Prescription Drug Efficacy Cost – Is It Worth It?
Group contends the market could weed out ineffective medication, conserving development cost
There’s an interesting angle on the high cost of prescription drugs – the cost of making sure they’re effective.
Developing and bringing a new drug to market carries an approximate $3 billion price tag,[i] necessary for conducting clinical trials mandated by the Food and Drug Administration (FDA). Almost $2 billion of that involves trials to assure efficacy,[ii] with the remaining billion spent testing for safety. Not only is there an enormous expense involved, but there is also an enormous amount of time involved, 10 years on average.
One public policy group considers the FDA’s $2 billion effort to determine if a safe drug is also effective a needless expenditure.[iii] Its reasoning is based upon history, noting that prior to 1962 pharmaceuticals needed to prove only that they’re safe, the market was left to determine if the drug was effective.
A retrospective analysis 10 years later determined that requiring efficacy improved the percentage of effective drugs reaching the marketplace to 95 percent instead of just 90 percent. But it also reduced the number of medications approved each year from 40 to just 16.
That was a lifetime ago. No telling if those ratios remain valid. Everyone can agree that a drug needs to be safe, but pre-market efficacy raises several questions:
- What good is a drug if it is not effective?
- To what degree does it need to be effective and at what expense?
- If a drug is safe and is 20% effective at cost of $100 million over 5 years, is that good enough? Or do you need to spend an extra $1.9 billion and an extra 5 years to be 90% effective?
There can be a strong argument for bringing a safe drug to market sooner even if it has low efficacy. Sometimes drugs have beneficial effects that weren’t initially anticipated. Greater leniency with off-label use could be another consumer benefit and cost saver.
Off Label Or Revised Usage
Many are aware that Pfizer originally intended Viagra to treat high blood pressure and angina.[iv] Prozac was approved to help people with depression before discovering how it alleviated pre-menstrual syndrome.
Merck’s Proscar went to market to treat enlarged prostate glands. Its users benefited as intended but also noticed increased hair growth. Since off-label usage cannot be promoted, Merck developed a separate but very similar product, Propecia, designed and approved for stimulating hair growth.
Rituxan has FDA approval for a certain type of non-Hodgkin’s lymphoma but oncologists prescribe it off-label for many types of cancers.
“Markets – which involve doctors, nurses, patients, hospitals, researchers, third-party payers, and the media – can determine what works and what doesn’t work with no input by the FDA,” The Goodman Brief contends.
With consumer products, if the consumer doesn’t think the product is working, they don’t buy the product. The same logic could be applied to prescription drugs. If the drug is safe, and if helps the patient, then the doctor should keep prescribing it. If it isn’t helping, then the doctor stops prescribing it and tries something else. Just like a product that no one buys, it will either be revamped to make it more effective or it will be taken off the market.
Facts Of the Matter
- Americans spent over $360B on prescription drug medications in 2019.
- More first dollar medical expenses are spent on prescriptions than any other coverage.
- Prescription Drug medications account for more utilization than dental, accident or critical illness policies.
- ACA considers Prescription Drug Coverage as an Essential Benefit – meaning everyone should have coverage.
Group Drug Programs
About 80 percent of drug expenditures in the U.S. receive coverage from either Medicare/Medicaid or private insurance. The four group programs available through OptiMed range from providing $0 deductible on generics to caps of $200 on preferred brands and $400 on non-preferred brands. There’s also an RX program that can be added for savings on specialty drugs.
The drug benefit in an ACA-compliant healthcare plan accounts for at least 20 percent of the overall cost. This expense can be lowered by reducing or removing the drug benefit component of the healthcare plan, and adding a fully insured stand-alone prescription drug benefit instead.
OptiMed Drug Plans
Knowing how vital it is for your groups to have a solid drug benefit, OptiMed plans feature:
- Guaranteed Issue.
- Extensive Network: 100% of all major chain drug stores and most independent pharmacies. This equates to over 67,000 pharmacies nationwide.
- Pairs well with Short Term Medical, Employer Groups (small/midsize/large) Limited medical, GAP, MEC, Indemnity, High deductible health plans, or can be purchased as a stand-alone.
- Works alongside most manufacturer coupons.
- Easy benefit management.
Download our product sheet to learn more, or contact your OptiMed rep.