BLOG: The ‘would you rather’ rule for drug pricing
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Historically in the United States, Medicare has not had the legal authority to negotiate the prices of drugs. Essentially, drug prices were unregulated.
In theory, this all changed with the Inflation Reduction Act, which gives limited negotiating power to CMS for 10 drugs initially, with others to follow in the years ahead. This idea represents excellent progress and has gained widespread bipartisan and public support, but it leaves many unanswered questions about exactly how prices will be determined. I would like to suggest a method to do that.
First, how are prices set outside the U.S.? Drug pricing regulation varies significantly by country, but most national health care systems set an upper limit to what will be paid for a drug. That price is determined by the “therapeutic value” of the drug, pricing for similar drugs and how the drug averts higher cost alternatives. Some drugs can be entirely restricted from sale in a country for having a high price, like the one-time gene therapy betibeglogene autotemcel, which was withdrawn from the German market because of pricing issues.
In the U.S., the price currently paid for betibeglogene autotemcel (here called Zynteglo from bluebird bio) is $2.8 million. It ranks No. 3 among the most expensive drugs in this country, according to Fierce Pharma. At the highest cost is the hemophilia B drug etranacogene dezaparvovec-drlb (Hemgenix, CSL Behring) at a cost of $3.5 million. Coming in at No. 2 is elivaldogene autotemcel (Skysona, bluebird bio), a drug for a rare condition, cerebral adrenoleukodystrophy, that otherwise leads to progressive neurologic dysfunction and death in children.
So, how do you put a value on a new drug that has no generic or biosimilar alternative? I would suggest starting with the manufacturer’s suggested pricing. Let’s say a treatment for chronic cervical spine pain costs $200,000 per year. Next, take a poll of patients whose doctors have written them prescriptions for that drug. Ask the patients, “Would you rather receive fully covered treatment or a cash gift equal to one half the amount of the drug’s cost?” Faced with the prospect of a shiny new Tesla Model S every year, each valued at $100,000, many patients might be willing to put up with a fairly big pain in the neck. And if a significant proportion of patients felt the same way, shouldn’t we sharpen our pencil on the pricing of that drug?
Surely, we want to reward innovators who save the lives of children, cure blindness and control life-threatening cancers. Surely, we have no perfect way to put a price on human suffering. But let’s face it, not all new drugs perform miracles. As with so many tough questions in medicine, maybe the answer can be found by asking the patient.
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