The high cost of drugs: treating cancer and cholesterol while building profit

The cost of drugs can be enormous, as anyone who is on many of them, or even one expensive one, can tell you. For most people with good health insurance, the amount that they pay is only a portion of the cost (as with much of health care); still, the co-payments for some drugs, particularly non-generics, can be high enough to be significant for even upper-middle-class people. Lower income people may have to choose between medication and other frivolities – like food. For very high cost drugs, like many of those made artificially by “recombinant DNA” that are used for conditions including cancers, autoimmune diseases like rheumatoid arthritis, neurologic conditions like multiple sclerosis, and inflammatory bowel disease like Crohn’s, the cost is enormous.

The high cost of cancer drugs, in particular, is the foundation of several industries. The most obvious, of course, are the drug companies who manufacture them, and make great profits. The markup price that health insurers (including Medicare) pay for the administration of these drugs, however, is a major source of revenue for hospitals and the doctors who supervise their administration. The staggering growth of “cancer centers” in almost every hospital that can put one together is testimony to this. Most hospitals pursue certain “product lines” (sorry if it offends you to be a widget in a product line) that they see as the most profitable. Yes, medical need is one component; there has to be demand. Clearly cancer, and heart disease are very common and very serious for the people who have them, as well as being high-profit product lines. If less common, diseases that can be treated by neurosurgery are also serious. Indeed, even some neurological conditions that have not been historically treated by surgery, such as stroke, are becoming profit centers when procedural intervention (by, “interventional radiologists”) can be used to treat them. But there are lots of conditions which are also common and serious and are not among the “product lines” hospitals often develop because they are not “profit lines”; obstetrics and psychiatry and pediatrics come to mind (although neonatal intensive care and pediatric cancer treatment, as well as certain types of high-intervention obstetrics, are exceptions).

It is that cancer-drug markup that makes treating cancer profitable. Anecdote: a relatively high-income colleague received the bill for her first set of breast cancer chemotherapy. $30,000. Her husband hid it for several months. (“That’s not so bad,” she was told by a staff member, “we recently had an uninsured woman get a bill for $45,000.” Didn’t make her feel a lot better.) After that initial event, her copayments for treatment were on the order of $600 a month. Because she had good insurance. And she could afford it. Not without some pain, you understand, but much more than someone in one of the lower income groups. Or who is uninsured. Sure, she is happy her cancer could be treated. The point is that hospitals invest in – and advertise their expertise in -- treatment for this kind of disease, and not that kind of disease based on the profitability of it, not the seriousness of the disease.

In addition to the hospitals and the pharmaceutical manufacturers, scientists and the universities that they often work for depend on deals with drug manufacturers to bring their discoveries to market. This can be very lucrative for the universities who employ these scientists, as well as (often) the scientists themselves. It is big business. Bad? Not necessarily. Only a small percentage of the compounds being researched lead to profitable drugs, which is one of the main arguments that pharmaceutical companies use for their high prices and profits (they are consistently, and by far, the most profitable industries in the world if we include only those industries that produce something; the financial industry is something else). Of course, by the way, most of the initial research that produces these new drugs is supported by the National Institutes of Health (NIH) -- which would be you, the taxpayer. So most of those compounds are developed and studied at public expense; then only the most promising are bought by drug companies. Yes, many of these don’t become marketable, not to mention blockbuster profit centers, but the yield is much greater than it was before all the publicly-funded research culled them out. Oh, by the way, even though you funded that research, you don’t get a discount on the drugs that finally come to market. Sorry.

Sometimes, of course, there are drugs that are “blockbusters”, and they are not always the most expensive cancer drugs. They are big because they treat (or sometimes are thought to treat) conditions that are very common, so that there are millions of users. These are not as likely to support the development of new hospital product lines (where the profit-per-user has to be very high) but make a lot of money for the manufacturers. In the past these have included anti-anxiety drugs of the benzodiazepine class (eg., Valium ®, Librium ®), non-steroidal anti-inflammatory drugs (NSAIDs) for arthritis pain (including a few taken off the market for major side effects like Vioxx ®), and most recently “statin” drugs that reduce cholesterol. These drugs not only work for that purpose, they seem to have other beneficial effects in prevention of heart disease, the reasons for which are not entirely understood, so they are very popular. While selling such heavily-used drugs is always profitable, the greatest profit comes in the first decade (or so) when it is under patent and there are no generic competitors.

In a recent Perspective, “Generic atorvastatin and health care costs”,  in the New England Journal of Medicine, Jackevicius and colleagues look at the impact of the costs of statin drugs on health care costs by examining the projected savings on atorvastatin, initially sold as Lipitor®, which became generic this last November.[1] They used the data on the gradual price reduction that followed simvastatin (Zocor®) becoming generic in 2006. There are some differences; atorvastatin is more potent than simvastatin and less likely to cause muscle pain (myopathy), so it may be preferable to many. When neither was generic, Lipitor® had by far the biggest share of the market, but when simvastatin became generic in 2006, it became the biggest seller, with Lipitor® dropping precipitously and brand name Zocor® almost disappearing. Because of its two advantages (greater potency, less myopathy) generic atorvastatin should become the number one statin in the near future. The savings are projected to be enormous: “The overall cost savings from the availability of generic atorvastatin are projected to reach $4.5 billion annually by 2014, equivalent to 23% of total expenditures on statins in that year.”

That’s a lot of money. It is good to be saving it. However, that “saving” means that we have been spending it for the last decade or more. Yes, drug companies deserve to make a profit. Yes, there are investments made that need to be recouped. But this – like, if perhaps not quite so egregious as what we have seen lately in the financial sector – seems to be excessive.

We should not use drugs that harm us or are unnecessary. The question is can we, as individuals or a society, afford to pay so much for the drugs we need in order for their profits to be so high?

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[1] Jackevicius CA, Chou MM, Ross JS, Shah ND, Krumholz HM, “Generic atorvastatin and health care costs”, NEJM 19Jan2012;366(3):201-3.