Congress' (Maybe More Than) Million-Dollar Medical Question: Who Will Pay for Cures?

A congressional bill that aims to encourage drug breakthroughs leaves unanswered the question of who will foot the bill for medical miracles.
by | June 2015
The 21st Century Cures bill would speed up approval of drugs and medical devices.
The 21st Century Cures bill would speed up approval of drugs and medical devices. (AP)

Few are opposed to helping spur the creation of lifesaving drugs and speeding up their approval, but among those who pay for those medications there’s concern that new federal legislation aimed at exactly those goals ignores the cost question.

The bill known as 21st Century Cures, currently being debated in Congress, comes at a difficult time. Some of the highest increases in pharmaceutical spending since 2001, driven largely by new brands that can cost $84,000 or more for a standard treatment period, are pushing drug prices to the top of state health agendas and alarming senior groups.

At a basic level, the legislation includes provisions meant to hasten Food and Drug Administration (FDA) approval processes for drugs and medical devices. It originally would have guaranteed 15 years of patent protection once a drug that tackled “unmet medical needs” entered the market, but Democrats managed to strip those and other exclusivity provisions from the bill during negotiations. Drugs currently get 20-year patents, but that protection typically begins at the early stages of development and is followed by years of clinical trials. After the patent runs out, competitors can market generic alternatives that usually cost far less. But there are ways, through existing laws and regulations, to draw out the window of market exclusivity -- now about 12 years on average, according to Scott Hemphill, a Columbia University patent expert.

The loss of the 15-year exclusivity period would come as a relief to some government payers. But there are plenty of health experts who thought it was necessary. Marc Boutin, who directs the National Health Council, argues that if drugmakers are guaranteed 15 years after development is finished, they’ll want to pursue advanced drugs for cancer, Alzheimer’s or other complicated conditions that have a much wider impact than, say, hepatitis C. “We’re saying let’s give them the chance to shoot for the drugs that have the highest value for society,” Boutin says.

The problem, still, is who ultimately pays for that innovation. The discussion around 21st Century Cures so far has avoided that question, says Andrea Maresca, director of federal policy and strategy for the National Association of Medicaid Directors. State Medicaid agencies are required to cover every FDA approved drug that’s part of a federal rebate program, but that program has proved inadequate in the face of new high-cost medications. “From a payer perspective, the removal of the extended exclusivity is helpful,” she says. “But it’s [still] so narrowly focused that they’re not thinking about the health-care system as a whole. So while we’re talking about exploding costs among entitlement programs, we’re not talking about the drivers of those costs.”

For its part, the pharmaceutical industry says that it alone is not responsible for rising costs. Pointing to federal reports, drugmakers argue that pharmaceutical costs are expected to rise at about the same level as health costs for the economy overall in the next 10 years, despite the recent uptick in drug costs.

Some legislators in a number of states -- five, so far -- aren’t buying it. They’re pushing bills, against stiff opposition, that would require drugmakers to give detailed information about their costs. The conversation may not be happening in Washington, D.C., but those lawmakers are determined to keep it going at the state level. “Until we have that information,” says Pennsylvania state Rep. Tony DeLuca, “it’s impossible to really have that discussion.”