Today’s Managing Health Care Costs Indicator is 27%
The best news about managing health care costs this week is probably buried on Page B6 of today’s New York Times. Amgen – the maker of epogen and other biologic medications, has formed a joint venture with generic pharmaceutical manufacturer Watson Pharmaceuticals, to manufacture and market biosimilars- the equivalent of generics for the biologic medications. They’ll be looking to make biosimilars of drugs that competitors to Amgen currently market – which is fine because other biopharmaceutical companies including Biogen-Idec have also begun to enter this market.
Why is this such good news? The biologic medications – including medicines for multiple sclerosis, rheumatoid arthritis, hemophilia, other rare genetic diseases and certain forms of cancer represent a larger and larger portion of the total pharmaceutical budget. Many people aren’t aware of this because these medications are often administered in a physician’s office- so the costs of them are not obvious when patients go to their local neighborhood pharmacy. Many of these medications cost $30-$40,000 per year – and drugs for hemophilia and other rare genetic diseases can cost hundreds of thousands of dollars per year.
CVS Caremark estimates that specialty medicines – the kind of drugs that Amgen and Watson have agreed to market – will be up from 13% of total pharmacy cost (2005) to 27% of total pharmacy cost (2015). I’ve already seen some instances where specialty pharmacy spending for certain employers was that high. These are good drugs – delivering longer and better quality life to many patients. But they are enormously expensive.
Biosimilars won’t be cheap like generic “small molecule” drugs – but they will be less expensive than the current specialty medications, and they will help pressure brand name biopharmaceutical manufacturers to constrain their own prices.
The Affordable Care Act requires that the FDA chart a path for marketing of biosimilar medications. The government should get these regulations out quickly so that we can let the competitive market work its magic.