting a balance between the patent length that recognizes innovation and development risk but allows appropriate access to the medication is contentious. Following the lapse of patents after twenty years in Australia, cheaper but essentially identical generic drugs can become available, however, many tactics have been used to reduce generic competition for the company holding the original patent.  For example, some companies have used ‘pay for delay’ where the medication patent holder may use an agreement to delay the generic drug launch. Often a new medication is priced significantly higher than the predecessor standard therapy. In Australia the newer derivatives of thalidomide now used to treat myeloma are 4-6 times more expensive than thalidomide per se, which is not proportional to their benefit. Price collusion, which is illegal, has been reported internationally but is closely monitored in Australia by the Australian Competition and Consumer Commission. Unfortunately, from a government perspective there are also significant barriers in regulating the cost of these expensive drugs effectively. Overseas based Pharma companies have strong negotiating positions with respect to the market prices of their drugs in Australia. In the USA, there are statutory limitations on the ability of Medicare to negotiate drug prices. This means in Australia, the Pharmaceutical Benefits Advisory Committee (PBAC) is also limited in its ability to negotiate medication price as the parent USA companies cannot accept publicly ‘listed’ prices that differ substantially from their USA prices. In part, this is also influenced by multinational free-trade agreements.

The impact of the financial toxicity of medications is manifold. For the patient this is dependent of the country’s wealth, health system and insurance structure. In some situations the costs of medications are crippling and lead to unconscionable inequity of access. Significant co-payments can also compromise medication compliance. Counterintuitively, the impact on Pharmaceutical companies can lead to reduced incentives to produce novel therapies with high profits to be made from developing second-generation medications rather than novel therapies. Australia currently has a robust system to assess cost effectiveness of medications through the PBAC and recommend needed and cost-effective medicines for subsidy.

Lowering the cost of medications would be of great benefit to individuals, government and society generally. So, how can financial toxicity be addressed? 

Firstly, health professionals have an important role as the prescribers. By changing their prescription patterns, medical professionals can exert pressure to pharmaceutical companies in reducing the cost of their overpriced drugs. Financial impact and cost-effectiveness must be taken into account when professional bodies develop guidelines and treatment recommendations. A recent example is the American Society of Clinical Oncology developing scorecards of different cancer treatments, which include cost.7 Universities could improve the education of future health professionals to the importance of health economics. Government may intervene directly through strengthening regulatory bodies as the gatekeepers to rationalise access to expensive medicines on the PBS. Innovative methods need to be developed to improve the methods we use to measure the health and economic outcomes accruing from approving access to these high cost medications. Specifically, there needs to be better predictors of drug response, more stringent criteria for approval of drugs affecting patient survival, not just proxy measures, such as reduction in tumour size. Finally, patients and community groups need a considered voice and this ought to be based on good quality evidence of the risks and benefits of a new medicine and not be overly influenced by public relations hype.

To address the increasing costs of medications, strategies should include: education to improve public awareness of the issue; and proactive participation of clinicians, professional bodies, patient advocacy groups and government agencies to find solutions. There must be increased transparency around sponsorships and pharmaceutical company largesse and negotiations between consumers, health professionals, government and commercial companies.  Escalating medicines prices limits access to medicines and places increasingly unsustainable strain on the health system. The latest example is CAR-T cell therapy tisagenlecleucel (Kymriah), originally invented by a university research team, was priced at about ½ million US dollars for a one time treatment by Novartis8. This is now a critical problem for everyone in our society.

Based on article: Ma et. al. Dealing with the spiraling price of medicines: issues and solution. Internal Medicine Journal 48 (2018) 16-24.

Funding: None.

Conflict of interest:

M Danta has received a lecture fee and travel bursaries from MSD, Abbvie, Roche and BMS. R. Day has received consultancy fees from Novartis, Australia, for participating in an occasional advisory group meeting commenting on registration and reimbursement plans for medicines in development. These fees are placed in audited trust funds of St Vincent’s Hospital Sydney to support research and education. D Ma has received a travel bursary from Phebra. 

Mark Danta is an Associate Professor of Medicine at St Vincent’s Hospital and UNSW, Sydney.  He is a clinical academic gastroenterologist with an interest in liver disease.  His research has focused on viral hepatitis, and the new therapies for hepatitis C are particularly relevant to any discussion of drug cost.

Chun K K Ma is a locum haematologist at St Vincent’s Hospital and conjoint lecturer at the UNSW.  His research is focused on adoptive cellular immunotherapy in haematopoietic stem cell transplant.

Richard Day is Professor of Clinical Pharmacology, University of New South Wales, Medicine, St Vincent’s Hospital, Sydney.

David Ma is a Haematologist at St Vincent’s Hospital Sydney and a conjoint Professor at UNSW, specialising in haematological malignancy and transplantation. His research focuses in blood stem cells to discover novel tests and treatments.  His clinical passions include equity of health care and mentoring the advancement of haematology in developing countries.

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One Response to MARK DANTA, CHUN MA, RICHARD DAY, DAVID MA. Dealing with the spiraling price of medicines: how “low” can it go?

  1. John Doyle says:

    A monetary sovereign nation like Australia has total command of its currency. It can buy any and every item or service the government chooses and “Taxpayers” are not infected by whatever the cost may be. No risk of going bankrupt applies* For foreign currency the government can buy it in the spot market. It has the unlimited ability to do that -unlike the rest of us.

    Medicine is an expensive industry. A new drug requires years and millions of dollars to get approval. But the citizens are unable to meet such a cost. The Federal Government has a different agenda from the corporate world. For the corporate world the bottom line is profit. For the national government it is the welfare of all its people, and not just the privileged and wealthy. more the norm today, unfortunately. The Federal government has a duty of care for all its subjects.and healthcare is a very high priority.

    The solution is as plain as the nose on one’s face. Just buy whatever it costs [after negotiations] Provide most medicines free. with restrictions if needed, [not cost related]. Free healthcare is not a privilege, it is a right a government obligation and easily affordable. It just has to spend to create the payments. It’s what the Constitution says. No ifs or buts. What the government can do is go after those who gouge excessive costs. No one is suggesting there be no cost guidelines, but theres no impediment to spend carefully.

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