A good ride while it lasts
Genzyme’s Cerezyme was a pioneer in two ways: by providing a great treatment for Gaucher’s patients, and for demonstrating that health plans would be willing to pay six-figure prices for annual treatment. The financial aspect was great: Genzyme could reap tremendous profits on a small patient population while the health plans could show they were generous –thus rebutting the criticisms of managed care stinginess. With so few patients affected, the implications for health plans were negligible.
After that everyone in biotech took notice and started charging huge sums for so-called specialty drugs. Serious diseases –some rare, others less so– got a taste of effective, but very high cost treatments. PhRMA brags of the number of drugs in development for rare disease, but the companies’ motivations are financial, not charitable. The strategy has become so popular that specialty drugs now account for 25 percent of all pharmaceutical spending.
Inevitably, payers are looking at things differently now. More or less all have identified specialty drugs as big cost drivers and are doing their best to hold costs down, according to a survey by MedPanel. They are using traditional cost management tools such as increasing co-pays and deductibles, but I have my doubts as to how effective these will be. Can a Gaucher’s patient afford to pay a significant percentage of Cerezyme’s costs? Can they stop taking the drug?
I expect specialty drugs to be the issue that eventually causes the US to confront the reality that the health care system can’t afford everything. I also wouldn’t bet that the specialty drug companies will enjoy their current degree of pricing freedom forever.June 28, 2006