Putting the Cost and Value of Medicines in Perspective

Putting the Cost and Value of Medicines in Perspective

Innovative medicines have been instrumental in transforming patient care over the last century – helping patients live longer, healthier and more productive lives.  In recent years we have witnessed tremendous progress in therapeutic areas such as cancer, heart disease, HIV/AIDS and Hepatitis C. Many diseases that used to be a death sentence are now chronic, manageable conditions.  

Medicines have also helped reduce costs in other parts of the health care system.  By helping patients stay healthy and manage chronic disease, innovative medicines help to prevent unnecessary utilization of costly hospitalizations, ER visits, and expensive medical procedures.  The Congressional Budget Office has stated that increased use of medications helps Medicare save money on other health care services. In addition to these cost savings, retail prescription medicines consistently make up only around 10 percent of the U.S. health care dollar – even as new medicines are developed to treat and cure disease.  

One reason that prescription drug spending continues to grow slowly - despite repeated claims to the contrary - is because cost-containment is built into the medicine lifecycle.  After a certain period of time, competition enters the market and lower-cost generic medicines become available.  Today, utilization of generic medicines are the highest it has ever been with more than four out of every five prescription medicines in the U.S. being dispensed as generic. This lifecycle supports a delicate balance between ensuring patient access to affordable medicines while fostering future medical innovation.  

Progress against disease often comes in incremental steps and the full value of a medicine may not be fully realized until several years after it has been approved by the Food and Drug Administration. For example, just 20 years ago, HIV/AIDS was considered a death sentence with unsustainable costs.  The opposite is true today.  The death rate for HIV/AIDS has dropped by more than 80 percent and a 20 year old diagnosed with HIV today can expect to live to the age of 70, near average life expectancy for the population as a whole.  The same can hold true for cancer and other many other diseases.

For the promise of medical innovation to be realized, patients must be able to access the medicines they need.  Too often patients face extraordinarily high out-of-pocket costs for prescription drugs due to an outdated insurance model that is a relic of the 1960s.  Commercially insured patients today are typically required to pay more than 20 percent of the cost of their medicines compared to just 4 to 7 percent for hospital care. Many patients battling cancer and other devastating diseases are required to pay 40 percent or more out of pocket for their medicines.  This disparity in insurance coverage prevents patients from being able to access the medicines they need to manage – or even cure – their disease and incentivizes more expensive hospitalizations and procedures these medicines could help prevent.  This is bad for patients and for the sustainability of our health care system.  

Unfortunately, insufficient coverage for prescription medicines is a trend that has been exacerbated in the new health insurance exchanges with many patients facing very high deductibles and exorbitant cost-sharing to access to medicines they need. Click here to learn more about patients access to medicines in exchange coverage.

We believe a conversation is needed around the long-term value innovative treatments provide patients and the health care system and we look forward to being part of this ongoing discussion.


Health Care Spending / Specialty Drug Costs

  • Hepatitis C
  • Cancer Medicines


Additional Resources

IMS Study: Helping Bend the Health Care Cost Curve


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