U.S. poised to spend $50B on just 10 'breakthrough' meds in 10 years

U.S. payers are striking out at drug spending again. This time, they're not lamenting their own spending on pricey meds. They're highlighting the cost to taxpayers--and according to a commissioned report, 10 hot new "breakthrough" meds are expected to cost publicly funded healthcare plans more than $50 billion over the next decade.

Among that group of 10 FDA-designated breakthrough drugs are Merck & Co.'s ($MRK) cancer treatment Keytruda, Regeneron ($REGN) and Bayer's eye drug Eylea, and Bristol-Myers Squibb's ($BMY) forthcoming hepatitis C drug daclatasvir. Other hep C drugs and cancer meds, plus the Vertex Pharmaceuticals ($VRTX) cystic fibrosis treatment Kalydeco, round out the list.

Commissioned by the trade group America's Health Insurance Plans (AHIP), the report from Avalere estimates the 10 drugs will cost Medicare $31.3 billion, Medicaid $15.8 billion and health-exchange plans $2.1 billion over the coming 10 years.

The report outlines its methods--estimating utilization and calculating government programs' share, for instance. It also admits one key thing: The quoted drug costs are for the meds alone, and don't take into account any potential savings that drug therapy might deliver to the healthcare system.

Hep C, for instance. Gilead Sciences ($GILD) has maintained that its pricey treatments Sovaldi and Harvoni are worth the cost because they cure a disease with costly complications such as hospitalizations, liver transplants and liver cancer; the same might be said of the hep C treatments from BMS, Merck and AbbVie ($ABBV) mentioned in this report.

Then again, these numbers also don't include many, many drugs coming to market. These are just 10 of the drugs that earned the FDA's "breakthrough" designation. There are more--and even more forthcoming meds that aren't in the breakthrough category. The numbers also leave out indications that didn't win the breakthrough tag. And they don't include spending by the Veterans Administration or Department of Defense.

"This is an enormous price tag for only 10 drugs, and it's just the tip of the pharmaceutical iceberg and a fraction of the costs that patients in the country will bear for prescription drugs," AHIP interim CEO Dan Durham said during a phone conference on the report (as quoted by MedPage Today).

AHIP says this level of spending on new meds won't just hit Medicare and Medicaid, but will also lead to higher insurance premiums--particularly new drugs that treat common diseases. That's not just hep C; Keytruda, for instance, is poised to win approval in lung cancer, the most common type of cancer in the U.S.--and its list price is around $150,000. "Looking ahead, therapies that come with a high cost and serve a large patient population are most likely to have an impact on government costs and consumer premiums," the report noted.

- get the Avalere report (PDF)
- see the MedPage Today story

Special Reports: 10 big brands keep pumping out big bucks, with a little help from price hikes | Top 10 most expensive drugs of 2013