Health insurance model must evolve

This week, the American Society of Clinical Oncology (ASCO) celebrates its 50th anniversary, and the group will observe how a half-century of innovation has enabled doctors and their patients to dramatically improve cancer survival rates since its first meeting.

For example, in 1964, one in every 300 patients died of cancer.  Today, that rate has been cut nearly in half.

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In 1964, only 34 percent of cancer patients were surviving five or more years beyond diagnosis.  Today, 66 percent are. 

The reason for such progress? In large part, new medicines.

Yet despite the revolution in treating many forms of cancer over the past 50 years, patients are still stuck with an insurance model from the 1960s that discourages the use of innovative medicines to treat and cure disease while encouraging more costly hospitalizations and physician services.

This needs to change.

Today, commercially insured patients are typically required to pay about 20 percent of the cost of their medicines compared to 4 to 7 percent for hospital care.

Many patients battling cancer and other devastating diseases are required to pay up to 40 percent out of pocket for their medicines.   

This is unfair to patients and it overlooks the inherent value that medicines provide to society and the U.S. health care system.  

The societal value of medicines is evident: longer lives means more time with family, friends, work, or however you choose. The economic value is also evident, as health breakthroughs are estimated to add about three trillion dollars, per year, to national wealth.

Those values come together: 20 years ago, HIV/AIDS was considered a death sentence. Some said that the cost of the disease was unsustainable and would break the health system. But thanks to new treatments the opposite happened, and HIV/AIDS is now considered a chronic, manageable disease with manageable costs.

The same can hold true for cancer – and many other diseases.

Which is why America’s biopharmaceutical companies have invested more than half a trillion dollars to research and develop new medicines around the world since 2000. Last year alone, they invested more than $50 billion.

There are more than 5,400 innovative new medicines in the biopharmaceutical pipeline to fight disease and the damage it does in America and the world, according to a  recent report by the Analysis Group.  The report found that there are over 3,000 cancer medicines in development globally and more than three-quarters of these have the potential to be first-in-class medicines.

Still there’s a lot of work to do – especially in ensuring a vibrant marketplace.

One fact often overlooked is that cost-containment is built into the system through the medicine lifecycle. 

During the medicine lifecycle, innovator biopharmaceutical companies produce medical advances through pioneering scientific work and massive investments. Over time, low-cost generics follow.

As a result of market dynamics and generic drug usage, the cost of medicines is growing more slowly than other health care costs. Today, medicines make up just 10 to 12 percent of total health care spending; cancer medicines represent just one percent of total spending on health care.  More than 85 percent of all medicines prescribed in the U.S. are generics.

Medicare Part D offers an excellent example of how increased access to medicines helps reduce hospitalizations and other health care costs by improving consumers’ health. Today, Part D is hundreds of millions of dollars under budget, and the Congressional Budget Office now says increased access to medicines can actually save Medicare money on use of other services.

That’s right: save money.

But the promise new medicines offer can only be achieved if patients can access the prescription drugs they need to manage their diseases.  

Already, we’re seeing that it’s tough for patients in the new health insurance exchanges to get access to medicines that can help keep them out of the hospital.

A new study from Milliman shows that some Silver exchange plans may require patients to pay more than twice as much out of pocket for prescription medicines as they would under a typical employer plan. And for many exchange plans, patients don’t have drug coverage until their deductible is met.

We are making medicines unattainable for patients who were guaranteed affordable access.

What does this lead to? Potentially worse patient health outcomes, not better ones.  And higher health costs, not lower ones.

America needs an insurance system that remains in-step with the pace of medical innovation. 

In order to ensure that life-saving treatments remain accessible to all patients who need and deserve them, our insurance model must evolve. Then we can truly look forward to another 50 years of remarkable medical achievement against disease.

Castellani is president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), the trade group representing the pharmaceutical research and biopharmaceutical companies in the U.S.