The Cost of New Pharmaceutical Agents

Today’s Managing Health Care Costs Indicator is $7.24

The Wall Street Journal has an article in Monday's paper entitled “Hurdles Multiply for Latest Drugs.”  It points out that there is more market pressure from health plans and governmental payers against new expensive brand name drugs. This is especially true for new agents for indications for which there are already generic medications.  WSJ points out that new agent sales (first 2 years) were $11.8 billion in 2005, but only $4.3 billion in 2010.

The article sites a new AstraZeneca medication, ticagrelor, sold in the US under the brand name Brilinta.  This is a new anticlotting agent for those at risk for blockage of coronary artery stents.  In the US, it would like be used instead of  Plavix (clopiogrel). 

Plavix is scheduled to become available generically in 2012.   In the US, it still costs over $6 per day, but in Europe generic versions are already available for 24 cents a day.   The price of Brilinta is $7.24 per day.

The New England Journal published some evidence that Brilinta is better than Plavix – a manufacturer-sponsored study that showed substantially lower rates of  rates of death.

At 12 months, the primary end point — a composite of death from vascular causes, myocardial infarction, or stroke — had occurred in 9.8% of patients receiving ticagrelor as compared with 11.7% of those receiving clopidogrel (hazard ratio, 0.84; 95% confidence interval [CI], 0.77 to 0.92; P<0.001).

As I’ve discussed before, early trials tend to show very positive results, which often fade considerably  with larger trials performed in more different settings

Here’s the conundrum.   It makes sense to approve ticagrelor based on the evidence.   It even makes sense for this medication to be 20% more expensive than brand name Plavix now– since there is some evidence that it’s better.  However, it won’t make sense in a year for this medication to be 30 times more expensive than generic clopidogrel. 

On approach is to pay for “value.”  For instance,Germany has a reference based pricing system for pharmaceuticals that would lower the price of a new agent in its second year if it proves no better than existing therapy.   However, that’s government price control – which we are loathe to accept in the US.

The US approach is to allow the pharmaceutical company to set its price, and ask health plans to control costs.  The health plans will try to negotiate lower prices for preferred formulary status, which is difficult because there is no competitor to AstraZeneca for this medication. The health plans will likely eventually either increase premiums to account for this new medication,  charge patients substantially more for this medicine, keep it off the formulary altogether, or require prior authorization for its use.