No miracle cure for rising drug costs

Dina Rudick

The two men shook hands in front of dozens of Massachusetts business leaders and politicians. One was the head of the state’s biotech trade group, the other chief executive of its biggest health insurer. They had just pledged to do something about the soaring price of prescription drugs.

“This could be landmark,” Massachusetts Biotechnology Council president Bob Coughlin said as he gripped the hand of Andrew Dreyfus of Blue Cross Blue Shield of Massachusetts. “We just agreed to solve a problem that we don’t know how we’re going to solve.”

Nearly two years after that January 2016 exchange, they still don’t.

The handshake made for good drama but turned out to be wishful thinking. How could a couple of Massachusetts health care industry leaders, by themselves, resolve a national dilemma that for years has confounded academics, economists, executives, and politicians? Since Coughlin and Dreyfus struck their informal pact at a MassBio breakfast, prices — especially those for a new crop of specialized medicines — have only zoomed higher.

The annual cost of some recently approved genetic treatments for rare diseases has more than doubled from the $300,000 level considered stunningly high only a few years ago. Spinraza, the new Biogen Inc. drug to treat the deadly disease spinal muscular atrophy,costs $750,000 per patient in the first year. And a million-dollar gene therapy to treat blindness is expected to debut early in 2018.

Any effort — or even preliminary talk — to curb the price of prescription drugs in America runs smack into a hard reality: The interests of the companies making innovative medicines remain at odds with the insurers that have to pay for them.

“We have to be honest,” Dreyfus said long after his meeting with Coughlin. “We’re still not discussing solutions that will significantly lower the rate of growth in spending on drugs.”

But that doesn’t mean people aren’t coming up with ideas. Approaches ranging from radical overhauls to technocratic fixes are under consideration by Congress, state legislatures, nonprofit health care groups, and think tanks. Here are some of the possibilities:

■  Single payer. The most sweeping reform would involve a “Medicare for all” system through which the federal government, which already insures older and poor people, would pay for drugs and other health care. The concept has historically been unpopular, but a growing number of lawmakers, including Vermont Senator Bernie Sanders, the former Democratic presidential candidate, and Massachusetts Senator Elizabeth Warren, have embraced it.

But single-payer remains a long shot politically. “We have to work within the parameters of the possible,” said Susan Dentzer, president of the Network for Excellence in Health Innovation, or NEHI, a Boston nonprofit that has been trying to forge a consensus on drug pricing. “We live in a capitalist economy.”

■  Gene therapy carveout. At a policy summit earlier this year sponsored by the nonprofit Institute for Clinical and Economic Review, or ICER, participants discussed making the federal government, rather than private insurers, pay for a particularly expensive class of medicines — one-time treatments called gene therapies that could replace defective genes and cure diseases.

Despite the huge cost of these drugs, which are just starting to come onto the market, their champions say that in the long run, they could save the health care system money.

For example, someone with the worst form of sickle cell disease who lives into his or her 50s will rack up almost $9 million in medical bills, according to a 2009 study in the American Journal of Hematology. The disease causes red blood cells to deform into a sickle shape and stick to vessel walls, depriving tissues of oxygen, resulting in severe pain and often requiring blood transfusions.

“I’m always sick,” said Dima Hendricks, a 35-year-old life coach and mother of two in Brockton. Hendricks says she has been hospitalized hundreds of times since being diagnosed with sickle cell as a baby, at a cost of more than $1 million to MassHealth, the Medicaid program in Massachusetts. To her, a gene therapy cure would be a bargain at hundreds of thousands of dollars. “It would make sense for them to invest in something like that,’’ she said.

■  Transparency. So-called transparency bills filed in more than a half dozen states would require drug makers to disclose data on the cost of research, manufacturing, and advertising before they set the price of a new drug or raise the price of an existing one. The first such bill was enacted in California in October over drug industry objections. The goal is to pressure drug makers to lower prices by forcing them to publicly justify what they charge.

In Massachusetts, a health care affordability bill passed by the Senate in October would empower a state watchdog agency to assess drug industry data, though it wouldn’t have any power to prevent price increases. The measure, backed by insurers but opposed by drug makers, still must pass the House and be signed into law by Governor Charlie Baker.

■  Pay for performance. Experiments are underway to pay drug makers based on how well medicines work for patients. The efforts rely on data from groups such as ICER and the Duke University Margolis Center for Health Policy, which is headed by a former commissioner of the Food and Drug Administration.

Steven Pearson, ICER’s president, said it’s not easy to determine whether a drug like Spinraza is overpriced because it helps a relatively small number of patients who have no other options. Earlier this year, the group published pricing guidelines for orphan disease drugs that treat fewer than 200,000 people. It pegged a fair range at $100,000 to $150,000 annually in “quality-adjusted life years” — an economic measure of the value of added years to a patient’s life.

Last month, ICER offered guidelines for medicines that treat “ultra-rare diseases,” such as Spinraza for spinal muscular atrophy, which afflicts about 10,000 Americans. The range is broader — from $50,000 to $500,000 a year.

Some health insurers, notably Harvard Pilgrim Health Care of Wellesley, have pioneered “value-based” contracts for drugs that treat high cholesterol and other conditions. But insurers and payers often can’t agree on how to define value. For drug makers, a medicine that improves health even incrementally could be a good value. Insurers typically want to see meaningful improvement that saves money by keeping patients out of the hospital.

■  Drug mortgages. MIT’s Center for Biomedical Innovation is testing ideas that include payment plans similar to a home mortgage. That would allow insurers, employers, and patients to finance their share of costs over years or decades.

As these and other strategies get discussed, dissected, and reshaped, one thing is almost certain: the demand for medicines is going to swell as baby boomers age.

“When you start thinking about the aging population, more and more people are entering the user pool,” said Susan Garfield, a life sciences consultant at Ernst & Young in Boston who advises companies on pricing. “We’re not set up for $1 million drugs. That’s where the system really breaks.”