New drug for amyotrophic lateral sclerosis costs $158,000: but where does this price come from

But the next day, the price of the drug became known: $158,000 per year. It was much higher than what the Institute

clinical and economic reviews, independenta non-profit organization that analyzes health care costs, estimated as a reasonable price, which, in their opinion, ranged from $9,100 to $30,700.

The Americans, however, were probably not shocked.Prescription drugs cost about 2.5 times more in the US than elsewhere, and a quarter of Americans cannot afford them. Nearly every new cancer drug costs over $100,000 a year. And a 2022 study found that the average price of newly released drugs rises by 20% each year.

How drug prices are set in the USis a mysterious black box. Pharmaceutical companies attribute their high price to one of the most common reasons, which is that the high price is necessary to justify the money invested in research and development.

“You hear it so often,” says OlivierWouters, Assistant Professor of Health Policy at the London School of Economics and Political Science. “That's why I thought let's collect some data, because I don't believe in it. I don't think anyone believes in it."

Wouters did just that.In September 2022, he and his colleagues published a new paper in JAMA that put this simple argument to the test. In the study, they reviewed 60 drugs that were approved by the U.S. Food and Drug Administration (FDA) between 2009 and 2018 for which public information was available on both R&D spending and pricing. And then they compared the numbers. “Basically, it was like investigative journalism — checking all the receipts, tracking over time how much they spend,” he says. If R&D spending were the cause of high drug prices, one would expect a high correlation between them. Instead, they found no correlation.

Wouters acknowledges that the sample size inThe study is small, but that's because drug companies keep most of their financial data under lock and key. If the industry wants to refute the conclusion of his paper, he says, pharmaceutical companies need to provide more data.

For everyone who works in this area, the reaction toThe conclusion is: “Well, yes. We know what drives drug pricing,” says Ezekiel Emanuel, chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania. It's: "How far can I go? What will the market stand for?" Still, says Emanuel, it's important to have empirical data like this study to disprove the industry's claim.

Intuitively, it seems plausible that the pricemedicines will be tied to its R&D costs - the risky business of innovation is very expensive. It turns out that even this causes great controversy. In 2020, Wouters published another article in JAMA revealing how much it actually costs to bring a new drug to market, something experts have been trying to figure out for decades. The number that is most often cited is from one newspaper that was based on confidential data provided by pharmaceutical companies, about $2.8 billion. “These estimates are kind of shrouded in mystery. There is a lot of controversy around them,” says Wouters. Instead, he and his colleagues found that the figure was closer to $1.3 billion, less than half the generally accepted estimate. The significantly lower R&D costs suggest that these costs should not have as much of an impact on drug prices.

From time to time backstage you can see howpharmaceutical companies actually determine the price of the drug. An example of this is the hepatitis C drug Sovaldi, which was launched in 2013 for $84,000 for a 12-week course. In 2015, an 18-month U.S. government investigation examining about 20,000 pages of internal company documents found that Gilead, the company that owned the drug, had charged a high price to "ensure that its drugs had the largest share of sales" . In response, Gilead said it is "responsible for pricing our treatments based on the value they deliver to patients and the significant value they provide to payers, providers and our entire healthcare system by reducing the long-term costs associated with treating chronic hepatitis FROM".

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