JAMA Forum: We Can’t All Have It All: The Economic Limits of Pharmaceutical Innovation

JAMA Forum: We Can’t All Have It All: The Economic Limits of Pharmaceutical Innovation
By Austin Frakt, PhD on April 6, 2016

Even though US consumers spend 3 times more for hospital care than for medication, they are much angrier with pharmaceutical companies than hospitals for driving up the cost of health care. Drug companies raise this apparent inconsistency in an effort to defend their pricing practices. In so doing, however, they fail to appreciate why they’ve been targeted for so much opprobrium. Ironically, the industry’s biggest public relations problems may arise from its most effective and widely applicable innovations. 

In fact, we may have already have reached the point of confronting the fact that we cannot all have it all. New, expensive drugs for hepatitis C—Viekera Pak, Sovaldi, and Harvoni—severely stress budget-constrained programs like Medicaid and the Veterans Health Administration. Even at the steep discounts those programs receive, these treatments—though cost-effective—are indicated for such large populations that their aggregate cost would overwhelm budgeted resources. The day that life-extending $1 million “miracle” pill arrives (or the precision-medicine equivalent of a collection of drugs), we may look back on the current hepatitis C treatment funding problems nostalgically. As innovation continues, drug pricing and budgeting problems will only get worse.

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