When we think about drug costs, many people immediately go to the idea that drug companies are just trying to maximize the return on their investment like any other company. But drug companies have high research and development costs, and are a constant risk of “losing” customers because medication adherence is low. High upfront costs and customer instability issues help drive drug pricing, but there are also other fundamental components at play.
For instance, how do we define the value of a drug? The value needs to fall within the framework value for the consumer, which is based on improving outcomes, satisfaction (or not hurting me), and cost. Any drug valuation has to take into account number needed to treat for benefit, number needed to treat to harm, and the Quality Adjusted Life Years component.
Another major issue is the “entity” that is paying for the drug is not necessarily getting to see the value delivered. For example, using a cholesterol agent that has value of lowering the risk for heart disease in a 59-year-old privately insured person really improves the cost component for Medicare, as the benefit is longer term. Thus, we will need to identify who receives the value, and begin to think through how that “entity” covers some or all of the cost.
This shift in thinking will require change management of how to move from one place to another. This will require market pressure, consumer-driven changes, and possibly regulatory intervention to move us down the road.
Everyone is trying to solve a piece of this issue without seeing how one impacts the other. Just defining a value does not work without taking into account who receives the value. And just doing price control will not always benefit the person without figuring out how to continue promoting innovation. Also, if we truly believe something new has greater value, it begs the question of how we stop doing other things that are no longer as valuable. This will require more standardization of care, which would include incorporation of improved agents and discontinuation of others. If we decide on how to value a drug, then comparing new ones to possibly cheaper, older ones becomes easier.
Nothing is easy. There are many variables to each problem we are trying to solve. We cannot throw up our hands in disgust as we realize the complexities, but we also cannot try to over simplify the issue at hand. Just understanding all the dynamics in play will help us come to a better solution. Knowing we all have different definitions of success will help us understand how we will need to work together , and having everyone at the table working towards a common goal is of paramount importance.