Drug Prices and Costs

Drug pricing has become a hot topic. Maybe I have become sensitized to it, but it seems like there is something about the cost of pharmaceuticals everywhere I turn – in medical journals, online discussion groups and mainstream news outlets. Just this past week, the front page story in the business section of the New York Times ran a long profile of a pharmaceutical executive that centered on his company’s controversial pricing practices. The article mentioned that pricing is now generating lawsuits and potential Congressional action.

Why all the attention? I am guessing (really – just guessing) that there are a few reasons.

First, despite the overall modest growth in health expenditures in the US, pharmaceutical spending is rising more rapidly. In fairness, other costs may be slowing precisely because the wider use of more effective and more expensive medications is preventing the need for other treatments. Think, for example, of an anti-TNF monoclonal antibody “biologic” that reduces the need for hospitalizations and GI surgery for patients with Crohn’s disease. It is much easier to “see” and quantify the drug expenditure than the downstream “savings.”

Second, more and more people have high deductible health insurance plans and narrow benefits packages, so that it is increasingly common for patients to face pharmaceutical costs. This is exacerbated in many cases by coincident facility fees for infusion therapies, which are already among the most expensive agents. More patients facing higher costs leads to greater public awareness.

Finally, everybody loves an outrageous anecdote, so drug company moves like the “repricing” of a drug from $13.50 per pill to $750 per pill, as detailed in the Times story, become irresistible evidence of just how insane US health care financing really is.

Despite all the attention, there’s at least one issue that is not getting much play. I haven’t seen a lot written about the difference between drug prices and drug costs. In fact, the terms often get used more or less interchangeably because we are used to normal commercial exchanges where the seller’s price is equal to the buyer’s cost. In the anything-but-normal world of pharmaceutical pricing, variable pharmacy benefits, negotiated coverage, deductibles, co-pays and the like, it is worth pointing out that patients are all facing different costs, and the only constant is the manufacturer’s price. Just to make things a little more complicated, that price is generally quite arbitrary and disconnected from the actual costs of production, leading to a different kind of cost/price discordance.

The bottom line is that we might be able to make more sense of this if we are a little more careful in our choice of words. I think we should explicitly call out the drug makers for their crazy prices, which only become our costs if we are willing to pay the bill.

What do you think?


1 thought on “Drug Prices and Costs

  1. I think that I’m dying because I can’t get the med that keeps me running. It’s Librax generic which costs 45 cents to a little over a doller per pill to make. Some quote 1 dollar and some cents-less than 50 cents. The one company that has control of it, says that $5 a pill is the reserve price in the auction. The rep also said 2 other things #1 If a person can’t afford it, they need to learn how to control stress, as it’s not a physical problem. #2-They are thinking of stopping production in order to increase demand and raise the price.

    The original company made a limited run of Librax production during the 1990s and the early 2000s. My Air Force PCP was chosen to observe and document pre-production preperation, production, and post-production at the plant. The plant shut down production of the normal medication. They tore everything apart to scrub, disenfect, power steam every nook and cranny. He watched part of the production run-45 cents a pill. Then he watched the company tear everything down, clean and restart the production of the regular medication. The FDA kept saying it couldn’t guarantee the purity of Librax, and different military doctors kept saying it wasn’t a contaminated medication. The military did not have a dog in the fight, as the military has 3 different medical corps that aren’t financialy compromised to any company.

    The FDA declared Librax as unreliable and banned it about 2002. It was a bid process, and I was paying around $200 give or take. The AMA, military, VA, gastroentologists, primary care, etc. protested. The FDA allowed the importation of generic Librax that was made in Taiwan, Venezuela, and I think-Italy. An importer in Vallejo, CA imported from Venezuela. A NJ importer handled Taiwanese Librax, and I think the 3rd importer was somewhere on the East Coast. I bought from a Costco in Albuquerque, NM. I paid a price of $16.00 to a $120 for 60 generic Librax. The price rose, as the American supply/quota was depleted, and the companies had to jump through hoops to increase production, and go through the FDA and US Customs. Then the price dropped when the permits for importation were approved, and Librax was imported.

    I was diagnosed with severe IBS about 1964. My intestines were inflamed and adhized. My ovaries were covered, as was most of my uterous. I was given a bland diet, and a child’s tranquilizer. When my husband’s ship returned, he was counceled about the severity of my problems and that I’d be lucky to survive past the age of 40.

    I’ve mostly used physical activity and diet to live a good life. I’d go maybe 6 months or 5 years in between major episodes with explosive diarherria and/or severe cramps. I avoided the trigger foods, sugar, bran, grease, and yeast-and the temperature-I need to eat room temp food.

    I had a really bad episode in my early 50s. The only reasons that I wasn’t admitted to the military hospital was that I could stand up without fainting and my BP remained stable. A scratch became an abscess.

    I was put on Librax and have had good results since then. I cannot find Librax, and the altrenite medications are disasters. Since the FDA does not approve of Librax, Medicare does not cover it, so I have been self-pay for quite some time. My husband left me, and I worked my way through the University of New Mexico. I taught 11th grade math at a school I call ‘gang central’. I’m 73, but 2 weeks ago, I was on the roof trimming pyracantha that was over the eaves to prevent roof damage.

    This problem is not just chemo meds, but a problem of what could affect every American. Earlier congressional investigations have shown people that were very well to do being reduced to poverty by medical costs.

    Thank you

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