From the Vault — Aaron Bholé — Drug Pricing and Orphan Drugs (Episode #14)
On the 14th episode of the Penn HealthX Podcast, Ryan sat down with Aaron Bholé, a first-year medical student at the Sidney Kimmel Medical College (SKMC) in Philadelphia.
Aaron graduated from a 3+2 program at Cornell, where he earned an undergraduate degree in neuroscience and an MBA. While at Cornell, he interned with FileVision USA and Northwestern Medicine. At the SKMC, Aaron is a part of an organization called the Physician Executive Leadership program, which is similar to HealthX at Penn. He is also combining his business and medical knowledge through an internship with Militia Hill Ventures in Philadelphia. Aaron holds a specific interest in drug pricing, and Ryan and Aaron delved into the topic during their discussion.
Some key takeaways from the discussion:
Prescription drugs cost hundreds of billions of dollars per year
Given the heightened visibility of drug pricing in the media spotlight over the past year, it is not a surprise that drug spending accounts for a substantial portion of healthcare spending. Currently, prescription drugs make up nearly 10% of all healthcare spending in the US, according to the Kaiser Family Foundation. Given that healthcare now costs the United States $3.3 trillion dollars per year, prescription drugs cost Americans over $300BB annually.
Specialty drugs receive more news coverage, but generics can also be expensive
Much of the news coverage around drug pricing focuses on extremely expensive specialty drugs, such as Biogen’s Spinraza for spinal muscular atrophy, which will cost $750,000 per patient, generics can also be extremely expensive. While the cost of generics has been declining overall, many drugs have only a single generic manufacturer. As a result, that manufacturer can have significant pricing power. This leads to situations where drugs that have been off-patent for decades can see price increases of hundreds or even thousands of percent, as was the case when Martin Shkreli raised the price of Daraprim in 2015, which made him infamous overnight.
It takes more than the sticker price to know if a drug price is “fair”
Drug pricing is complicated. One of the biggest challenges in determining a reasonable price for a drug is that the cost must be weighed against the effectiveness of the drug. Two common methods of valuing drugs are to compare the drug to the current standard of care and increase the price in accordance with the benefits (safety, efficacy, adherence) it provides or to place a value on the complications that it can avoid. Thus, an expensive but very efficacious drug could be relatively more cost-effective than a drug with a much lower price tag but less efficacy. As an example, consider Harvoni, a hepatitis C drug that was developed by Gilead pharmaceuticals. The drug was initially priced at $95,000, although with discounts the average cost is about $40,000 for a course of treatment. While the sticker price is high, it cures hepatitis C in over 90% of patients — so even though the price of the drug is massive, it is considered a “high value” treatment.
To hear more about drug pricing, orphan drugs, patent law surrounding drugs, and some legal history of drug pricing in the United States, check out this episode of the HealthX podcast.
Originally published at https://pennhealthx.blog on January 7, 2018.
