Cuomo's Placebo Drug-Price Plans

Americans and New Yorkers are by now familiar with the cycles of outrage over skyrocketing prescription drug prices, not the least of which was Martin Shkreli raising the price of a toxoplasmosis drug, Daraprim, by several thousand percent overnight. So it’s understandable that Gov. Cuomo’s latest budget proposal includes an attempt to address drug pricing in New York State.

But while making drugs more affordable is a noble goal, the governor’s proposal would do nothing of the sort. It is shallow politics and little more.

Given the amount of attention paid to the supposedly greed-infected executives who rule the pharmaceutical industry, one could be forgiven for thinking that drug prices are out of control. In reality, over the past decade, overall drug prices have grown about as quickly as the price of health-care generally. Hospital prices, by comparison, have grown about 40 percentage points faster. But because patients tend to pay a larger share of their drug costs directly — through copays, coinsurance and deductibles — these price increases are much more visible to the typical patient.

It’s not unreasonable, of course, to want to protect patients with the highest drug costs, such as those with cancer, HIV/AIDS and other debilitating diseases, from undue financial burden. But this is not what Cuomo’s proposal would accomplish.

The first item on the governor’s agenda is to require drugmakers to pay a rebate to Medicaid for a yet-to-be-determined list of “critical” drugs. This would be on top of existing rebates required under federal law, which typically amount to about a quarter of a drug’s price.

What would this mean for patients? Not very much. People with Medicaid already either pay nothing or very little for their prescriptions. So while the reform might save the state a bit of money, patients wouldn’t see any benefits.

The second set of changes really is nothing more than politics. The proposed legislation would require pharmaceutical companies to release a slew of data on development costs and profits for particular drugs. The goal, it seems, is to shame drugmakers for seemingly exorbitant prices.

The problem is that the data released would grossly understate the costs and time it takes to get a drug to market. The money spent on clinical trials for any one drug doesn’t include all the money spent on failures for other drugs — an unavoidable part of the drug-development process. In the real world, you can’t pull out a single pharmaceutical’s development costs in isolation.

The bigger concern is what these proposals say about the governor’s view of health care more broadly. The cost of any health-care service should be considered in light of its benefit to patients. A $100,000 drug that prevents dementia 30 or 40 years down the line is very different from a $100,000 drug that lowers cholesterol, each having different value depending on a patient’s needs.

The focus of any health-care pricing reform must be on extracting as much value as possible from services. This includes not only drugs but hospitals, physicians and specialists, too. When treating cancer, for instance, some of the newest drugs often substitute for other, more expensive treatment options. One experiment, pioneered by United Health, saw total treatment costs drop while drug spending increased.

Patients deserve value from their health care treatments — and if a $100,000 drug means avoiding a $200,000 hospitalization, that’s a great deal.

Rather than offering soundbite solutions, New York’s policymakers should use the state’s massive purchasing power to drive reforms that produce concrete benefits to patient outcomes, such as an improved quality of life or reduced mortality rate. This would offer far better value for patients than the governor’s cosmetic surgery ever could.

This piece originally appeared in New York Daily News

This piece originally appeared in New York Daily News