American medicine is heading into new terrain, a place where a year's supply of drugs can come with a price tag that exceeds what an average family earns.
Pharmacy benefit manager Express Scripts says last year more than half a million Americans racked up prescription drug bills exceeding $50,000.
Barbara Haedtke of Portland, Ore., knows this all too well. When she was diagnosed with multiple sclerosis in 2001 at the age of 35, she was prescribed Avonex, at a cost of around $10,000 a year. Her health insurance paid most of that, until she and her husband found themselves without jobs during an economic downturn. "We were in the hole, and so $10,000 was a lot of money," she says. "Under the best circumstances it's a lot of money, but then particularly it was really difficult."
The drug company gave her the medication at no charge until she once again had a job with insurance, and for that, she says, she's really grateful. But the story doesn't end there. Haedtke used Avonex for about a decade and watched with disbelief as the price more than tripled. She's now taking a new drug, Tecfidera, that's priced even higher — $66,000 a year, according to her pharmacy receipt.
The drug is supposed to help reduce the number of episodes that characterize multiple sclerosis, a disease in which nerve fibers gradually degenerate, causing muscle weakness, numbness, loss of balance and even paralysis. Haedtke describes these episodes as "terrifying," saying sometimes it feels like there's a cinder block on her leg when she tries to move. And she's had vision problems, too. It's hoped the new medication will also slow down the progression to permanent physical disability caused by the disease.
Still, Haedtke worries not just about the disease, but about the financial threat it poses. All the prescription medications for MS are extremely expensive.
A recent study from Oregon State University and the Oregon Health and Science University finds that the cost for MS drugs averages $60,000 a year, compared to $8,000 to $11,000 a year in the 1990s. The price for some climbed by an average of 30 percent per year for two decades, according to the report in the journal Neurology.
Every time a new drug came onto the market, the price of all the drugs jumped, too, says Daniel Hartung, a pharmacist and associate professor who conducted the study along with Dr. Dennis Bourdette, Sharia Ahmed and Dr. Ruth Whitham.
"Despite more choices, prices just continue to rise, contrary to what you think would happen," Hartung says.
The standard economic principle that more choices will drive down prices doesn't always apply in the topsy-turvy world of drug economics, especially in the United States.
"We pay more, substantially more, than what is paid in Canada, Australia and the U.K., often two to three times more than what those countries are able to negotiate directly," Hartung says.
Drug companies are acting much like a cartel such as OPEC, says Stephen Schondelmeyer, a pharmaceutical economist at the University of Minnesota. He says the companies must figure "if we all keep moving [our prices] up and nobody moves down, we can get away with raising the price, because if a person has multiple sclerosis, what other choice do they have?"
Last year, new drugs to treat hepatitis C at a cost of $80,000 or more also sparked an anxious discussion about high drug prices. At least those drugs cure the disease, and by so doing reduce future health-care costs. But that's not true for multiple sclerosis drugs.
"When the price of a drug doubles, does the patient get twice as much outcome?" Schondelmeyer asks. "No, it's the same drug."
Expensive new drugs are becoming increasingly common, not just for neurological diseases but for cancer as well. The federal government's Centers for Medicare and Medicaid Services estimates that drug costs in the U.S. will rise from $272 billion in 2013 to $406 billion at the end of this decade, driven in part by higher priced "specialty" drugs like the MS medications.
"Sometimes the drug companies talk about a death spiral down if they compete on prices," Schondelmeyer says. "I think we've entered the period of the death spiral upward."
The trade group Pharmaceutical Research and Manufacturers of America (PhRMA) disputes that. Lori Reilly, executive vice president for policy and research, says inflation for drugs has been about the same as medical inflation overall.
While new high-priced drugs are driving up expenses for some conditions, there are savings elsewhere, Reilly says, as consumers switch from brand-name drugs to generics.
Reilly also says the figures cited in the Neurology paper aren't a true reflection of the price of drugs because they are list prices. "When you're only looking at the list price and you're not looking at the significant rebates and discounts that go on," she says. "It's really not an apples-to-apples comparison."
Insurance companies cut deals with the drug companies, so it's hard to know what the manufacturers are actually charging. Reilly says the discounts can be 30 percent or more. Even then, they are still very expensive drugs.
Patients themselves don't often pay the sticker price. In fact, for drugs with the extreme price tags, drug companies may also let them off the hook for copays that could easily run into the thousands of dollars.
Instead, the price of these high-cost drugs is typically shouldered by the other people who are in a patient's health-insurance plan. The premiums go up for everyone. And for patients getting these drugs through government-sponsored health care plans, taxpayers pick up a lot of the tab.
The drug industry remains one of the most profitable businesses on the planet, but Reilly argues that the high prices are justified.
"The revenue that a company derives year in and year out is also paying for future research," she says. "Obviously we know in the MS space that the medicines that exist on the market today don't cure the disease. A lot of the companies that are currently in the MS space ... are using that revenue to reinvest for future innovation. And that innovation is costly."
Barbara Haedtke has heard that argument before, and she understands it. But still, "To have to think about costs continually going up so I can help fund the research — on the one hand I'm grateful, but on the other hand I'm upset."
She's also grateful to be in a drug-company program that lets her avoid what could be thousands of dollars in copayments for her medication. But that's not guaranteed.
"It's always a stress, because every year I also need to renew the copay program, and I don't know if they're going to continue to cover me."
And she says that stress surely can't be helpful as she tries to keep her MS under control.
RENEE MONTAGNE, HOST:
Today in your health, the escalating cost of prescription drugs. Over a half-a-million Americans racked up drug bills last year that exceeded $50,000. More and more, a year's supply of new drugs can be even pricier. That's the case for drugs to treat multiple sclerosis. NPR's Richard Harris has more.
RICHARD HARRIS, BYLINE: Portland, Ore., resident Barbara Haedtke once lived the athletic life that the city is known for.
BARBARA HAEDTKE: I used to do crazy things. I used to be a crazy rollerblader, and we do, like, 25-mile rollerblades. And, you know, I used to be a big, huge biker.
HARRIS: But more than 15 years ago, she inexplicably started losing strength in one leg.
HAEDTKE: During a six-week period, I went from being able to walk normally to having a difficult time walking a block.
HARRIS: Doctors couldn't figure out what was wrong with her. Her strength mostly returned, but then she got another ominous symptom.
HAEDTKE: In 2001, then I had an issue with my eye where I had a difficult time seeing - sort of the eye became darker. And then I was diagnosed officially then.
HARRIS: She had multiple sclerosis, a degenerative disease that interferes with nerve impulses. Her type is a variety that comes and goes over the years. She started taking a drug which cost about $10,000 a year. Insurance covered most of that until the economy turned sour and she and her husband found themselves both looking for work.
HAEDTKE: We were in the hole, and so $10,000 was a lot of money. I mean, under the best circumstances, it's a lot of money. But then, particularly, it was really difficult.
HARRIS: The drugmaker offered her the medicine at no cost until she once again had health insurance. And then, as the years rolled by, she watched as the price of her medicine simply went through the roof.
HAEDTKE: It went up almost three times in that 10-year timeframe.
HARRIS: That's an increase of 30 percent a year every single year for the exact same product. She recently switched drugs, and the new one costs even more.
HAEDTKE: This is the drug - $5,500 worth of drug right here in this little bottle.
HARRIS: And that's a one-month supply. A year of this medication costs $66,000. The drug company isn't sticking her with the bill, though. She's grateful that the company has excused copayments that could cost her thousands of dollars. But those huge drug bills are typically shouldered by co-workers who end up with higher health insurance premiums. Even the oldest drugs for MS are priced at this level now according to a recent study in the journal Neurology.
DANIEL HARTUNG: Despite more choices, prices just continue to rise - so yeah, contrary to kind of what you would think would happen.
HARRIS: Daniel Hartung and his colleagues at Oregon State and the Oregon Health and Sciences University decided to dig into the economics of MS drugs. There are now 12 drugs on the market to treat this disease, and they are all really expensive. And unlike other fields where competition drives down prices, the rules of supply and demand don't apply here. Some cost six times more than they did when they hit the market in the 1990s.
HARTUNG: We pay more - substantially more - than what is paid in Canada, Australia and the U.K. and often two to three times more than what those countries are able to negotiate directly.
HARRIS: Drug companies have often argued that they have to set the price high to recoup the expense of developing a challenging and risky drug in the first place.
HARTUNG: Those arguments do kind of lose a lot of their credibility when you talk about these medications that have been on the market for 20 years or so. I mean, they've made their money, many fold over, probably, on these agents.
HARRIS: So what's going on here? Stephen Schondelmeyer is a pharmaceutical economist at the University of Minnesota. He wasn't involved in the MS study, but he has studied drug pricing for many years.
STEPHEN SCHONDELMEYER: These companies were acting much like a OPEC or a cartel, knowing that if we all keep moving up and nobody moves down, we can get away with raising price because if a person has MS - multiple sclerosis - what other choice do they have?
HARRIS: This situation is a bit different from the $80,000 price tag for a new class of drugs for hepatitis C. At least those drugs cure the patient and reduce future health care costs, not so for the rapidly rising cost of existing drugs to treat MS.
SCHONDELMEYER: When the price of a drug doubles, does the patient get twice as much outcome? No, it's the same drug.
HARRIS: And expensive new drugs are becoming increasingly common, not just for neurological diseases but for cancer as well, Schondelmeyer notes, as the drug industry remains one of the most profitable businesses on the planet.
SCHONDELMEYER: Sometimes, the drug companies talk about a death spiral down if they compete on prices. I think we've entered the period of the death spiral upward, that the prices being set for drugs are so high that literally, the pricing committee of a drug company becomes the death panel that people were afraid of under Obamacare.
HARRIS: The pharmaceutical industry's trade group disputes that, saying that inflation in drugs is about the same as medical inflation overall, mostly because cheaper generic drugs are replacing widely used brand-name products. Lori Reilly at the Pharmaceutical Research and Manufacturers of America also takes issue with the drug prices used in the Oregon study. It looked at list prices.
LORI REILLY: When you're only looking at the list price and you're not looking at the significant rebates and discounts that go on, it's really not an apples-to-apples comparison.
HARRIS: Insurance companies cut deals with the drug companies, so it's hard to know how much people are actually paying. And she says drug prices aren't simply based on what it takes for companies to recoup past investments.
REILLY: The revenue that a company derives year in over year out, you know, is also paying for future research. Obviously, we know in the MS space that the medicines that exist on the market today don't cure the disease. Lot of the companies that are currently in the MS space that have medicines on the market are using that revenue to reinvest for future innovation. And that innovation is costly.
HARRIS: Back in Portland, Barbara Haedtke has heard that argument before, and she understands it. But still...
HAEDTKE: To have to think about cost continually going up so that I can help fund the research, you know, on the one hand, I'm grateful. On the other hand, I'm upset, you know?
HARRIS: Haedtke really appreciates that the drug company has left her off the hook for thousands of dollars of copays that she could've been hit with. Still, the expense makes her uneasy.
HAEDTKE: It's always a stress because every year, I also have to renew the copay program with them, and I don't know that they're going to continue to cover me.
HARRIS: And she says that stress surely can't be helpful as she tries to keep her MS under control. Richard Harris, NPR News. Transcript provided by NPR, Copyright NPR.