Is profit or innovation driving the rising costs of drugs?

Turing Pharmaceuticals sparked outcry when it raised the price of a single pill from $13 to $750. Judy Woodruff discusses the rising costs of prescriptions drugs with Dr. Peter Bach of Memorial Sloan Kettering Cancer Center and Dr. Thomas Stossel of Harvard Medical School.

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    Now let's turn to the rising price of prescription drugs and outcries to do something about it.

    The latest uproar began after The New York Times reported how one company, Turing Pharmaceuticals, raised the price of a drug from $13 a pill to $750. It follows headlines about the rising costs of new cancer drugs, as well as a breakthrough drug for hepatitis C that initially cost more than $80,000 for a course of treatment.

    The two leading Democratic candidates for president, Hillary Clinton and Bernie Sanders, are proposing big changes, including lowering patient costs and bigger discounts for Medicare.

    Now two views on this.

    Dr. Peter Bach is the director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. And Dr. Thomas Stossel is the director of translational medicine at Brigham and Women's Hospital and a professor of medicine at Harvard Medical School.

    And, gentlemen, we welcome you both.

    Dr. Bach, I'm going to start with you.

    Why is this happening?

  • DR. PETER BACH, Memorial Sloan Kettering Cancer Center:

    Well, it's really that there's no system in place the hold down drug prices, and so companies are just becoming increasingly bold, charging prices that they think the market will bear.

    And Turing Pharmaceuticals and the 55-fold increase in the price of Daraprim is just a version of a company testing the market, if you will, just how high they can raise a price. But we see it across drugs, rapid inflation in the cost of drugs, not only new ones, but old ones.


    Dr. Stossel, how do you explain it? It's long been the case that there has been no system for keeping prices down. Why now?

  • DR. THOMAS STOSSEL, Harvard Medical School:

    Well, there still is no system, although people are asking for it.

    Well, thank you for having me.

    So, I have been in medicine for almost half-a-century, and it's incredibly better because of the drugs that are available. So, drugs bring great value. There's no question about it. Also, despite the fact there's been uptake in costs in recent years, they still constitute less than, I think, 14 percent of total health care costs.

    Now, in that 50 years, the price, the cost of what it takes to get a drug approved by the FDA has increased 100 times. And if you're interested, I can explain why I think that is.




    But it's that is what is driving — the only antidote to keeping innovation going is to sustain profitability. Now, the Turing case is an anomaly.


    Let me…


    That has nothing to do with innovation. That, I agree, is pure opportunism.


    Right. And we have reported on that, and we want to set that aside, because we could spend the whole time we have with you talking about it.

    But, just quickly, Dr. Bach, this point that it's innovation, these companies are taking a risk, does that explain it, the rise in costs?


    Well, yes and no.

    It's unbelievably important that we get new drugs. We need more new treatments. We have patients who need help. But it isn't the case that the rise in costs tracks with extra burden. The truth is, more drugs are being approved now, about 90 percent of new drug applications to the Food and Drug Administration. It was only about 50 percent just eight years ago.

    There are more sort of detours around the regulatory process, single-arm trials, skipping randomized trials, shorter trials, so it's actually getting easier to get a drug approved. The reason is that it is possible to charge very high prices.


    And I want to turn to both of you because — on this question of how badly patients are being hurt.

    Dr. Stossel, I read a quote. As I mentioned, the Democratic candidates for president are making a big issue of this. Bernie Sanders said in one interview — he talked about working-class women struggling with breast cancer, not having a lot of money, they were able to get the same medicine for one-tenth the price in Canada.

    I mean, real people are being affected by this, aren't they?


    Absolutely. And I don't discount the misery, the stress that having, on top of a bad disease, to be socked with a big co-pay.

    But I see that — a big mistake to just point the finger at the drug companies. I mean, I have to disagree with Dr. Bach that it's easier to get a drug approved today. I think it's harder to get a drug approved today, because there is more stringent FDA regulation, and it's engrafted on a nasty fact that biology is tough.

    There is a huge failure rate. Nine out of 10 great drug candidates don't make it. And the successes have to pay for those failures.


    Well, it…



    And Canada controls prices. The whole world freeloads off of American drug innovation.


    Do you want to quickly respond to that? Because I want to ask you both what you think should be done.


    No, please, proceed. Go ahead.


    Well, what do you think should be done about this?

    I mean, we have got the Democratic candidates for president both talking about putting caps on the price of prescription drugs. The Republican candidates take, it's my understanding, a hands-off, government hands-off approach. What do you think should be done, Dr. Bach?


    Well, what we have is pricing for drugs that doesn't make any sense. You can have a drug that doesn't work well and charge a high price. You can have a drug that's terrific and charge a high price.

    And what I would like to see is prices based on value. And Dr. Stossel mentioned that. And so value is something about how well the drug works to alleviate suffering, to prolong life. And if we had a market where drugs that worked better to treat disease cost more, the companies that would win in that environment are the ones who are best at innovating.

    And they could get the biggest profit. And the companies that make me-too products that aren't incremental improvements, they wouldn't be as profitable. And that's how markets are supposed to work. And what's broken here is, right now, both of those companies can charge whatever they want.


    Dr. Stossel, does that sound like a solution?


    No, because it costs just as much to develop a marginal drug as a good drug.

    Good intentions don't lead to drug innovation. There's a huge amount of luck, serendipity, that's involved. And so there's — I can't think of any enterprise where there's so little connection between what it costs to develop the product, what the value of the product is and what it costs to keep the system going, keeping the innovation going.

    And it's that huge failure rate that's the bugaboo here. And I don't know any easy answer to it, but I do believe that it's fantasy to think that, if you impose top-down pricing, you bring the political process into it, that you're — if that's what society wants, fine, but you have to understand that it is incompatible with innovation.


    Well, gentlemen, it is a big subject. And I think we have only begun to scratch at the surface. I know we're going to come back to this again, but I want to thank both of you for joining us.

    Dr. Thomas Stossel, Dr. Peter Bach, we thank you both.


    Thanks very much.


    Thank you.

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