American health spending is growing at its fastest rate in more than three decades, according to the federal government's Bureau of Economic Analysis. For that, say many doctors and insurers, the cost of innovative drugs is to blame.
But this single-minded focus on the price of cutting-edge medicines ignores the data on health costs. Drugs represent a small portion of our nation's healthcare bill -- and deliver value to patients, the healthcare system, and the broader economy that far exceeds their price tag.
But the numbers show that drug spending has slowed. Between 2009 and 2012 -- the last year for which data are available -- spending on prescription drugs climbed just 3.5 percent. By comparison, total health spending rose 11.5 percent.
Prescription drugs account for 10 percent of America's total healthcare tab. That's lower than it was in 1960.
Even as innovative therapies consume less of the nation's healthcare budget, they're delivering greater benefits to patients. New treatments are responsible for three-quarters of the 50 million years of life that cancer patients have gained since 1990.
Survival rates among children with cancer increased from 58 percent to 83 percent between the mid-1970s and 2002, thanks largely to new drugs.
In the past decade, heart disease deaths have dropped 30 percent, according to the Centers for Disease Control and Prevention. The agency cites new drug therapies and the expanded use of existing drugs as primary reasons for the improvement.
Novel treatments also benefit the broader economy by allowing patients to live longer, healthier lives -- and to continue working, consuming, and otherwise contributing to society. The increases in life expectancy that new drugs have delivered cancer patients have translated into $5 trillion in additional economic value.
Innovative drugs also generate savings elsewhere in the healthcare system. One study published by Health Affairs found that spending $1,000 on medicines to treat congestive heart failure reduced other health spending by nearly $9,000.
Researchers are working on therapies that could deliver similar benefits to patients suffering from diseases previously thought incurable. More than 5,000 potential drugs are in the pipeline, many of them "first in class" or for diseases that haven't seen a new therapy in a decade or more.
One-third of the drugs approved by the Food and Drug Administration (FDA) in the past five years have been "orphan drugs," which treat diseases that affect a small number of people.
All this innovation doesn't come cheap. Development costs climbed 50 percent between the late 1990s and early 2000s. They now amount to an average $1.2 billion for each new drug that makes it to the market, irrespective of the size of the patient population being served.
America's cumbersome regulatory system accounts for a substantial portion of a drug's development cost. Ninety percent of that cost occurs in the last clinical trial phase of the approval process.
Even a treatment classified by the FDA as a "breakthrough therapy" -- which provides a faster regulatory path for drugs the agency deems truly revolutionary -- takes four and a half years for approval, on average.
These regulatory development costs -- as well as those for the thousands of promising treatments that don't pan out -- are beyond the control of medical innovators. They're the key drivers of the cost of today's cancer therapies. Without adequate revenue from successful therapies to recoup development costs, the innovation pipeline will dry up.
Even so, the official price of a drug is misleading because few patients actually pay it. Health plans negotiate aggressive discounts for their members. In other cases, medical innovators provide treatments to needy patients at sharply reduced rates. And when an innovative therapy reaches the generic phase of its lifecycle, it's discounted 70 to 90 percent -- forever.
For instance, the average health plan receives a discount of about 14 percent off the wholesale price of Novartis's Gleevec, a groundbreaking leukemia therapy that has reduced mortality, hospitalization, disability, and more. In 2013, the company provided $542 million worth of this breakthrough therapy to 86,000 patients at no cost.
Prescription drugs come with costs. But the benefits of cutting-edge treatments – to patients, the healthcare system, and the economy – are many times greater than their price tag.
Worthy is public policy director at the Alliance for the Adoption of Innovations in Medicine (www.aimedalliance.org).