The pharmaceutical industry has been responsible for almost half of the increase in longevity achieved in the past 15 years.1 Given that pharmaceutical costs represent only 15% of the total health care budget in the US, modern drugs represent a very good deal indeed for consumers. However, spiraling costs for lifesaving drugs are increasingly fueling the runaway economic freight train that is health care. Most responsible for these increases are the “specialty drugs,” a growing category of biotechnology agents primarily used to treat chronic conditions such as autoimmune disease, cancer, and infections such as hepatitis. Chronic illnesses now cost $1.3 trillion in the US, more than half of annual health care costs, and consume nearly 10% of the nation's entire gross domestic product. Drugs used to treat these chronic conditions constitute less than 1% of total prescriptions but represent 20% of all drug costs in the US (more than $60 billion US in 2010).2

Fewer than 0.1% of prescriptions written in the US are drugs for multiple sclerosis (MS), but these represent 3.1% of total drug costs. The global MS drug market is now estimated at $10 billion, and is predicted to experience double digit increases on an annual basis.1, 3 Two MS drugs are now in the top 20 in terms of global sales: glatiramer acetate (Copaxone, produced by Teva) was #12 in 2011, with sales of $3.3 billion, followed by interferon beta 1a (Avonex, Biogen Idec) at #20 with $2.5 billion. Currently, drug costs account for more than half of the total cost of care for MS.

The big surprise - counter to expectations of supply and demand - is that as competition for the MS market intensifies, costs appear to be moving sharply upward rather than down. The newest MS therapy to hit the market was fingolimod (Gilenya, Novartis) in the fall of 2010. Gilenya, the first oral disease modifying therapy for MS, was priced at $48,000 US per year, igniting global sticker shock. (We had previously in these pages discussed the high price of Ampyra, “the MS walking drug” modified slightly from the long-available and low-cost 4-aminopyridine4). One might have anticipated that the high price of Gilenya would provide an opportunity for the older injectable therapies to differentiate themselves based on lower price. On the contrary, prices of all MS therapies have galloped higher, seemingly in lockstep with Gilenya.5 The price of glatiramer acetate has been raised in the US to approximately $45,000 per year, an amazing increase of 40% in the past 2 years; the interferons (Betaseron [Bayer], Avonex, Rebif [Merck]) have also seen major increases and now cost between $37,000-38,000 US wholesale; and the infusion therapy natalizumab (Tysabri, Biogen Idec) now checks in at approximately $43,000.

Pricing for other emerging drugs now in the MS pipeline are uncertain. Alemtuzumab (CAMPATH, Genzyme) is an existing agent now used for chronic lymphocytic leukemia (CLL), and its repurposing for MS would involve use at a lower dose compared with CLL; this would place the cost at a more reasonable $6,000 annually. However, with FDA approval (possibly later this year) it is likely that alemtuzumab will be rebranded as Lemtrada and priced in the $55,000 range. Biogen is also preparing for launch of a second oral agent for MS, dimethyl fumarate or BG-12, and it is also expected that BG-12 will be priced in the range of the other available MS drugs.

Not everyone pays the same price for drugs, of course, and rules that underlie various pricing levels in the US (Medicare, commercial, individual), added to negotiated rebates, patient assistance programs, and different rules for international buyers provide enough complexity to make the most seasoned economist's head spin. However, it is clear that prices in the US are higher than almost anywhere else, and because of these prices the value of any drug will be lower. For example, the cost to provide one quality of life year (QALY) from an MS drug may be unacceptably high in the US – over $800,000 in one recent study.6 In the UK, by contrast, interferon treatment costs approximately $12,000 USD annually, and because of this lower cost, the value of MS drugs dramatically improves. One could reasonably argue that it is patently unfair for the American health care system to pay such a premium for these needed therapies. If overall pricing is justified, is the disproportionate US burden our gift to Europe and the rest of the world?

One of us (SLH) recently purchased a new Apple computer. It was expensive, but I decided that it was worth it. I found that the price was the same whether purchased in the local Apple store, ordered by phone from a retailer in Canada, or purchased on the Internet from the Apple US website or Amazon UK. It all seemed rational. The US healthcare system is chaos by comparison. The current rules of drug pricing in the US mirror the woes of the entire health care system, in which pricing is essentially unregulated and profit must be squeezed from one group of consumers to pay for the needs of large numbers of under- or uninsured. For drugs, patients and physicians demand full access to a complete armamentarium without consideration of value, thus limiting the usual downward pressures on price seen in a free market. When asked about future trajectories of MS drug prices in the US, pharmaceutical company executives generally speak about vague “market forces” determining pricing decisions. Until market size shrinks when prices increase, any pharmaceutical executive would be a poor corporate steward if he or she did not raise prices dramatically and consistently. But we will all suffer (except for these executives and their shareholders) and ultimately be forced to ration limited resources if we do not change the status quo, and the Affordable Care Act does not address this problem. One wonders why – in 2012 – we still lack any coherent system of public interest arbitration to help guide drug pricing, or lacking this, some rational system to create competition on the basis of price and value.


  1. Top of page
  2. References