This article is more than 5 years old. Information may no longer be current.
Industry financing could lessen financial burden of new, expensive drugs
Click Here to Manage Email Alerts
Researchers with the nonprofit RAND Corp. have suggested that to finance expensive pharmaceuticals and vaccines, health systems could issue debt instruments, such as bonds, mortgages or lines of credit to manufacturers.
The idea stems partially from the cost of Sovaldi (sofosbuvir, Gilead Sciences), the breakthrough hepatitis C virus drug that results in a cure rate upwards of 95%. The cost for sofosbuvir is $1,000 per pill, making a typical 12-week course of treatment cost $80,000, according to the report.
Soeren Mattke, MD, a senior scientist at RAND and lead author of the analysis, said the health care industry could learn from other industries, where supplier-financed credit is common. It is not an unprecedented step for the health care industry, as hospitals often lease or finance expensive equipment, he said.
“It’s not far-fetched for pharmaceutical companies to offer payers financial arrangements to ease some of the upfront costs,” Mattke, the managing director of RAND Health Advisory Services, said in a press release. “Pharmaceutical companies are focusing on highly targeted medicines to treat rarer conditions and smaller numbers of patients. In order to get to a blockbuster, drug companies may need to charge $100,000 per course of treatment and give a medication to 10,000 people. You have a drug that is highly effective, a good value for the money, and yet you have payers saying that they cannot afford it because of the front-loaded nature of the cost.”
Soeren Mattke
Another example will be a vaccine for dengue fever expected this year, Mattke wrote in the report. Dengue is endemic in 100 countries and the vaccine can “rid emerging economies of a deadly and costly scourge.” At a cost of $100 per person for the vaccine, however, vaccinating the 2.5 billion people in these countries may be unaffordable for the countries’ health systems.
This issue is especially problematic for infectious diseases, the authors wrote. Because treatments for infectious diseases, particularly antibiotics and vaccines, are given in short, defined doses, however, these drugs need to be priced higher for companies to recoup their investments. But the “Sovaldi effect” could extend into treatment for chronic conditions as well, they wrote.
For these financial arrangements to be successful, companies would need to demonstrate that the drugs perform as well in the real world as they did in clinical trials to receive the full payment for the drug. When they don’t perform as well, repayment would need to be reduced. The authors said these financial arrangements would work best in countries with national health systems or stable insurance coverage.
“Without a doubt, implementing such sophisticated finance models is not an easy task,” they wrote. “But an effort to craft demonstration programs to test their feasibility could spur new financing instruments that resolve the tension between cost and innovation posed by recently introduced breakthrough pharmaceutical products.” – by Emily Shafer
Reference:
Mattke S, Hoch E. Borrowing for the Cure: Debt Financing of Breakthrough Treatments. Available at: http://www.rand.org/pubs/perspectives/PE141.html. Accessed: March 10, 2015.
Disclosure: Mattke reports no relevant financial disclosures.