ADVERTISEMENT
Demystifying Pharmaceutical Pricing Strategies
Arlington, VA—When the challenges of healthcare management are being discussed, inevitably the topic of drug costs finds its way into the conversation. Although skyrocketing drug costs seem like a burden of modern times, Alex Bastian, MBA, GfK Custom Research, LLC, reminded attendees of the ACCC 41st Annual Meeting: Cancerscape: Policy, Value & Quality that this issue is far from new.
In his presentation, Mr. Bastian provided a brief and highly informative history lesson by way of introduction. Drug pricing has actually been a controversial issue since the 1890s and, despite public perception, Mr. Bastian cited data to show that prices have been relatively stable over the years.
He continued by citing that the United States actually spends less on pharmaceuticals than the European market. That being said, the rising cost of healthcare spending across the board is a global phenomenon.
“Value glimmers before it shines.” Mr. Bastian used this quote to begin his exploration of the challenges inherent in determining the value of a new pharmaceutical product. Value evolves through a drug’s lifetime and this evolution cannot be predicted at the time of the drug’s launch, making the assignment of value to a new product difficult to anticipate. With this in mind, pricing strategy includes the lifecycle and portfolio considerations of a product.
When it comes to pricing and drug coverage, there is a strong philosophy that patients need “skin in the game.” Mr. Bastian illustrated this concept through an anecdote given to him by a Congressman. There are 2 weddings being planned. At the first one, the hosts opt to provide an open bar; at the second one the hosts opt to provide a cash bar. At the end of the night, the wedding with the open bar has tables filled with unconsumed drinks whereas the wedding with the cash bar has mostly empty glasses on the tables. How does this apply to healthcare drug costs and coverage?
It is theorized that when a patient is responsible for some or all of the cost of their willingness and ability to pay are extremely important considerations when developing drug costs. In oncology, as with most specialty drugs, the out-of-pocket maximums are frequently reached. Price transparency needs to occur as the cost of cancer therapies have increased.
Mr. Bastian went on to discuss the many factors involved in establishing a pharmaceutical product’s cost. These included considerations for future research and development, blockbuster drugs versus niche market drugs, and payers ability to leverage new payment models for reimbursing.
In terms of a long-term view, Mr. Bastian stressed that the focus of cost should be on value and that defining value in the field is critical.—Lisa A. Tomaszewski, PhD
