- Vasundhara Gray, Associate, Content Management, Sales Enablement Team, dentsu

- Rupali Bajaj, Research Analyst, Sales Enablement Team, dentsu

- Mansi Srivastava, Research Analyst, Sales Enablement Team, dentsu

- Kent Groves, PhD, Chief Strategy Officer, dentsu health

Good health is invaluable – but should it come at a price?

COVID-19 accelerated healthcare innovation, pushing for health awareness, better medicines, and quicker recoveries. But big medical discoveries have equally big price tags – and the economy is yet to catch up. But how critical is the situation, really?

The healthcare environment in the US can provide some insight. The US witnessed an annual 20% hike in the launch prices of drugs annually over the past 15 years. As a result, many patients skipped medication or simply couldn’t afford to fill their initial prescriptions in 2021. The situation was particularly grim for the uninsured and those with lower incomes. Despite the highest per capita health expenditure (as reported in 2021) among countries that are members of the Organization for Economic Co-operation and Development (OECD), one in eight Americans cut food spending in lieu of covering their medical expenses. When people get forced to choose between life-saving medication and next month’s groceries, it’s time to revise the model.

Generic drugs, or biosimilar versions of brand-name drugs, may be the savior many need – they can be up to 80-85% cheaper than their branded  counterparts! In 2023, Amazon made these generic pills even cheaper at just $5/month with the ‘Amazon Pharmacy: RxPass’.

The RxPass has served more than 150 million Americans in all 50 states, providing them with stable access to frequently prescribed medications that cover over 80 common ailments, delivered right to their doorstep. The flat monthly rate covers prescription refills as often as needed. Leveraging Amazon's superior operational capabilities, this model allows consumers to cut down on time and save up to 68% of the cost on each medication - savings that pile up with each pill box refilled.

But is this really the magic bullet it sounds like? As the old adage goes, if something appears to good to be true, it probably is.

Since generic versions of a branded drug can only be produced after its patent expires, their unavailability is a patent renewal away. With a “must not substitute” or “no substitutions” note from a provider, pharmacists are obligated to fill the prescription as is, and for a disease with a narrow therapeutic index of drugs, choosing the branded variant is often a better idea. Since expensive healthcare is unavoidable for many, we need to consider reforming the drug pricing structure instead.

Making the value of drugs the North Star, reconsidering their pricing model can hold promise. Prof. Michael Porter, who laid the foundation of value-based healthcare, defines value as “outcomes relative to cost.” Here, cost covers all facets of care, including the patient, payer, and hospital’s perspectives. The costs incurred due to patient cancellations and the opportunity cost associated with missed days or non-functionality during rehab, treatment, etc., can be considered too. Price, on the other hand, is what a consumer pays to realize the anticipated value.

Under value-based pricing (VBP), drugs are priced relative to drivers like impact on the Quality of Life (QOL), Patient-Reported Outcomes (PRO), life years gained, novelty (the addressing of unmet needs), efficacy relative to the alternatives, reduction in admission events, and reduction in non-Rx related costs. Prices then reflect cost-effectiveness and the consumers’ willingness to pay (WTP).

Like any ecosystem, healthcare has connected components that keep the system running. Therefore, a realistic VBP approach would be one that’s collaborative and strikes a balance among patients, pharma companies, HCPs, providers, payers, and related stakeholders. Canada and the UK are pioneers in this regard.

One example is the Canadian Agency for Drugs and Technologies in Health (CADTH)'s pan-Canadian Oncology Drug Review (pCODR) expert committee which comprises physicians, pharmacists, economists, and patients, and provides well-rounded advice on reimbursements and public drug plans based on objective drug reviews. Another Canadian body, the Patented Medicine Prices Review Board (PMPRB) maintains patented drugs at controlled prices with its regulatory mandate through an internal VBP model.

The UK's National Institute for Health and Care Excellence (NICE) takes a more rigorous approach. With a representative committee of healthcare beneficiaries, receivers, and providers, NICE advises the National Health Service (NHS) on the cost-effectiveness of drugs. It outlines the WTP threshold by comparing a drug’s ability to provide an additional Quality-Adjusted Life Year (QALY) with that of a pre-existing one.

Such regulation can invigorate the healthcare space, encouraging innovation, transparency, education, and coordination among its elements. The overarching benefits would soon follow. Pharma firms can gain soaring sales from high-performing drugs, while well-informed patients can receive aptly priced, sound treatments. Doctors and provider networks can ensure better outcomes, and payers can expect cost cuts on follow-up treatments.

In an ideal world, healthcare is high-quality, more affordable, and more available for all masses alike. While the idea of a medical utopia may seem far-fetched, constant measures to achieve a more realistic, optimal healthcare landscape can add up to bring us all closer to this vision. Life may not be fair, but the price of life-saving drugs can be.