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‘Healthy’ profits: Drug prices based on success

Should the price of prescription drugs be tied to their efficacy?

That’s what Express Scripts (ESRX) wants for some very high cost cancer treatments. The Chief Medical Officer of the big pharmacy benefits provider, Steve Miller, is quoted in the Wall Street Journal as saying the company is looking to negotiate with pharmaceutical firms to provide differentiated pricing depending on how well the medicines work.

Yahoo Finance’s Aaron Task thinks that makes a lot of sense.

“It seems logical to me,” he says. “You want to give people the best drugs available, but if that same drug isn’t going to be as effective fighting one disease versus another, why should you pay the same price for it.”

But Carol Pepper, founder of Carol Pepper International, disagrees.

“The science is not really there yet,” she argues. “These studies are based on large populations, and what if you’re the one person for whom that drug really is efficacious? You’re going to miss out on that opportunity.”

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The talk of efficacy pricing comes as new research from Express Scripts finds the number of patients in the U.S. estimated to have annual medication costs above $50,000 increased 63% last year…and those at $100,000 or more nearly tripled.  

Yahoo Finance’s Lauren Lyster points out the main reason for that is because of the costs of just a handful of treatments.

“Two-thirds of that was due to cancer drugs, Hepatitis C drugs and these made-to-order drugs from compounding pharmacies,” she explains. “So it really does seem that something should be done to rein in costs.”

And Task feels that would help everyone.

“Express Scripts, they’re in the business of managing health care costs,” he notes. “And for the rest of us because what happens to you affects me, anything we can do to keep costs down-- while still having the drugs available--is a good thing.”

However, Pepper isn’t so sure.

“It becomes the question: do we have a two-tiered system where only the wealthy-- who can afford to buy any drug--will pay whatever it takes to get the expensive drugs while the rest of the population--the 99%--is not going to be able to afford the drugs,” she says. “I think we’re on a slippery slope. We really have to watch that.”

Task doesn’t argue, but remains convinced something needs to be done.

“If someone’s sick they should be able to get whatever treatment is out there,” he explains. “But as a society we should try to do something to rein in the costs of health care, because it’s going crazy.”

Pepper believes for now, the best answer is to let doctors decide what’s best.

“I’d say five years from now the science will be there,” she says. "You’re going to be able to figure out what drugs to take based on blood tests because they’re actually able to map drugs to your DNA. And that’s going to be very exciting. I just don’t think we’re there yet.”

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