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1 The Affordability Conundrum
Pages 11-30

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From page 11...
... Cancer patients especially face severe financial risks -- or "financial toxicity" (NCI, 2017) -- and have a materially higher rate of personal bankruptcy than 1  The term "biopharmaceutical sector" used in this report encompasses a wide range of par ticipants from researchers to physicians to industrial producers, from public and private payers to intermediaries such as pharmacy benefit managers, and from health care organizations and care providers who prescribe medications to patient advocacy organizations.
From page 12...
... While spending relating to hospital and clinician payments fell because of Medicare reforms, the growth pattern for prescription drugs followed an entirely different path as influenced by three legislative changes: the Bayh– Dole Act of 1980, the Orphan Drug Act of 1983, and the Hatch–Waxman Act of 1984. Since the early 1980s, spending on drugs has increased at 1.1 1.095 1.05 1.05 1.042 1.039 1.039 1.023 1.025 1.02 1.014 1.006 0.999 1 1.983 0.95 0.9 Total Hospitals Care Providers Drugs Other Nursing Homes FIGURE 1-1 Proportional change in real per capita spending by sector before (dark blue bars)
From page 13...
... Prescription drug policies at both the federal and the state level are the result of extensive technocratic decision making. However, individual patients and their families relate to the biopharmaceutical sector in a very direct manner, responding to such issues as access, cost, and efficacy on a very personal level.
From page 14...
... The latter includes expenditures on construction and equipment, research, and administration of both public and private health insurance plans. Personal medical expenditures include payment for all health care services and products (such as medications, durable medical equipment, and supplies)
From page 15...
... . Although specialty drugs accounted for about 2 percent of prescriptions dispensed in 2016, they represented more than one-third of total prescription drug spending (Express Scripts, 2017; QuintilesIMS, 2017)
From page 16...
... . Presently, different patients pay different prices for identical drugs, with individual prices depending mainly on the specifics of their health insurance plans, which generally include cost-sharing features such as copays, deductibles, and coinsurance.
From page 17...
... One powerful force, however, is the extensive and increasing health insurance coverage for prescription drugs that blunts -- and in the case of full coverage, eliminates -- normal consumerrelated market forces that might otherwise control prices. A SYSTEM OF CONFLICTING SYSTEMS The current structure of the biopharmaceutical sector often gives rise to conflicting interests and positions.
From page 18...
... For most consumer goods, free market maximizes consumer choice and makes decisions based on the economic "votes" of people participating in a particular market. In the United States, market forces are generally considered to be the most economically efficient way of determining what goods are provided and at what price -- and also the fairest way of determining how limited resources should be allocated (Elegido, 2015; Friedman, 2009)
From page 19...
... Another benefit intermediaries offer is to negotiate lower prices for their clients, including insurers and self-insured employers who can potentially turn those savings into lower insurance premiums or cost sharing for their enrolees. The question is whether market forces in the biopharmaceutical sector work effectively enough to ensure true competition and prevent excessive profits that otherwise might have been passed on to patients.
From page 20...
... Conversely, a person who chooses not to receive vaccines or drug therapies may cause negative externalities, including reduced herd immunity and greater spread of the disease as well as the associated costs to society when resources need to be devoted to subsequent medical interventions that could have been avoided. In certain cases, a treatment can eliminate substantial non-drug medical expenses later in life (e.g., the use of a hepatitis B vaccine)
From page 21...
... In light of such issues, insurance plans need explicit and transparent processes for setting priorities, yet there is little national agreement as to what those processes should be. THE ROLE AND RESPONSIBILITY OF FIRMS Beyond the sorts of moral considerations that are applicable to all firms, some ethicists believe that biopharmaceutical companies have a special obligation to ensure that their products are accessible to patients who need them -- even if doing so reduces profitability and returns to share
From page 22...
... Their mission and vision statements often announce the intention to bring transformative therapies to patients around the world. Box 1-2 explores the potential of new business models -- beyond traditional profit maximization -- in the biopharmaceutical sector.
From page 23...
... Those who apply this particular framework in discussions about drug pricing are likely to be resistant to suggestions about restricting prices or intellectual property rights in the biopharmaceutical sector. The idea that investments in research and development must be fairly rewarded is closely related to another general concern for biopharmaceu
From page 24...
... Corporate leaders, then, may not feel at liberty to price prescription drugs in a way that maximizes affordability to consumers. The principle of near-absolute fidelity to shareholders is itself controversial, especially when profits are derived from non-market circumstances.
From page 25...
... . Indeed, the public conversation about drug prices has been galvanized by publicity surrounding highly sympathetic cases in which particular patients cannot afford particular drugs.
From page 26...
... Most other developed countries have explicit price controls or bargaining mechanisms in place for prescription drugs, some of which use cost-effectiveness metrics. In the United States, currently there are no centralized price controls, and payers do not explicitly deny access to treatments on the basis of costs, thus enabling biopharmaceutical companies to set higher prices than in other countries.
From page 27...
... from clinicians and choices among different prescription drug options. In the United States, as of 2016, about 50 percent of individuals gained health insurance coverage through their employers and about 14 percent through Medicare, which is available to those older than age 65 and those who are disabled, among others.
From page 28...
... As knowledge of the complexity of human biology has increased, researchers have uncovered more and more pathways through which to treat and prevent illnesses using complex and costly biopharmaceutical products. This growing capability has also played a major role in the steady increase in the amount being spent on prescription drugs and related insurance.
From page 29...
... Overlaying this is the complexity of health insurance plans in the United States, which makes it difficult for patients to become familiar with the specifics of their plan, including its cost-sharing provisions. THE STUDY CONTEXT Given the sheer complexity of the subject -- and its high stakes -- it is clear that much greater clarity is needed to guide the biopharmaceutical sector that serves the nation's (and to some extent the world's)
From page 30...
... No materials were discarded from consideration based purely on financial or other connections that their authors may have had with participants in the biopharmaceutical sector or other interested parties; however, this circumstance was considered in interpreting such materials.


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