There has been heavy debate over the high cost of prescription drugs, and an analysis by Avalere Health estimates that the federal government will spend nearly $50 billion over the next decade on ten breakthrough drugs.
The US Food and Drug Administration’s (FDA) new Breakthrough Therapy program is designed to expedite drug review periods for drugs that treat serious or life-threatening diseases where no drugs exist or that are considered more effective than treatments currently available. Drugs designated as breakthrough therapies include Gilead Sciences’ hepatitis C drug Sovaldi and Bristol-Myers Squibb’s lung and skin cancer drug Opdivo, drugs with high price tags.
The report was commissioned by America’s Health Insurance Plans (AHIP) and offers a first look at estimated state and federal spending on breakthrough drugs for certain cancers and chronic conditions. According to AHIP, these ten drugs represent a small subset of the more than 5,400 drugs in the pipeline.
The high price tags for these breakthrough drugs lead to significant increases in health care spending. Last year, spending on prescription drugs increased by 13 percent from 2013, the largest percentage in over a decade. In 2014, prescription drug spend reached a record-breaking $374 billion. Nearly half of this spending increase was a result of breakthrough therapies and specialty drugs.
Among these ten breakthrough drugs over the next decade, Medicare would absorb the largest expense at $31.3 billion. This will be followed by Medicaid with an estimated spending of $15.8 billion and another $2.1 billion in spending resulting from subsidies provided through Exchange plans under the Affordable Care Act (ACA). The report notes that total US spending may exceed these numbers when accounting for spending by other government agencies, such as Veterans Affairs and Defense, costs to private sector payers, patient out-of-pocket costs, and the significant spending increases associated with off-label use.
These new, innovative drugs offer significant promise for patients with serious health conditions, however the price that comes with these drugs often make treating large patient populations unsustainable.
“Patients rely on innovative, life-saving medications, but soaring prices jeopardize access for those who would benefit the most from these treatments,” said AHIP Interim CEO Dan Durham. “With the future cost challenges facing patients and the health system, more needs to be done to increase transparency around prescription drug costs and to advance a sustainable pricing solution that will ensure patients can access the medications they need.”
Often times, breakthrough therapies have a period of market exclusivity, which can last for several years. Because of the lack of competition, drugmakers may significantly markup the price of the drug, making it unaffordable for patients and private payers.
Three of the ten drugs that Avalere cites in its report are currently available and include AbbVie’s hepatitis C treatment Viekera Pak, Pfizer’s breast cancer drug Ibrance, and Regeneron Pharmaceuticals’ diabetic retinopathy in patients with diabetic macular edema drug Eylea. These drugs were all approved for these indications less than a year ago. Additional drugs include, a cystic fibrosis treatment that combines Vertex’s Kalydeco and an investigational compound; Merck’s Keytruda, which is already approved for treatment of melanoma and is awaiting approval for treatment of lung cancer; Merck and Bristol-Myers Squibbs’ late-stage hepatitis C drugs; Syndax’s breast cancer candidate entinostat; Clovis Oncology’s late-stage lung cancer drug rociletinib; and Novartis’ mid-stage acute lymphoblastic leukemia (ALL) drug CTL019.
For the full report, click here.
Sources: Avalere Health; America’s Health Insurance Plans
Last updated: 6/10/15; 10:15am EST