A Faster FDA Approval Rate Key to Price Debate

Sander Flaum, principal, Flaum Navigators
Sander Flaum, principal, Flaum Navigators

Apparently, Dr. Ezekiel Emanuel loves to open his window and shout “fire!

We noticed this recently in the New York Times Sunday Review when he predicted that the new PCSK9 inhibitors would raise everyone's insurance premiums by at least $124 a year! Even if you don't take the drug! (As though health insurance should cover only the drugs that we take.) Citing an article in the New England Journal of Medicine, Dr. Emanuel predicted that 1.1 million people would take these drugs at an average cost of $11,000 per year. The result? Not only will your premiums skyrocket, but your Medicare and Medicaid taxes will go through the roof as well. And then the sky will fall!

Well, his fear mongering didn't go quite that far, but he did warn that unless pharma can self-regulate its greed, it may be time for government regulation. That's a comforting thought: imagine the FDA, or better yet, the current US Congress legislating the fair price of drugs. 

Remember when Turing Pharmaceuticals and Valeant made headlines with astronomic price increases? A few politicians (you know their names) proclaimed that the only solution was to have federal price controls. As we know, public outcry rapidly brought the prices back down to earth, and the “crisis” became just another nonevent. However, we often forget there's an even more potent method than jawboning for controlling drug prices. It's called competition.

When Sovaldi (the notorious “$1,000 pill') was introduced, our critics were horrified by the $84,000 cost for treating—and usually curing—hepatitis C. To their surprise, however, the price didn't faze insurers, once they considered the alternative of paying for a lifetime of HCV care. Yet Dr. Emanuel and colleagues still bemoaned the price. Then competition reared its head. A new HCV drug was introduced, one with even more impressive efficacy. Guess what? Sovaldi was suddenly being discounted by nearly 50%. And as more HCV drugs are introduced, I bet the prices will drop even lower.

Let's return to the PCSK9 drugs that are supposedly going to add $124 to everyone's insurance premiums. The first two drugs, Amgen's Repatha and Regeneron/Sanofi's Praluent, are indeed expected to cost around $14,000 a year. However, according to an April 15 article in The Pharmaceutical Journal, about 18 more drugs in this class are currently in development! Not all will survive, but unless the FDA drags its feet during the approval process, I'm willing to bet that quite a few will make it to market. And then you can say good-bye to those $14,000 price tags.

In contrast, implementing price controls on PCSK9 drugs would probably torpedo the development of any future competitors. Why bother, if some bureaucrat has already decided what these drug should cost? By encouraging the FDA to accelerate approvals of next-in-class drugs, we can encourage both innovation and competition.

When we eventually discover a way to halt the progress of Alzheimer's disease (as I'm sure we will), you can bet the pioneer drug will cost a lot. It's also not hard to predict that once again we'll see Dr. Emanuel wringing his hands and demanding price controls. “Pharma is making us pay a fortune for drugs that many of us will never need to take.”   

But until, as a society, we understand the benefit of offering rewards to successful drug developers while permitting fair competition (and I mean fast-tracking rival drugs, not encouraging generics), I fear we'll encounter this depressing and mean-spirited argument again and again.