Paying Differently for Health

We are entering a golden age of innovation that will see a steady flow of new cures and treatments for devastating illnesses. In 2015 alone, the Food and Drug Administration has approved new medications for chronic heart failure, Type 2 diabetes, breast cancer and cystic fibrosis, among other conditions. And new strides in genomic science and precision medicine are certain to catalyze more rapid therapeutic progress.

With these innovative breakthroughs, understandably, come concerns about cost and accessibility. As we embark on this conversation, and as we strive to strengthen an innovative environment that literally saves lives, it is essential that we not look at the cost of drug development in a vacuum, but rather the totality of these costs within the context of both time (the extent to which drug development can slow the escalation of, and the future costs associated with, chronic disease, as well as the inevitable decreasing of drug costs when competitors enter a therapeutic category’s marketplace) and space (the role of pharmaceutical innovation within a health care system in the process of transformation). 

It is unrealistic, for example, to talk about the cost of new cures and treatments without also discussing a health system that could be made much more cost efficient by eliminating hundreds of billions of dollars in waste. Studies have shown that, at a minimum, one of every five health care dollars is lost to overtreatment, breakdowns in care coordination and other system failures that stand to be repaired as the nation transitions to a pay-for-value approach to care delivery. As we determine how to curb overall health spending, it is a flawed direction to focus disproportionately on pharmaceutical development.

In fact, as we look at a present day in which chronic disease accounts for 86 percent of the nation’s health care costs and a future in which, for example, one of every three Americans is projected to be diabetic by the year 2050, we cannot have a productive conversation about short-term drug costs without also addressing the long-term financial and societal impact of chronic illness. In fact, as we address this issue, there are essential questions that need to be asked, such as:

  • How do we put all health care costs on the table to determine where we get the best long-term value in health care for patients, the economy and society?
  • Given the unique nature of the life cycle of pharmaceutical innovations, are there methods or tools that should be utilized, or developed, to weigh the potential long-term health savings generated by a new therapy versus its immediate costs?
  • Within health care payment systems, should policy makers encourage innovative risk mechanisms that would incentivize and optimize impactful drug development?

This is a discussion that will profoundly affect our nation’s health and future, and one that the National Pharmaceutical Council is working to continue through our research and collaboration with other health care stakeholders.