Everyone knows that the market mechanisms that make most of the US economy efficient are lacking in healthcare. That’s especially true for pharmaceuticals, where drug companies can raise prices at will, and only the government can step in with price controls to put things right. At least that’s what we’ve been hearing in the press and on the campaign trail for the last year or more.
So I read with interest a recent STAT article These pricey cholesterol drugs aren’t selling. And that has the biotech industry sweating, about how the market is blocking high-priced drugs –and preventing pharma companies from doing all the things we’ve been told they can do at will.
No one disputes that the new drugs, Repatha and Praluent, are excellent at lowering bad cholesterol, or LDL. They often succeed where the traditional treatment — an inexpensive class of drugs called statins — fails. The problem boils down to doctors who are reluctant to write prescriptions, insurers who are unwilling to pay for them, and drug companies that have failed to understand a fast-changing marketplace.
The failures could send a chill through the still-booming biotech business, which relies on the idea that the risky, expensive process of developing new drugs can one day pay off big.
Contrary to the views expressed in the STAT article, I think the market is actually doing an ok job here. There are two main reasons why the drugs haven’t sold well:
- First and foremost, while they are proven to lower cholesterol they are not proven to reduce heart attacks or strokes or to lower death rates
- Second, most patients do just fine with generic statins, which are inexpensive and have a long track record, compared with the new drugs that have list prices of about $14,000 per year
The result is that doctors who want to prescribe the drugs have to jump through a lot of hoops to get insurance company approval. That’s a hassle and it’s expensive and time consuming, so I sympathize. But by the way, before we get mad at the PBMs and insurers, consider that the experience for prescribers might not be that different under a fully capitated payment model since health system administrators would still be worried about their budgets.
The companies that make these drugs are conducting studies of the impact on outcomes that people really care about: heart attack, stroke, death. If they demonstrate that the drugs are effective on these measures, they will have no problem generating prescriptions or charging premium prices –at least in the United States.
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