Facts about the Cost and Value of Prescription Drugs

March 28, 2018

Are you concerned about the high cost of prescription drugs? There are important facts you should consider.

New research by the Goldwater Institute shows there’s much more to the story about the cost and value of prescription drugs. And sensational claims about drug prices don’t solve any policy problems. They can also hinder innovation and harm patients. Here are some important facts about the cost and value of prescription drugs.

Key Facts:

1.  Consider both cost and value of medication.

Both costs and benefits of medication need to be considered when we look at prescription drug prices. If medications improve our quality of life or help us live longer, they bring us increased value, which should be taken into account.Too often, policymakers look only at the drug price and not the treatment benefits to patient well-being and overall health spending. Discussions about high prices without consideration of the how well the treatment might potentially serve the patient are not only short-sighted, they interfere with important decisions that are unique to the individual patient.

2. Patients can still get medication, even with high “sticker prices.”

Too often, charges of high prescription drug costs are made without any evaluation of whether or not patients are getting access to needed treatments. The reality is that most patients do get access despite high “sticker prices” for the drug treatment.Contrary to conventional wisdom, a high list price of a drug does not mean that most patients pay that price. The cost to the consumer can vary dramatically depending on insurance co-pays.

But for patients who lack insurance or are underinsured, most do receive needed treatments through pharmacy assistance programs that offer treatments at substantial discounts or at no cost. Almost all patients have access to needed treatments, even when it poses a major financial challenge.

3. Bad policy can limit innovation and harm patients.

Perhaps well-intentioned, policy proposals that would limit manufacturers’ ability or incentive to innovate will have the unintended consequences of stifling development and limiting patients’ access to the newest, most-innovative treatments.

4. Focusing on drug price alone can do more harm than good.

Lawmakers are facing increasing pressure to “do something” about prescription drug costs. But misguided solutions can be perilous prescriptions. The narrow focus on high drug prices ignores the vast majority of treatments that are generics, the speed at which newer treatments are available in the U.S., and the overall benefits that innovative treatments offer patients, such as reduced hospitalizations, increased lifespan, and better quality of life.

5. Beware the government negotiator and Medicaid formularies.

Proposals that would have the government negotiate prices in the Medicare program are flawed and misguided. This approach has already been attempted in the VA program. Rather than promote healthcare access, this approach has led to rationing and many of the newest, innovative treatments are unavailable.

In addition, states are seeking new authority from the Department of Health and Human Services to exclude certain high-cost treatments from the program formularies. While seemingly economical, these approaches not only undermine individual patient care, they also override the important doctor recommendations. While seemingly “expensive, these decisions can increase overall treatment costs when hospitalizations, additional treatments, and patient suffering are included.”

To learn more about this issue, read our report, Cost vs. Value and the Price of Innovation in Cancer Care: Oral Anticancer Drugs in Multiple Myeloma, as a Case Study.