New Math Needed for the Value of Medicines

New Math Needed for the Value of Medicines

08.03.11 | By

Last week we were talking a lot about the JAMA study showing how proper use of prescription medicines by Part D beneficiaries is helping to reduce overall Medicare non-drug medical expenditures.

The report underscores links between improving access to medicines, proper use of medicines and reducing growing health care costs. For Part D beneficiaries, at least, better access to medicines and resulting improved health means reducing their use of more costly healthcare services such as hospitalizations and long-term care.

This illustrates the significant value to both individual health as well as the potential for achieving long-term savings from improved access to medicines. With annual U.S. healthcare costs projected to increase to more than $3.4 trillion annually by 2020, finding better ways to control or limit costs are both a healthcare and economic imperative.

It also illustrates the importance of an economic and public policy environment that supports research, development and medical innovation. While R&D into potential new medicines is both risky and expensive, it is critical to continued future progress against a host of diseases.

There is also a historical track record that underscores this point. New medicines, for example, have played an important role in declining HIV/AIDS death rates and cancer death rates.

As importantly, it is nearly impossible to see how we will effectively deal with and pay for conditions like Alzheimer's disease - where there currently are no treatments- without extensive R&D into finding new medicines to slow its onset or even find a cure.

The argument is really this: More than 13 million Americans could suffer from Alzheimer's disease by 2050 with a projected annual healthcare cost of over $1 trillion. The cost of care and treatment is projected to amount to over $20 trillion over the next 40 years, according to the Alzheimer's Association. But, a new medicine that delays the onset of the disease by five years, for example, could produce offsetting savings of more than $400 billion a year by 2050, in addition to the profound relief it would bring to patients, families and their caregivers.

Let me propose a hypothetical. Biopharmaceutical research companies spend billions on R&D over the next few years and one company succeeds and introduces a new medicine that delays Alzheimer's onset by five years. Now imagine the year is 2050. That first breakthrough medicine has long since gone generic, and a 30-day supply of it is now available at Wal-Mart for a few dollars. And it's saving more than $400 billion in health care costs annually.

That is an example of the long-term value that new medical R&D and innovative medicines can bring to the health care cost equation.

The point is that as we look at the health care challenges we today confront - both in the long- and short-term - we need to find a better way to reflect avoided costs in our healthcare planning. This means supporting public policies that foster innovation and understanding that the costs of R&D into new medicines will, with time, not just improve health and save lives but by so doing potentially reduce healthcare cost pressures.

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