Sure to add fuel to the fiery U.S. drug pricing debate, new work from several health policy experts showed that pharma makes more from platinum pricing in the U.S. than it spends on research around the world.
Published in Health Affairs, the study found a 59% spread between the average prices for the world’s 20 top-selling meds in other developed countries and those in the U.S. In other words, a drug that costs $41 in other countries costs $100 in the U.S.
This isn't a premium that can be argued away with drug rebates, either. The study compared U.S. net prices—after rebates and discounts—to list prices in other developed countries. All told for 2015, that U.S. premium created $116 billion in revenue for 15 of the world’s top drugmakers, compared with $76 billion in global R&D spending from the group.
So, as the researchers point out, lowering the total U.S. pricing premium just to match that $76 billion would put $40 billion back in the hands of U.S. taxpayers and patients.
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Even that rationale leaves the U.S. on the hook for funding global R&D. And the researchers' analysis can’t answer whether the U.S. should be paying for the world’s drug research, co-author Peter Bach told FiercePharma.
Bach, director at the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, said the group wanted to dive deeper into the argument that society “invests” in drug research through premium drug pricing.
The “math doesn’t work out,” he said.
The results warrant more discussion on just how much society should pay “downstream” to fund pharma’s R&D, Bach said. He added that the current system for drug pricing “is not working and may be optimizing profitability.”
For the medicines analyzed, the sales premium created revenue averaging 163% of pharma R&D budgets. We're talking only about the additional dollars paid in the U.S.—that additional $59 per $100—not the total revenue in the U.S.
At 263%, Teva’s specialty meds ranked the highest in the metric, followed by Biogen at 245%. Those companies and AbbVie, through premium pricing on top-selling drugs alone—Copaxone, Tecfidera and Humira, respectively—“covered or nearly covered” their entire R&D budgets, the study stated.
For instance, the study authors found that Biogen's U.S. pricing created an extra $4.93 billion in 2015 sales, compared with a $2 billion R&D spend that year. AbbVie's $7 billion windfall from U.S. premium pricing dwarfed its $4.3 billion global R&D budget.
U.S. pricing on big-selling drugs created sales premiums greater than global R&D budgets at AstraZeneca, Celgene, Roche, Gilead, GlaxoSmithKline, Johnson & Johnson, Merck, Pfizer and Sanofi, the researchers found. The study excluded consumer health at Pfizer and GSK, and only looked at the pharma divisions at Roche and J&J.
Bach and colleagues at Memorial Sloan Kettering Cancer Center previously introduced a DrugAbacus to analyze the costs and benefits of dozens of cancer meds. He said Thursday he’s an advocate of a value-based pricing system where the price of a med would “travel” with its efficacy.
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And that’s a concept catching on in the U.S., with several top drugmakers and payers making moves in that direction. Among them are indication-specific pricing on cancer drugs from Express Scripts and an agreement between Merck and Aetna on the diabetes blockbuster Januvia.
The new Health Affairs piece comes amid a period of steady debate on U.S. pricing that has led to several political proposals to allow importation and Medicare price negotiations. President Donald Trump this week tweeted that he’s working on a “new system” that’ll favor competition to bring prices down.