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Statements posted on this blog represent the views of individual authors and do not necessarily represent the views of the Center for Law Science & Innovation (which does not take positions on policy issues) or of the Sandra Day O'Connor College of Law or Arizona State University.

The Cost of Living

As if the average healthy American’s housing, transportation, grocery and tax payments aren’t high enough, the average sick American also has to contend with the escalating cost of prescription cancer medications.  A recently published 60 Minutes script highlights that a cancer diagnosis carries with it the fear of not only the disease but also the fear of not being able to financially survive disease treatment.   In our country, both the disease and treatment costs are killers.  In the United States, pharmaceutical companies set the price for drugs.  Often, when pharmaceutical costs are challenged, the drug companies cite the cost of innovation — approximately one billion dollars to bring a drug to market.  Getting a drug to a patient typically involves a doctor purchasing the drug at cost from the manufacturer and then selling and billing it at retail – a set percentage of the wholesale cost.  The more expensive the drug, the more money lining the doctor’s pocket and a huge incentive for using more expensive drugs — albeit the doctor also has to shell out more in up-front costs.  However, behind the scenes, drug companies are finding other ways of providing financial incentives to physicians to prescribe high-cost drugs to already financially-struggling patients.  When one drug company, Sanofi, was called out by concerned physicians for charging an exorbitant amount for a certain cancer drug, it responded by reducing doctor’s costs while keeping patients’ and insurance companies’ costs sky-high.  The company offered to charge doctors $10,000 for the drug which the doctors would then bill to a patient’s insurer.  Medicare, for instance, is required to pay what a drug manufacturer charges and recoup part of that cost through a patient’s co-pay — a couple thousand dollars of that original $10,000.   This may not be news to many.  But, what many are not aware of is that after charging a doctor $10,000 for a drug, Sanofi opted to issue a check back to the doctor, worth thousands of dollars, as a way of saying “thank you for prescribing our drug.”  So, while Sanofi claims it is charging $10,000 for a particular drug because R&D costs allegedly demand it, it is also sending the message that it really doesn’t cost $10,000 because the company can afford to lose thousands of dollars in incentive payments to physicians to promote its product(s).   A win-win for both physician and big pharma.  Some doctors, appalled by drug company practices in general, are raising their voices to promote patients’ well-being and quality of life.  One drug company official’s response to those concerned:  the insurer should just lower the patient’s co-pay.  Things that make one go hmmmmmm.  This is a very important issue, and one that we at the Center for Law, Science & Innovation are following closely, especially as one third of Americans can expect a cancer diagnosis in their lifetime.