Prescription Drug Costs: Striking a Balance Between Innovation and Affordability

We are living in a new “golden age” of prescription drug innovation. Over the last several years, advancements in biologics, as well as the development of cell and gene therapies offer tremendous promise for extending people’s quality of life and even curing debilitating diseases. The downside is that these are among the most expensive drug therapies on the market with more to come.

Patients want innovation but as prescription drug costs continue to grow at unsustainable levels, we find ourselves at a crossroads. The most innovative drug in the world is worthless if it is not affordable and accessible.

Policymakers across the country have attempted to solve prescription drug affordability. However, many attempts have fallen short due to the inability to address the root causes of rising drug prices without simply shifting costs to others in the health care ecosystem.

The Regence Health Policy Center (RHPC) believes in a system that incentivizes the development of innovative drugs but also recognizes that we need to have a serious discussion about affordability. Finding sustainable solutions can take many forms and there is no shortage of experts who have opined on the issue. Over the next several months we will provide a landscape analysis of laws that currently exist and offer long-term policy solutions that support affordable, innovative, commercially reimbursable treatments.

Federal Activity

In August, the Inflation Reduction Act (IRA) was signed into law. The IRA contains drug pricing reforms including allowing Medicare to negotiate directly for the price of certain prescription drugs and capping Medicare beneficiaries’ out of pocket drug costs. In an earlier post, our colleague Ryne Carney broke down some of the most important elements of the new law. The Department of Health and Human Services will be issuing proposed rules before all the law’s provisions are fully implemented.

As we approach the 118th Congress, there is still room for policy solutions that preserve competition, address market failures, and deliver equitable prescription drug savings. For example, Congress should address abusive patent laws by limiting the amount of time a manufacturer can hold a monopoly on prescription drugs and biologics. Policymakers should increase transparency and address manufacturer mechanisms that obscure and inflate drug prices, including the use of rebates, coupons, and copay cards. Finally, policymakers must focus on improving the safety, effectiveness, and value of prescription drugs—including high scientific standards with robust data for new drug approvals.

State Overview

Over the last decade, several states have enacted statutes aimed at controlling drugs costs. State legislatures have passed laws capping the cost of insulin, outlawing spread pricing, banning the use of copay accumulators, establishing the drug pricing review boards, and requiring PBM registration.

Most of these laws are well intentioned and some will save consumers money however none attack the underlying problems that make prescription drugs unaffordable. To build robust clinical pipelines that deliver for patients and shareholders and are commercially reimbursable, we need to support policy solutions that ensure in-class competition, price transparency, and innovative payment solutions that consider the complexities associated with cell and gene therapies.

Advancing Competition, Price Transparency and Innovative Payment Models

Within the framework of promoting competition, transparency, and innovative payment models, the RHPC will explore the issue of specialty drugs and cell and gene therapies. Specialty drugs are high-cost medications used to treat rare or complex medical conditions that often require specialized support to manage and administer. Cell and gene therapies are innovative, emerging therapies that can effectively manage specific diseases and have the potential to cure certain diseases.

While these advanced therapies are providing life changing results for patients, financing these drugs presents its own set of challenges, as specialty drugs are one of the largest cost drivers within the pharmacy space. One study found that in CAR T-cell therapy, a form of immunotherapy aimed at certain cancer treatments, drugs can range from $475,000 to $1,500,000 per patient, and specialty drugs for autoimmune conditions such as rheumatoid arthritis, multiple sclerosis, and Crohn’s disease can cost thousands of dollars per month. Cell and gene therapies are also high cost, with a report finding that cell therapies are typically priced close to $500,000 per treatment course and gene therapies may approach or exceed $1,000,000 per treatment course.

Addressing the high cost of these classes of drugs is an essential component of promoting drug affordability and reining in inflationary healthcare spending. The RHPC will examine a range of policy options, including promoting increased patient access to biosimilars, encouraging the design and implementation of innovative payment models - including value-based pricing - and encouraging drug price transparency, which we believe will promote innovation in pharmaceutical manufacturing, help control drug spending, and ensure patient access to essential therapies.