Pharma Drug Pricing
Brand name drugs cost Medicare the most
.Brand-name prescription drugs may be the source of regional variation in per capita drug costs, not the quantity of drugs prescribed.
The cost of medications through Medicare’s subsidized prescription drug program varies from region to region across the United States largely due to the use of more expensive brand-name drugs and not because of the amount of drugs prescribed, according to a study led by researchers from the University of Pittsburgh Graduate School of Public Health (GSPH).
The authors say that more efficient prescribing practices could have saved the Medicare program and its beneficiaries $4.5 billion.
The study results, which appear in The New England Journal of Medicine, suggest increased use of lower-cost generic medications could substantially reduce drug spending and beneficiary out-of-pocket costs without compromising quality of care or health. In addition, regional costs per prescription closely parallel the use of brand-named drugs.
The research suggests the Medicare Part D benefit design, which promotes cost-sharing and utilization management, may be an important tool for boosting the use of generic drugs in the program and saving money, particularly in high-cost regions, says Julie M. Donohue, associate professor of health policy and management and lead author of the study.
“Promoting the use of generics could greatly lower out-of-pocket costs for patients and save Medicare money. Lower costs could potentially lead to improved adherence to medication regimens, which in turn would lead to overall improvements in health,” Donohue says.
Studies have shown that there are differences in Medicare drug spending across the United States, but until now the reasons behind those differences have not been well understood.
Donohue’s team examined 2008 Medicare data for 4.7 million beneficiaries. In addition to studying overall medication use, they looked at three drug categories widely prescribed to the elderly: blood pressure medications, cholesterol-lowering statins, and newer antidepressants. The data was analyzed across hospital referral regions and adjusted for demographic, socioeconomic, and health status differences.
They found that mean adjusted per capita pharmaceutical spending ranged from $2,413 in the lowest hospital referral region to $3,008 in the highest. More than 75 percent of that difference was due to the cost per prescription ($53 versus $63).
However, the data indicated differences in the role of volume versus cost depending on the drug class studied. For example, the cost per prescription was the most important factor for medications used to treat hypertension and high cholesterol while the differences in volume were more important in the costs of antidepressants.
“The preference to use antidepressants among the elderly may vary by region, which may account for some of the difference the research found in this drug class compared to the other two studied,” says Donohue.
Collaborators on the study included researchers at the University of Pittsburgh and Dartmouth Medical School.
The study was supported by the National Institute on Aging; the Agency for Healthcare Research and Quality; the National Institute of Nursing Research; the National Institute of Mental Health; the Robert Wood Johnson Foundation; and the Veterans Affairs Health Services Research and Development Service.
Source : Futurity.org
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The Truly Staggering Cost Of Inventing New Drugs
During the Super Bowl, a representative of the pharmaceutical company Eli Lilly posted the on the company’s corporate blog that the average cost of bringing a new drug to market is $1.3 billion, a price that would buy 371 Super Bowl ads, 16 million official NFL footballs, two pro football stadiums, pay of almost all NFL football players, and every seat in every NFL stadium for six weeks in a row. This is, of course, ludicrous.
The average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billion.
Research Spending Per New Drug
Company Ticker No of drugs approved R&D Spending Per Drug ($Mil) Total R&D Spending
AstraZeneca AZN 5 11,790.93 58,955
GlaxoSmithKline GSK 10 8,170.81 81,708
Sanofi SNY 8 7,909.26 63,274
Roche Holding AG RHHBY 11 7,803.77 85,841
Pfizer Inc. PFE 14 7,727.03 108,178
Johnson & Johnson JNJ 15 5,885.65 88,285
Eli Lilly & Co. LLY 11 4,577.04 50,347
Abbott Laboratories ABT 8 4,496.21 35,970
Merck & Co Inc MRK 16 4,209.99 67,360
Bristol-Myers Squibb Co. BMY 11 4,152.26 45,675
Novartis AG NVS 21 3,983.13 83,646
Amgen Inc. AMGN 9 3,692.14 33,229
The drug industry has been tossing around the $1 billion number for years. It is based largely on a study (supported by drug companies) by Joseph DiMasi of Tufts University. It’s a nice number for the pharmaceutical industry, because it seems to justify the idea that medicines should be pricey (and increasingly, they can be very price, costing tens of thousands of dollars per patient per year) without making it seem that inventing new medicines is so expensive an endeavor as to be ultimately futile.
But as Bernard Munos of the InnoThink Center for Research In Biomedical Innovation has noted, just adjusting that estimate for current failure rates results in an estimate of $4 billion in research dollars spent for every drug that is approved. But Munos showed me another figure, where he divided each drug company’s R&D budget by the average number of drugs approved. This was far more dramatic.
Wanting to make this even more rigorous, Forbes (that would be Scott DeCarlo and me) took Munos’ count of drug approvals for the major pharmas and combined it with their research and development spending as reported in annual earnings filings going back fifteen years, pulled from a Thomson Reuters database using FactSet. We adjusted all the figures for inflation. Using both drug approvals and research budgets since 1997 keeps the estimates being skewed by short-term periods when R&D budgets or drug approvals changed dramatically.
The range of money spent is stunning. AstraZeneca has spent $12 billion in research money for every new drug approved, as much as the top-selling medicine ever generated in annual sales; Amgen spent just $3.7 billion. At $12 billion per drug, inventing medicines is a pretty unsustainable business. At $3.7 billion, you might just be able to make money (a new medicine can probably keep generating revenue for ten years; invent one a year at that rate and you’ll do well).
There are lots of expenses here. A single clinical trial can cost $100 million at the high end, and the combined cost of manufacturing and clinical testing for some drugs has added up to $1 billion. But the main expense is failure. AstraZeneca does badly by this measure because it has had so few new drugs hit the market. Eli Lilly spent roughly the same amount on R&D, but got twice as many new medicines approved over that 15 year period, and so spent just $4.5 billion per drug.
Why include failure in the cost? Right now, fewer than 1 in 10 medicines that start being tested in human clinical trials succeed. Some biotechnology companies do manage to make it to market without having to spend money on failed medicines – but only because other startups went bust trying to test other ideas.
Last year, an accounting in the journal BioSocieties claimed to take apart the earlier $1 billion figure and find that drug companies were really only spending $55 million on each new drugs. Picked up by Slate, this paper whittled down the number to $55 million. That’s about a third of what was recorded in R&D by about the cheapest drug I can find – Optimer’s new antibiotic Dificid for drug resistant clostriduim difficile bacteria. Total costs sunk? $175 million, for a product that delivered $24 million in sales during its first five months. If this is really just taxes and accounting games, I’d like it explained how it is that biotechnology companies manage so often manage to spend all of their cash.
The high cost of developing drugs shouldn’t be a badge of honor for drug firms; there’s no reason it has to be this expensive. And using the the cost of research to justify the prices of prescription drugs was always a dumb move on the pharmaceutical industry’s part. Just because something was expensive doesn’t make it good. And another: many medicines are over-priced, but high-cost drugs are only a small part of our general health cost problem. Medicines are just among the easiest products to scapegoat because their prices are easier to track.
But if a drug company could promise to invent new medicines for $55 million a pop, its stock price would soar like Apple’s. It really does cost billions of dollars to invent new medicines for heart disease, cancer, or diabetes. The reality is that the pharmaceutical business is in the grip of rising failure rates and rising costs. We can all only hope that new technologies and a better understanding of biology will turn things around.
Source : Forbes
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Two drugs, two price-setting tales
By Tracy Staton
As governments worldwide slash prices on prescription meds, drugmakers in the U.S. are raising them. Cancer specialist Celgene ($CELG) has raised the price of its Revlimid pill for multiple myeloma by another 4.5 percent, just the latest in a series of Revlimid hikes. Meanwhile, Dainippon Sumitomo plans to slap a $14 per dose price tag on its new antipsychotic drug Latuda.
First, Celgene: Revlimid accounts for more than half of its 2009 revenue of $2.7 billion. One of the ways the company has been growing sales is by instituting a series of price increases. Celgene tells Dow Jones that increases usually are pegged to inflation, but the CPI hasn't grown anywhere close to 4.5 percent this year. Wells Fargo analyst Brian Abrahams had projected a price hike of about 1 percent in the U.S., Dow Jones says, compared with expected double-digit decreases in Europe.
Dainippon's pricing on Latuda is predicated on its safety profile, the company says, which also must be its selling point in a market that is already crowded with atypical antipsychotics, including low-cost generics. "Products like (AstraZeneca's) Seroquel and (Eli Lilly's) Zyprexa, which are market leading products, cause significant weight gain, lipid and glucose issues," Dainippon unit Sunovion's COO Mark Iwicki told Reuters. "And our profile on those cardiovascular risk issues look very, very good."
A price of $14 a dose would put annual treatment at $5,000. Still, as Reuters points out, that's not as expensive as the other new antipsychotic, Vanda Pharmaceuticals' Fanapt.
- see the Dow Jones story
- get more from Reuters
Celgene talks Revlimid defense strategy
FDA approves Dainippon's Latuda for schizophrenia
Source : Fierce Pharma
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