The High Cost of Biological Medicines

The other day I ran into a friend who asked how my new RA treatment was going. He knew that I started a new treatment in past few months. What he didn’t know was that this treatment was not a simple pill that I took every day, but was administered via infusion by a nurse in a clinic. My friend wondered about this and I told him that the medicine is a biological treatment consisting of a genetically engineered antibody protein developed via recombinant DNA technology. These delicate proteins must be given via infusion rather than be ingested in the stomach where they would be destroyed. My friend was astounded to hear that each monthly infusion was billed at around $2,000.

This conversation came about the same time I read a story about the rising costs of medical expenses in Time magazine. In this story, a person with non-Hodgkin’s lymphoma went to the world famous MD Anderson Cancer Center in Texas. In addition to being charged $1.50 for one generic acetaminophen pill, the patient was charged $13,702 for one Rituxin infusion. In addition to being used to treat lymphoma, Rituxin is also used to treat rheumatoid arthritis. Should Actemra not work for me, a real possibility given the lack of desired response the past couple of months, Rituxin is next on my rheumatologist’s list.

Yesterday I received an Explanation of Benefits (EOB) form from my insurance company for a recent Actemra infusion (see photo). On this EOB, it showed that the clinic charged $1,600 for the Acemtra. A discount of $419 was then applied resulting in a total charge of $1,181. My insurance company paid $595 leaving me responsible for $585 because of my deductible. After a few of these infusions, my annual deductible will be met and my costs will go down considerably. Fortunately, Genentech, the maker of Actemra, has a copay program. They sent me a MasterCard debit card (see photo) with $4,000 loaded on it which can be used to pay my clinic for the portion I’m responsible for after the insurance paid their portion. The amount of my next Actemra infusion will double since the dose is being doubled.

All of this got me thinking once again about the costs of biological treatments for RA. The costs of the medicines that are built into the charge to the patient must include research and development (which includes clinical trials and approval), manufacturing, distribution, packaging, and profit. There are real and expensive costs built into biological medicines due to their complex and highly technical nature. But there are two facts on the EOB that leave me wondering just how much profit is built into the costs of drugs and health care providers. First, the insurance network discount of $419 represents a 26% subtraction off of the “retail” cost of the drug. According U.S. News, this discount is “A discounted fee that insurers negotiate with doctors, hospitals and other healthcare providers in their network.” In order to offer this discount, there must be huge wiggle room in the profit margins of providers. Second, the willingness of the drug manufacturer to pay the patient’s copay expenses represents a huge discount. Let’s say that a patient has 12 infusions during a year. At the discounted cost of $1,181 per infusion, that is an annual cost of $14,172. With an annual copay assistance of $4,000 (some pharmaceutical companies offer more), that’s essentially underwriting 28% of the cost of the medicine. Combined, these discounts represent 54% of the “cost” as listed on the EOB. I know of no other product on the market that has that much profit margin to allow for these types of discounts.

I’m thrilled for groundbreaking biological treatments. They have been lifesavers for so many. And I’m grateful for excellent healthcare providers including doctors, clinics, and hospitals in the United States. But something is broken with the system that has such huge profit margins.

About these ads