Rising Drug Costs, Medicare Part D, and Defining Value

Medicare Part D is nearly 50% under budget with premiums almost 40% less than originally projected.

Medicare Part D is nearly 50% under budget with premiums almost 40% less than originally projected.

A decade after the introduction of the Medicare Part D program and the program has seen great success—but that may be coming to an end. Panelists debated just that and discussed rising drug costs during the general session “Future Environment for Prescription Drugs and the Impact on Part D” at America’s Health Insurance Plans’ National Conference on Medicare in Washington, DC.

Although she acknowledged that the Part D program has flaws, Lori M. Reilly, Esq, executive vice president for Policy and Research at PhRMA, as a big proponent of the program and highlighted that Part D is almost 50% under budget with premiums almost 40% less than they were projected to be when the program first began, plus it has high beneficiary satisfaction.

However, John Rother, president and CEO of the National Coalition on Health Care, is more bearish on the future of the program. The price of drugs coming out are bigger and bigger, which will impact Part D.

“Premiums going up 13% in 1 year indicates our success with the program—and it’s a successful program—has turned a corner,” he said.

Reilly and Ron Cohen, MD, chair of Biotechnology Industry Organizations and president and CEO of Acorda Therapeutics, are not as concerned. Yes, they agreed, the patent cliff is behind us, but there will be more patents expiring.

Dr Cohen pointed out that health care costs ebb and flow—some years there are more patent expirations and some years there are less. He also noted that with the first biosimilar now approved in the United States and more in the pipeline, their impact will be significant in the future.

“It’s a mistake to look at a 2-year period or 1-year period and say ‘the sky is falling,’” Dr Cohen said. “You have to look at the arc and realize that the drugs coming out today will also expire one day.”

The current pipeline of drugs in the US is unprecedented, said Steve Miller, MD, senior vice president and chief medical officer for Express Scripts. Like Rother, he expressed worries over the current 13% increase in drug prices and the fact that prices are expected to continue to go up.

The panel remained split while discussing the price of drugs and paying pharmaceutical companies for innovation. Reilly pointed out that the cost of a drug isn’t just its offset in year one. Often these drugs are used to prevent or delay something farther down the road.

However, Rother said that with the high cost of health care, the industry has to look for efficiencies and in the case of pharmaceuticals, reimbursement should only be for proven value. The public investment in the pharmaceutical sector is substantial, and he questioned if that meant there was a social contract to fulfill when setting drug prices instead of just setting the highest price the market can bear.

Reilly debated that only paying for proven value would be a mistake because something close to 90% of drug development fails. She provided the example of an Alzheimer’s drug with Eli Lilly working 30 years to bring one to the market.

While Miller agreed that they all want the US to be the leader in drug development, he is also looking for sustainability. Instead, the industry is seeing diminishing returns with prices escalating without a comparable increase in benefit to the patient.

What the conversation ultimately came back to was defining value, which means different things to different stakeholders. However, defining it through the eye of the patient often means valuing quality of life.

“Death is cheap; oftentimes keeping someone alive is expensive,” Reilly said. “To patients and patients’ families that’s a cost that’s worth it.”