Rafael Fonseca MDChair, Department of Medicine Mayo Clinic in AZ

Are drug prices a problem?

Scottsdale, Arizona Rochester, Minnesota Jacksonville, Florida

Mayo Clinic College of MedicineMayo Clinic Comprehensive Cancer Center

• Consulting multiple bio and pharmaceutical companies

• Passionate to see my patients do better • Opinions my own – not political• Fierce free market supporter• Dislike wasting your time with this slide

Disclosures

• Cures for many ailments• Hepatitis C is highly curable• Many cancers are now controlled and more can

be cured• Number of options is ever increasing• Improvements in life expectancy 20th Century

• Sanitation• Diagnostics• Drugs

Golden age in Medicine

• 15 years ago 3 yr survival ~30%• Now >90%• Basic research vs empirical progress• New treatments like lenalidomide and

proteasome inhibitors• Monthly cost sometime in excess of $10,000• How can patients pay for this?

Multiple Myeloma

Economic benefit

• Murphy and Topel (2006) estimated that a “1 percent reduction in cancer mortality (sic for the whole of the United States) would be worth nearly $500 billion to current and future Americans.”10

Murphy K, Tope R. The Value of Health and Longevity. Journal of Political Economy. 2006;114(5):871-904.

• HERE: Everyone wants to help patients

• But we have to make a choice:• Choice A - Broad access now

• Cheap and immediate• Worldwide• “Today’s best is forever best”

• Choice B - Continued innovation• Continued discovery• Any drug in B becomes A at patent exp.

Goals

Are the costs of drugs a problem?

• Drugs account for ~10% of cost of care• Depends who pays

• Patients (co-pays)• Insurers and payers• Government health programs

• Is this concern new?... Hardly• Is this the right question

• How to frame it

So is cost the real issue?• It should not be! - Total cost of care

• Value is the issue• Economic benefit of intervention

• Cost of drugs has been 10% since 1960’s• Higher in cancer

• Despite higher costs of drugs lower total cost of cancer care• Economic benefit

Has the free market failed?

• Hardly a free market situation• Third part payer system

• “A solution to lack of free market is not less free market”

• The free markets work• Daraprim story• Lasik eye surgery and plastic surgery• Peter Bach and colon cancer

Misconceptions• Generics and patent medications• “Red pill versus blue pill”• We are smart and can help set prices!• Patients have to get 2nd mortgage• No one pays full price• Few pay full co-pay• Bankruptcy

Clinical Misconceptions

• Drug only improve survival by such..• Median• Individuals

• Long term outcomes• Cures• Combined benefits

• Tumor heterogeneity• Better tolerability

Cancer Survival

Ok no new drugs, but we will have supply!

• Vaccines for children 1993• Generic injectable medications

• http://www.ashp.org/drugshortages/current/

• Household goods• Toilet paper in Venezuela

Price Controls

• iShares Nasdaq Biotechnology Index (IBB) is down 4% while the SPDR S&P Biotech ETF (XBI) is off 6%.

September 2015

Return of investment, not good intentions, drive investment in biotech

Conclusion

• Cannot fix markets by making them less free than they are

• Proposed solutions – cost controls are ling term dangerous

• Effective competition in generic markets is key

• We all benefit from this• The future remains bright