Commentary: Mark Cuban won’t solve our drug price problem | Opinion columns

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Billionaire “Shark Tank” celebrity and Dallas Mavericks owner Mark Cuban is once again attracting attention – this time for his Mark Cuban Cost Plus Drug Co., which seeks to lower prescription drug prices for Americans. A new study finds that Medicare could have saved $3.6 billion in 2020 if it had paid Mark Cuban’s drug prices.

The discovery was hailed as big news, reflecting the fact that Americans reliably consider the cost of prescription drugs a high priority issue. CBS reported that Cuban aims to disrupt the industry.

Savings on Cuban prices would be welcome. Its website complements Walmart and Costco’s services that sell generic drugs at discounted prices (researchers reported last year that Costco’s prices could also have saved Medicare billions).

However, Cuban’s service currently only covers older generic drugs. These should be cheap to start with because their makers no longer hold patents or other protections that prevent generic manufacturers from providing cheap copies. But their prices can be pushed up. Sometimes it’s because drugs treat rare diseases with small markets that discourage competition. But it’s also because wholesalers, pharmacies and middlemen called drug benefit managers can pocket nearly two-thirds of a drug’s price, the kind of price inflation the Cuban service seeks to avoid.

Yet the problem of drug cost goes far beyond these generics: Medicare spent $183 billion in total on drugs in 2019, while the country as a whole spends half a trillion dollars a year. Of prescription drug spending in the United States, generic drugs make up only about 20%. The remaining 80% is for brand name drugs.

Branded drugs are sold at high prices because their developers still enjoy a monopoly on their production and sale. These monopolies reflect intentional and longstanding government policies to encourage investment in research by rewarding drug developers with substantial profits for new drugs that improve health and extend life.

But that doesn’t mean the sky should be the limit for brand pricing. It is, of course, possible to pay too much and therefore induce pharmaceutical companies to spend unnecessarily on drugs that have too little chance of working or that produce too limited health benefits even if the new drugs work. .

Cuban says he is considering adding brand name drugs to his service. But it’s unclear when that will happen, and any savings to his company will likely be modest.

So the long-term question remains: how do you set prices high enough to incentivize pharma companies to make profitable investments without sacrificing the store? Paying too little does not provide enough incentive for industry to develop new drugs (a process that can cost a billion dollars or more). Paying too much diverts resources from better uses elsewhere.

To strike the right balance, policy makers should look to value-based drug pricing, that is, pricing drugs according to the health benefits they provide. Formal cost-effectiveness analysis compares the cost of a medicine – taking into account the savings the medicine may create elsewhere, for example by reducing costly hospitalizations – with its benefits, including longer life expectancy. life and improving the quality of life. This analysis offers a systematic approach to identifying appropriate prices.

Organizations such as the nonprofit Institute for Clinical and Economic Review in Boston, the National Institute for Health and Care Excellence in Britain, and other agencies around the world have demonstrated that such information can help determine a appropriate pricing. Unlike its international counterparts, the ICER in Boston has no formal authority to negotiate prices. Yet public and private health insurers use ICER information as a factor in decisions about pricing and equitable access policies for new medicines.

The analyzes of these groups do not systematically push prices down. Instead, they recommend paying more when the benefits warrant it. For example, a recent ICER study concluded that a new gene therapy for a rare blood disorder would provide good value, even at a one-time cost for a single patient exceeding $2 million (likely to have to be covered by insurance). ). On the other hand, ICER rejected the first new treatment for Alzheimer’s disease in decades, because it concluded that the annual price of around $50,000 was not in line with the limited benefit suggested by the authors. clinical evidence.

Such approaches are not perfect. But methods are improving, particularly efforts to better take into account the benefits of drugs, including, for example, reduced burdens for caregivers and families as well as economic benefits for society as a whole. The alternative to formal analysis is to trust people’s mistaken intuitions about the value of a drug, a route more susceptible to the grip of interest groups.

Value-based drug pricing will not make all needed drugs affordable. Other policies must ensure that people have adequate health insurance coverage that eliminates excessive co-payments and other barriers to accessing worthwhile therapies. There is evidence that insurers are reducing access or completely dropping coverage for certain drugs based on cost rather than patient value considerations.

Efforts like the Mark Cuban Cost Plus Drug Co. can help ease many Americans’ costs for the generic drugs they depend on.

But the much larger issue of brand name drug prices desperately needs attention too. Value-based pricing and insurance reform could make these expensive drugs more affordable and create better incentives to produce more of the drugs we need and fewer of the ones we don’t.

Peter Neumann, Joshua Cohen, and Daniel Ollendorf are authors of “The Right Price: A Value-Based Prescription for Drug Costs” and members of the Center for the Evaluation of Value and Risk in Health at Tufts Medical Center.

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