PhRMA Puts Drug Costs in Perspective as Pricing Scrutiny Increases

Nov. 9, 2015 – Congress, federal agencies and the media continue to turn up the heat on their examination of drug pricing practices, but the industry is starting to defend itself – with facts. As part of a multi-pronged effort to defend the worth of pharmaceutical companies and their products, the Pharmaceutical Research and Manufacturers of America (PhRMA) recently released a new 40-slide deck that addresses the cost issue in great detail.

“Unfortunately, the press has given this information little coverage thus far,” said Coalition for Healthcare Communication Executive Director John Kamp. “For industry, becoming familiar with the messages in this deck will help us all fight the good fight in continuing to make clear to the media, Congress and others that new treatments and cures are transforming healthcare,” he said. “After all, the 21st Century Cures Act, which has tremendous bipartisan support, cannot reach its goals without the vital role of biopharmaceutical companies and their allies.”

At a Coalition meeting a few weeks ago in Washington, D.C., Robby Zirkelbach, PhRMA’s senior vice president for Communications, and Rich Bagger, senior vice president of Corporate Affairs and Market Access, discussed the drug pricing issue at length. For example, Zirkelbach asserted that the industry has “a great story to tell,” and that it needs to put the costs of medicines into perspective and highlight their value. Bagger noted that “questions about cost and value are important,” and that “medicines are a small and declining share of healthcare spending growth.”

A few of the slides are summarized below; the full deck is available at: PhRMA Deck on Drug Pricing_4Nov2015

PhRMA highlights how adherence to medicines lowers total health spending for chronically ill patients, stating that the U.S. healthcare system could save $213 billion per year if medicines are used properly to avoid expensive hospitalization and emergency room visits. The biggest savings are realized for congestive heart failure, diabetes, hypertension and dyslipidemia (Slide #7).

PhRMA also makes the argument that the biopharmaceuticals industry is an important force in the U.S. economy, supporting 3.4 million jobs across the country in 2011 (Slide #12). In Slides #13 and #14, PhRMA cites statistics about this industry sector being the single largest funder of business R&D in the United States and the most R&D-intensive industry.

Further, PhRMA reiterates that prescription drug spending accounts for just 10 cents of every healthcare dollar, behind both hospitals (32 cents) and physicians and clinical services (20 cents) (Slide #20). This 10-percent rate has remained steady since 1960, PhRMA notes.

The organization also makes the important point that although the costs of medical procedures continue to rise, cost containment is built into the drug pricing life cycle (Slide #28). For example, the cost of percutaneous coronary angioplasty rose from $47,962 in 2005 to $79,391 in 2013, while the cost of Atorvastin 10 mg decreased from $2.13 in 2005 to $0.15 in 2014. Additionally, nearly nine out of 10 U.S. prescriptions are filled with lower-cost generic drugs (Slide #31).

PhRMA also underscores the often unsung economic realities of the drug development process, citing that developing a new medicine takes at least 10 years on average, costs roughly $2.6 billion and results in fewer than 12 percent of the drugs that make it into Phase I clinical trials being approved by the FDA. PhRMA also points out that when it comes to targeting healthcare costs, pharmaceutical companies are being singled out, despite the statistics cited here.

“We all have a lot of work to do in improving our industry’s reputation and asserting its value,” Kamp said. “Hopefully these slides will provide healthcare marketers with more fodder as they helps their clients do that work.”