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Recent critics of cancer drug prices claim that the new higher priced medications drive up  total health care spending.  

In fact, the opposite is the case.  The evidence is overwhelming.   In fact, the addition of new medicines under Medicare's drug plan (Part D) has led to an absoute reduction in what's been spent on Medicare overall, $380 billion less to be exact.    A recent Health Affairs blog notes:  "Much attention in particular has focused on the remarkable slowdown in Medicare spending over the past few years, and rightfully so: Spending per beneficiary actually shrank (!) by one percent this year (or grew only one percent if one removes the effects of temporary policy changes).

Yet the disproportionate role played by prescription drug spending (or Part D) has seemingly escaped notice. Despite constituting barely more than 10 percent of Medicare spending, our analysis shows that Part D has accounted for over 60 percent of the slowdown in Medicare benefits since 2011 (beyond the sequestration contained in the 2011 Budget Control Act)."

Critics will respond that the decline in Medicare spending was a function of the recession.  Not true.  "The recession and its aftermath appear to have had little effect on Medicare Part A and Part B spending; senior’s incomes are less influenced by economic downturns and the large majority of beneficiaries have supplemental coverage that shields them from most Part A and Part B cost-sharing. The primary analysis on the topic from CBO, in fact, found that only one-eighth of the slowdown in Parts A and B from 2007-2010 could be explained by factors related to the economy – and not through the usual channel of utilization impacts that take place in the private market."

Finally, some argue that the decline in spending was due to increased use of generic drugs on the part of Medicare consumers.  In fact,  most of the increase in Part D spending is the result of the use of new medicines for cancer, MS, diabetes and other drugs for the most expensive conditions Medicare patients deal with.  This is in line with studies conducted by Frank Lichtenberg and others showing that each dollar spent on new medicines reduces what would be spent on hospitals, doctors, etc. by $6.  

Looking at the price of a new medicine or what we spend on biopharmaceuticals in isolation is misleading.  Use of innovative  medicines should be looked at in terms of the impact it has on other medical spending and the lives of patients.   

This is Part One in a Series Entitled Why High Drug Prices Are Good For You.    Each blog will destroy a commonly held myth about health care costs and the blame people assign to new drugs for total health care spending.    Today we will look at the claim that "health care spending in the United States is rising at an unsustainable rate and faster than in Europe.  Following the example of Jonathan Gruber, I will try to use graphics and images that even someone like me can understand.    Here's the mythbuster Number One

Source: World Health Organization National Health Account database (see for the most recent updates).

According to a story in the Austin Statesman, Federal law doesn’t deliver HIV care as promised.” The ACA, per the story, “brought a lot of hope … but the law didn’t live up to expectations” because … “the plans on the federally created health insurance exchange, the Internet-based marketplace where consumers can compare and buy health plans, didn’t offer affordable ways to buy the life-saving medications” or allow patients to see “physician with expertise in HIV and AIDS.

Carl Schmid, the deputy executive director at the David Powell Clinic AIDS Institute, blamed insurance companies that offer plans that he said discriminate against HIV and AIDS patients and require huge out-of-pocket payments for their expensive medications.

“They are designing their benefits in such a way to dissuade people with HIV and other conditions from choosing their plans,” he said, “and that’s against the law.” Schmid’s national public policy group filed a complaint with the Office of Civil Rights in the U.S. Department of Health and Human Services. The case is pending.

David Wright, one of the first physicians in Central Texas to treat AIDS patients, said, “For a lot of patients, it actually created more barriers. It’s kind of overwhelming.”

Peter Pitts, a former U.S. Food and Drug Administration official and current president of the Center for Medicine in the Public Interest, echoed Wright’s assessment. He said before the law’s rollout, the standard talking point of proponents was that people shouldn’t have to choose between food or medicine.

“Unfortunately not only did the ACA not solve that problem, it made it worse,” Pitts said. “That’s shameful.”

The complete story can be found here.

One of the often-overlooked benefits of biosimilars is that it will drive innovation in manufacturing. Competition is the mother of invention.

Or, in the case of Amgen, reinvention. They’ve just launched a biologics manufacturing facility in Singapore that required one-quarter of the capital investment of a conventional operation, will operate one-third cheaper and took half the time to build.

(The plant will manufacture Prolia and Xgeva at a site that at 120,000 square feet is 80% smaller than a comparable conventional facility.)

When the company announced deep job and cost cuts in July, including at manufacturing facilities in Colorado and Washington, Amgen CEO Robert Bradway said that the company would be "exiting 20-year-old manufacturing technologies and continuing to invest in what we think are state-of-the-art, cutting-edge technologies that will enable us to rationalize and, we think, make product more reliably and more cost effectively.”

And, while there are yet many regulatory hurdles to leap, this is an excellent example of an innovator working to stay competitive in the age of biosimilars.

According to a report in Fierce Pharma, other drug makers, like GlaxoSmithKline are building plants utilizing the technology and Singapore appears to be the place to build them. GSK is working on a $50 million continuous manufacturing plant in Singapore that CEO Andrew Witty said will be 100 square meters instead of the usual 900 and so result in a "massive reduction in capital deployment" reducing costs by about 50%

As Eli Lilly & Co. CEO John Leichleiter said, "Creating and maintaining the conditions for innovation to flourish is challenging and complicated work - work that is never finished.”

But, the big question remains – will better and less costly manufacturing technologies (assuming they are approved by leading global regulators) lead to lower costs? More specifically, will it make off-patent biologics more price competitive with their biosimilar cousins?

Stay tuned.

There are few "eureka!" moments in healthcare.  Innovations are often incremental -- but doesn't make them any less important. Advances in abuse-deterrent opioids are no exception.

Here's an advance important enough for an FDA press release.

FDA approves extended-release, single-entity hydrocodone product with abuse-deterrent properties

The U.S. Food and Drug Administration today approved Hysingla ER (hydrocodone bitartrate), an extended-release (ER) opioid analgesic to treat pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. Hysingla ER has approved labeling describing the product’s abuse-deterrent properties consistent with the FDA’s 2013 draft guidance for industry, Abuse-Deterrent Opioids – Evaluation and Labeling.

Hysingla ER has properties that are expected to reduce, but not totally prevent, abuse of the drug when chewed and then taken orally, or crushed and snorted or injected. The tablet is difficult to crush, break or dissolve. It also forms a viscous hydrogel (thick gel) and cannot be easily prepared for injection. The FDA has determined that the physical and chemical properties of Hysingla ER are expected to make abuse by these routes difficult. However, abuse of Hysingla ER by these routes is still possible. It is important to note that taking too much Hysingla ER, whether by intentional abuse or by accident, can cause an overdose that may result in death.

“While the science of abuse deterrence is still evolving, the development of opioids that are harder to abuse is helpful in addressing the public health crisis of prescription drug abuse in the U.S.,” said Janet Woodcock, M.D., director of the FDA’s Center for Drug Evaluation and Research. “Preventing prescription opioid abuse is a top public health priority for the FDA, and encouraging the development of opioids with abuse-deterrent properties is just one component of a broader approach to reducing abuse and misuse, and will better enable the agency to balance addressing this problem with ensuring that patients have access to appropriate treatments for pain.”

Hysingla ER is not approved for, and should not be used for, as-needed pain relief. Given Hysingla ER’s risks for abuse, misuse and addiction, it should only be prescribed to people for whom alternative treatment options are ineffective, not tolerated or would be otherwise inadequate to provide sufficient pain management. As a single-entity opioid, Hysingla ER does not carry the serious liver toxicity risks associated with hydrocodone combination products containing acetaminophen. The FDA encourages health care professionals to review and consider all available information as part of their decision-making when prescribing opioid analgesics.

Strengths of Hysingla ER contain 20, 30, 40, 60, 80, 100 and 120 milligrams (mg) of hydrocodone to be taken every 24 hours. Doses of 80 mg per day and higher should not be prescribed to people who have not previously taken an opioid medication (opioid non-tolerant). While Hysingla ER contains larger amounts of hydrocodone compared to immediate-release hydrocodone combination products, the range of tablet strengths of Hysingla ER is comparable to existing approved ER opioids. 

The safety and effectiveness of Hysingla ER were evaluated in a clinical trial of 905 people with chronic low back pain. Additional data from studies conducted in laboratories and in people demonstrated the abuse-deterrent features of Hysingla ER for certain types of abuse (oral, snorting and injection). The most common side effects of Hysingla ER are constipation, nausea, fatigue, upper respiratory tract infection, dizziness, headache and drowsiness (somnolence). 

The FDA is requiring postmarketing studies of Hysingla ER to assess the effects of the abuse-deterrent features on the risk for abuse of Hysingla ER and the consequences of that abuse in the community. In addition, Hysingla ER is part of the ER/LA Opioid Analgesics Risk Evaluation and Mitigation Strategy (REMS), which requires companies to make available to health care professionals educational programs on how to safely prescribe ER/LA opioid analgesics and to provide Medication Guides and patient counseling documents containing information on the safe use, storage, and disposal of ER/LA opioids.

Hysingla ER is manufactured by Stamford-based Purdue Pharma L.P.

For more information:

       FDA Approved Drugs: Questions and Answers

       FDA: Opioid Medications


  • 11.20.2014
Grubernomics:  Economic analyses that are shielded from criticism and cited to the exclusion of other viewpoints in media outlets because they confirm existing biases.  

Here's why Jonathan Gruber was at once so prominent and arrogant:  He knew his audience wouldn't challenge him and critics would have no outlets to offer alternative research in the mainstream media, blogosphere, policy circles and academic publications.  In short, Gruber, like many liberal economists who are self-pronounced health economists,  had a monopoly.    The fact that Gruber received NIH money to study part D right after the election and White House cash to confirm that Obamacare would boost insurance enrollment, save money and improve health AND was flacking for Obamacare was not considered a conflict.  

Compare his treatment to that of Joseph DiMasi, another leading economist who studies the economic and opportunity costs of developing drugs.  DiMasi's critics have what amounts to an open mike in the media.  Academic publications have allowed critics to assail his research without any evidence or economic analyses.  DiMasi's research credibility is attacked as suspect because pharmaceutical companies provided support to the Tufts Center for the Study of Drug Development, where he heads up economic research.   But above all, DiMasi is dissed because his research -- which shows that drug development is costly because it's risky and sometimes done inefficiently --  doesn't fit the liberal narrative that drug companies sell useless drugs at outrageous prices because of monopolies and their ability to bribe doctors and the FDA.    

So Grubernomics can only survive if other viewpoints are systematically silenced or suppressed while media outlets, economic conferences, etc give the Gruber-views exalted status/

According to a report in

“The Pharmaceutical Care Management Association (PCMA), an organization that represents the nation's leading pharmacy benefit managers (PBMs), which administer prescription drug plans for over 210 million Americans, released a new white paper investigating FDA’s influence on drug prices and competition in the pharmaceutical marketplace. The PCMA argues that competition within branded drugs is undervalued in FDA priorities and that FDA’s structures and regulations fundamentally hinder competition.”

The report's bias and ignorance can be summed up via this segment, “Without a statutory and regulatory agenda for the FDA that carefully examines the agency’s effect on pharmaceutical competition, some consumer welfare may be unnecessarily lost.”

Note to PCMA -- the FDA does not factor issues such as "competition" into it's regulatory calculations. Facts cannot be ignored because they are inconvenient.

The report takes specific aim at the FDA’s biosimilar pathway development process, stating that the delay in final guidance has “thwarted the development of a U.S. biosimilars industry—thus preventing the savings that competition would generate.” The report also calls out nomenclature issue for biosimilars as a potential impediment to the utilization of these products, and could also reduce the probability that drug makers would pursue a biosimilar for a product.

Wrong, wrong, and wrong.

Wrong that guidance should be rushed. (Isn’t it more important to get it right?) Wrong that discrete nomenclature will in any way deter use. (Isn’t it more important to ensure safety?) Wrong that manufacturers will decide to walk away because “it’s hard.” (Isn’t that table stakes?)

Speaking of transparency, it’s important to note that PBMs, such as Express Scripts, have a vested interest in keeping drug costs low. The PBM industry has largely supported the biosimilar movement from an early stage, as their utilization could produce an estimated 15% to 20% savings from innovator drug prices. This white paper screams, “cost over care.” According to Express Scripts President George Paz, “The cheapest drugs is (sic) where we make our profits.” (In 2008, Express Scripts agreed to pay $9.3 million to 28 states and $200,000 in reimbursement to consumers to settle lawsuits that accused the company of deceptive business practices in allegedly overstating the economic benefits to consumers of switching to certain drugs.)

“The cheapest drugs is (sic) where we make our profits.” To that end, the article points out that in 2008, “Express Scripts agreed to pay $9.3 million to 28 states and $200,000 in reimbursement to consumers to settle lawsuits that accused the company of deceptive business practices in allegedly overstating the economic benefits to consumers of switching to certain drugs.” - See more at:
“The cheapest drugs is (sic) where we make our profits.” To that end, the article points out that in 2008, “Express Scripts agreed to pay $9.3 million to 28 states and $200,000 in reimbursement to consumers to settle lawsuits that accused the company of deceptive business practices in allegedly overstating the economic benefits to consumers of switching to certain drugs.” - See more at:

Here’s the conclusion of the PharmaTech article:

“I believe the intent of Congress in providing a biosimilar pathway is to allow greater access through increased competition,” Peter Pitts, president of the Center for Medicine in the Public Interest and former FDA associate commissioner, told BioPharm International in a call. “The FDA’s job is to provide a pathway that’s transparent and predictable to allow enough companies to get into the game. If FDA doesn’t do that, it isn’t fully representing the intent of the legislation.”

Pitts believes FDA is doing the best job that it can, given the circumstances. “The creation of biosimilar regulations has to be a thoughtful and evolutionary process. The agency wants to make sure it’s as comprehensive as possible to create a level playing field.” Pitts adds, “The same proposition to transparency is relevant to nonbiologic, complex drugs as well, such as Lovenox.”

The complete PharmaTech article can be found here.

Joe vs. the Volcano

  • 11.19.2014

Much chatter about the Tuft’s Center’s new number for the cost of drug development.

Here’s the thoughtful comment from those lovely folks at Médecins Sans Frontières :

“The pharmaceutical industry-supported Tufts Center for the Study of Drug Development claims it costs US$2.56 billion to develop a new drug today; but if you believe that, you probably also believe the earth is flat.”

NGO’s can poo-poo the important work of Joe DiMasi and crew this as much as they like – but serious analysis can’t just be tsk-tsked away by using the “industry-supported” evasion.

Here’s the news – and it’s important.

Tufts Center for the Study of Drug Development Releases New Data on the Average Cost to Develop a New Medicine

The Tufts Center for the Study of Drug Development released new research on the average cost of drug development.  The research conducted by Joseph DiMasi, Tufts Center for the Study of Drug Development, Henry Grabowski, Department of Economics, Duke University, and Ronald Hansen, William E. Simon School of Business, University of Rochester. 

The estimates are based on research and development (R&D) costs for 106 randomly selected new drugs (87 small molecule drugs and 19 biologic medicines) obtained from a survey of 10 pharmaceutical firms The methodology used is consistent with prior research.  The studies use compound-level data on the cost and timing of development for a random sample of new drugs first investigated in humans and annual company pharmaceutical R&D expenditures obtained through surveys of a number of pharmaceutical firms. The new compounds were first tested in humans anywhere in the world from 2005 and 2007 and development costs were obtained through 2013. [i]

The estimates represent the average cost of developing a new medicine, including the costs of the majority of compounds which do not make it through clinical trials, and the large cost of capital associated with the long-term investments required for drug discovery and development.

  • The average R&D cost required to bring a new, FDA-approved medicine to patients is estimated to be $2.6 billion over the past decade (in 2013 dollars), including the cost of failures. When costs of post-approval R&D[ii] are included the cost estimate increases to $2.8 billion. 
  • Average R&D costs have more than doubled over the past decade.

*Previous research by same author estimated average R&D costs in the early 2000s at $1.2 billion in constant 2000 dollars (see J.A. DiMasi and H.G. Grabowski. "The Cost of Biopharmaceutical R&D: Is Biotech Different?" Managerial and Decision Economics 2007; 28: 469–479).  That estimate was based on the same underlying survey as the author's estimates for the 1990s to early 2000s reported here ($800 million in constant 2000 dollars), but updated for changes in the cost of capital.

  • The overall probability of clinical success (i.e., likelihood drug entering clinical testing will eventually be approved) was estimated to be 11.83%--this is significantly lower than the rate of 21.5% estimated previously.
  • While the length of the process did not contribute to increases in R&D costs, it remained a very large share (45%) of total capitalized costs.
  • Factors contributing to rising R&D costs cited by the researchers include:

o   Increases in out-of-pocket costs for individual drugs are attributed to a range of factors including but not limited to increased clinical trial complexity and larger clinical trial sizes and a greater focus on targeting chronic and degenerative diseases.

o   Higher failure rates for drugs tested in human subjects. The researchers noted an increase in the proportion of projects failing early, before reaching more costly Phase III trials.

These findings reinforce the challenges and complexities related to drug development, including technical challenges as companies are often focusing their R&D where the science is difficult and the failure risks are also higher.

For more information, please see:  

[i] Note: the data are based on R&D projects there were self-originated. The study excludes R&D costs for licensed-in and co-developed compounds.

[ii] Post-approval R&D comprises efforts subsequent to original market approval to develop the active ingredient for new indications and patient populations, new dosage forms and strengths, and to conduct post-approval research required by regulatory authorities as a condition of original approval.

Pain patient advocate extraordinaire, Cindy Steinberg lays it on the line for Massachusetts Governor-Elect Charlie Baker.

Memo To Gov.-Elect: Include Pain Sufferers As You Seek Opiate Solution

By Cindy Steinberg

 Cindy Steinberg is the policy chair for the Massachusetts Pain Initiative and the national director of policy and advocacy for the U.S. Pain Foundation.

Charlie Baker vows to tackle state opiate problem,” was the Boston Globe headline two days after Election Day.

It’s good to hear from our newly elected governor that he plans to take steps to curb the ongoing problem with illegal use of prescription medication in our state. There’s little doubt that too many lives are being harmed by drug abuse and addiction.

But in a quest to fix one problem, policymakers need to consider the potential unintended negative consequences for the patients for whom these medications are a lifeline.

Gov.-elect Baker said in that Globe interview that he plans to convene a coalition of lawmakers, health care providers and labor leaders to confront the opioid crisis in our state. Representatives of the pain community — an estimated 1.2 million Massachusetts residents live with chronic pain — must be included in these discussions as well.

For many with chronic pain, the right medications mean the difference between a life worth living or not.

But despite these legitimate needs, more and more I’m hearing from residents of our state who are unable to access treatment that their doctors say they need and that they depend on. These are not addicts; these are people who are trying to manage their lives with debilitating conditions such as cancer, diabetic neuropathy, sickle cell, daily migraine, fibromyalgia, severe back pain and many others.

These are not addicts; these are people who are trying to manage their lives with debilitating conditions such as cancer, diabetic neuropathy, sickle cell, daily migraine, fibromyalgia.

Not including members of the pain community in discussions about how these medications are prescribed, regulated and controlled marginalizes the lives of thousands of Massachusetts citizens who live with pain caused by a myriad of conditions and serious injuries.

There is not a silver bullet solution to solving the abuse of prescription drugs. We need to take a thoughtful, multifaceted approach to ensure that those who need pain medication have access to it, and that those who choose to abuse these medications are stopped. There is no group more invested in making sure that medications are responsibly controlled than members of the pain community.

Last legislative session, Massachusetts lawmakers did take a step forward: they passed legislation on medications specially formulated to deter abuse.

“Abuse deterrent formulations” are opioids with physical and chemical properties that prevent chewing, crushing, grating, grinding, or extracting, or contain another substance that reduces or defeats the euphoria that those susceptible to substance abuse disorders experience. The new law requires insurance companies to provide the same coverage for the new abuse deterrent formulations as non-abuse deterrents, and they are not permitted to shift any additional cost of these medications to patients. It makes doctors more able to prescribe these medications without pushback from insurance companies.

Abuse deterrent formulations are not the only solution, but they are a good first step in balancing the legitimate needs of pain patients with the need to reduce medication abuse.

Other efforts must also include more robust education of medical professionals and of consumers to keep the medication out of the hands of potential abusers in the first place. Government statistics show that 78.5 percent of those who abuse prescription pain medication did not obtain them from a doctor themselves.

As someone who personally suffers from debilitating chronic pain, I have firsthand experience with the myriad challenges faced each day by the millions of Americans with severe chronic pain. I encourage Governor Baker to work to eliminate improper use of prescription medications, while remembering the medical needs of the chronic pain community.

A new article in the DIA's Therapeutic Innovation and Regulatory Science journal discusses the pitfalls and potential for the FDA's openFDA program.

This past June, the FDA launched openFDA, a new initiative designed to make it easier for web developers, researchers, and the public to access large, important public health datasets collected by the agency.

The crowd-sourcing of adverse event data may or may not yield interesting results, but it’s a good place to start. It represents an opportunity for the agency to begin designing a more evolved approach to 21st-century pharmacovigilance.

To borrow a term from the nuclear disarmament discussion, 21st-century pharmacovigilance must work with its various colleagues to ‘‘trust, but verify.’’ Again, this fits hand-in-glove with the spirit of openFDA.

Access to data is important—but 21st-century pharmacovigilance must also take into consideration the realities of funding, existing staff levels and training programs, and existing regulatory authority. Perhaps creative public use of FDA data via openFDA will help develop not only new solutions but also awareness of the magnitude of the task at hand.

The full open FDA: An Open Question article can be found here.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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