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New Report: Ten “Breakthrough” Therapies Alone To Increase Government Spending By Nearly $50 Billion Over A Decade

posted by Clare Krusing

on June 8, 2015

For Immediate Release

Soaring Price Tag Represents a “Small Subset” of the Total Cost of the Pharmaceutical Pipeline for Patients, Federal Government

Washington, D.C. – Spending on ten breakthrough medications alone will cost the federal government nearly $50 billion over a decade, according to a new analysis from Avalere Health. This soaring price tag represents just a fraction of the total cost of future treatments for patients and taxpayers.

The report, commissioned by America’s Health Insurance Plans (AHIP), offers a first look at estimated state and federal spending on breakthrough drugs for certain cancers and chronic conditions. These 10 drugs represent a small subset of the more than 5,400 medications in the drug pipeline. With many more drug manufacturers seeking breakthrough status and more than half of the total pipeline in later stages of clinical development (Phase II or Phase III), total prescription drug costs are expected to dramatically increase in the coming years.

Despite claims by pharmaceutical manufacturers that new therapies offset other health care costs, the exorbitant price tags lead to significant increases in health care spending.  In fact, these latest estimates add to the growing financial strain facing patients and the health system as a result of prescription drug costs. Last year, spending on prescription drugs reached a record-breaking $374 billion – a 13 percent growth from 2013 and the largest percentage increase in over a decade. Breakthrough therapies and specialty drugs accounted for nearly half of this spending increase. While these new, innovative medications offer tremendous promise in managing serious health conditions, their price tags make treating large patient populations unsustainable.  

“Patients rely on innovative, life-saving medications, but soaring prices jeopardize access for those who would benefit the most from these treatments,” AHIP Interim CEO Dan Durham said. “With the future cost challenges facing patients and the health system, more needs to be done to increase transparency around prescription drug costs and to advance a sustainable pricing solution that will ensure patients can access the medications they need.”

According to the report, over the next decade, ten breakthrough drugs are estimated to:

  • Increase Medicare spending by $31.3 billion;
  • Account for $15.8 billion in increased Medicaid costs; and
  • Add more than $2 billion in spending from subsidies provided through Exchange plans.

Notably, the analysis adds that total U.S. spending may exceed these estimates when accounting for spending by other government agencies, such as Veterans Affairs and Defense, costs to private sector payers (e.g., employers), patient out-of-pocket costs, and the significant spending increases associated with off-label use.

Breakthrough therapies often include a period of market exclusivity for drugmakers. In many cases, a new, novel therapy may be the only product available for several years. Without any competition, drugmakers may charge whatever the market will bear – oftentimes at prices unaffordable for patients and public and private payers. 

Given the significant cost impact associated with the prescription drug pipeline, greater transparency around drug pricing, specifically related to the cost of developing these medications, will help inform policy discussions and solutions for improving patient access to lifesaving treatments. Ensuring a pathway for new products, including biosimilars, and more affordable treatment alternatives, such as generic medications, will also promote a more competitive marketplace, greater choice, and better value for patients.

To view the full report, click here.

For more information on the factors driving prescription drug prices, click here.

 

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