How should California value medical breakthroughs?
By Sara Radcliffe
Oscar Wilde famously defined a cynic as someone “who knows the price of everything and the value of nothing.” This observation really cuts to the heart of the nation’s ongoing discussion about drug costs. Innovative new medicines cost billions of dollars to develop and are often priced accordingly. Are they worth it?
In California, lawmakers are wrestling with this issue as part of a special legislative session on health care. As they do, it is important that policymakers consider more than just the upfront costs associated with these miracle drugs. Yes, front-line drugs to treat hepatitis, HIV, cancer and other conditions often carry big price tags. But those initial costs are only a fraction of the equation.
For example, drugs introduced a decade ago to treat multiple myeloma, an often deadly blood cancer, boosted treatment costs by nearly $73,000 per patient. However, these new medicines also increased survival rates.
Increasing patients’ life spans and improving their quality of life can also be quantified. For multiple myeloma, the new drug regimens provided big health improvements, valued at around $140,000, netting a $67,000 societal benefit per patient.
This is not an isolated example. Consider the introduction of highly active antiretroviral therapy (HAART) in the mid-1990s to treat HIV/AIDS. At the time, these drugs were also considered expensive but provided much-needed relief from what had been a uniformly deadly disease.
HAART’s ultimate dollar value in lives saved has been enormous; its emotional value is incalculable.
Many of these live-saving drugs are developed here in Northern California. The Bay Area is one of the top regions in the nation for biomedical companies and research.
Over and over, medicines have been shown to reduce health care spending. One study found that Medicare Part D prescription drug coverage, introduced last decade, reduced hospitalization rates by 8 percent, saving around $1.5 billion per year.
As public health improves, these breakthroughs will continue to provide tremendous value for both individuals and society. Since 1991, the overall death rate from cancer has fallen by 20 percent. That’s real people who can proceed with their lives: working, going on vacation, having children. One estimate puts the societal value of cancer medicines at $1.9 trillion.
There’s also a flip side to the focus on treatment costs — patients not receiving access to new medicines. Returning to multiple myeloma, because these new medicines were second-line therapies, many patients did not receive them. The resulting cost of care for these patients increased by $49,000, even though they were taking the less expensive drugs.
The opportunity cost of not introducing new therapies and technologies is also an important consideration. As noted above, bringing new medicines to patients is expensive, approaching $2.5 billion per drug and taking as long as 20 years. The resources to pursue these breakthroughs largely come from existing drug revenues, which are reinvested into research and development.
Reduced investment could deny future patients the benefits of breakthrough therapies. There’s no question that we need to address the high costs of health care, but there are many factors to consider. Any cost assessment must include societal benefit. By this metric, a drug that provides only incremental health benefits, regardless of its actual price, could be judged a poor value. On the other hand, an “expensive” medicine that saves or extends lives would be considered extremely valuable. We must never forget that price is only one component of the value of medical innovation.
Sara Radcliffe is president and CEO of the California Life Sciences Association. She wrote this article for this newspaper.