By Matthew Kandrach
February 7, 2019 at 5:00 am ET
There is no question America’s health care system is too costly. We spend $3.3 trillion on health care a year on average, equating to 18 percent of our total gross domestic product.
Yet, there also is no question that the care provided and offered in the United States is the best available in the world. For example, more than 70 percent of all new medicines that come to market are treatments made possible from innovative research and development conducted here at home. Without such leadership in research investment, countless disease categories, and the patients living with related illnesses, would never have had the chance to benefit from the resulting medical breakthroughs.
Some on the far left are demanding the federal government take over all aspects of health care in the form of a single-payer program, which equates to an unaffordable taxpayer-funded program, while others embrace the idea of imposing foreign price controls, which would effectively disincentivize investment in innovations that lead to future cures.
These misguided proposals ignore increased Food and Drug Administration efforts both in fostering innovation and creating more patient access to more affordable medicine. According to a Wall Street Journal editorial published late last year: “the FDA has over 20 months of the Trump Administration approved an astounding 1,617 generic drugs, which are identical to branded versions but sold at commodity prices after patents expire. That works out to 81 a month on average — a 17% increase over the preceding 20 months. The Council of Economic Advisers in October tried to tally the savings from new entrants: $26 billion.”
And the FDA is embracing a broader wave of development by prioritizing the review and approval of treatments for diseases where few options exist, such as their recent approval of Astellas’ new targeted drug for acute myeloid leukemia. This is made further evident with 2018 marking a record-breaking year for the number of FDA new drug approvals, peaking at a total of 59. Precision medicine holds enormous hope for patients suffering from rare diseases and demonstrates why the FDA’s commitment to supporting ongoing investment in science is so important.
Of course, this innovation comes at a cost to the tune of nearly $3 billion to research and develop each drug successfully to market. Accordingly, it is right for government and industry leaders to explore solutions for ensuring consumers have access to new, albeit sometimes expensive treatments. It begs the question: How do we address rising health care costs without sacrificing our ability to discover new and more effective therapies and treatments?
One way is for industry to embrace more innovative payment models that ensure patients only pay for a product if it works for them. Biopharmaceutical manufacturers and health insurers are increasing their focus on value-based outcome programs, whereby the cost of the medicine is reimbursed if it is not effective for a patient after a certain period. In July 2018, Novartis announced it would offer a value-based outcome contract for its acute leukemia medication Kymriah. AstraZeneca, in partnership with Express Scripts, offers a program to reimburse the cost of the lung cancer drug Iressa, as well.
More recently, the FDA approved a new treatment, Vitrakvi, for a rare form of cancer through a partnership between Bayer and Loxo Oncology. It’s only the second time the FDA has approved a cancer treatment based on a common biomarker across different types of tumors rather than the location in the body where the tumor originated. And it’s actually the first time the FDA has done this at the time of the initial approval.
At the same time the drug was approved, Bayer also announced its plans for implementing a value-based outcome program for its patients. In many cases, like the Bayer program, it’s a very rare patient constituency who otherwise might not see investment directed toward breakthrough therapies in their disease category.
These types of value-based contracts are quickly becoming more popular by the day. According to a survey conducted by Avalere in 2017, 70 percent of health plans report they have favorable attitudes toward value-based outcome programs; one-quarter said they have at least one in place, and 30 percent report they are currently negotiating for one or more.
For companies to take on this type of R&D, they must be incentivized by the prospect of recouping their significant investment. However, the last thing anyone would want is for these advances in medicine to remain inaccessible to patients simply due to cost. While value-based contracting and fast-tracking new drug approvals are not silver bullet solutions to our challenges in health care costs, they are encouraging and more impactful than the current finger-pointing by policymakers and influencers in Washington.
As the United States continues to lead global development of transformative treatments in precision medicine, we must embrace market-based solutions to ensure we achieve the right balance between rewarding medical breakthroughs and ensuring patient access and affordability.
Matthew Kandrach is president of Consumer Action for a Strong Economy.
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The original version of this op-ed previously appeared on RealClear Health.