Specialty Drugs Cost More Than Most Yearly Incomes

The AARP says the average yearly retail cost of specialty drugs is more than $53,000.

By Erin Delmore

A U.S. pharmaceutical company came under fire in September for hiking the price of a lifesaving medication by 5,000 percent.

Turing Pharmaceuticals Founder and CEO Martin Shkreli responded to public outrage after increasing the price of Daraprim, a specialty medication used by AIDS patients and other people with weakened immune systems. It went from $13.50 to $750 per pill.

Assemblyman Daniel Benson, Vice-chair of the Health & Senior Services Committee, says it prompted concerned New Jerseyans to call his office, even if they have insurance.

“What we’re hearing, for the most part is: ‘I’ve bought insurance, I’m paying these large premiums per month and I still can’t get the drugs that I need to have a quality, a frame of life, because the co-pays are so high,'” Benson said.

Benson introduced legislation that would cap out-of-pocket costs at $100 to $200 a month, depending on the type of drug and whether it’s a generic or brand name. He says a fixed cap is especially crucial for people with fixed incomes.

“What’s happening is, insurance companies are setting up what they call a specialty tier,” Benson said, “so these high-cost drugs, instead of having your normal co-pay of $20 or whatever you pay for your insurance, they’re are now saying, well no, this is a higher-cost drug, we’re going to pass it on to the consumer. You’re not only going to have to pay a co-pay and some money, in some cases, you’re paying what they call a co-insurance. So, your monthly out of pocket [cost] with insurance can run in the thousands of dollars for these drugs.”

It’s even higher without insurance. The AARP says the average yearly retail cost of specialty drugs is more than $53,000. That’s more than most households’ yearly income, or twice the household income of Medicare beneficiaries. It’s more than three times the average Social Security benefit.

“There’s really no way for people to afford drugs that cost that much money especially when they’re using them for, on a chronic basis,” said Leigh Purvis, Director of Health Services Research for the AARP Public Policy Institute. “So, it’s not a one-time cost for a lot of people. It’s something they’ll be paying for the rest of their lives.”

“Specialty drugs” treat complex diseases, like cancer, multiple sclerosis and rheumatoid arthritis. The AARP says that retail prices for more than a hundred of these medications went up by more than 10 percent in 2013, but pharmaceutical and med-tech companies say there’s more to it.

“So much of the cost of those drugs is offset by rebates, discounts, coupons and the like, in terms of what the true cost of the drug is,” Dean Paranicas, President and CEO of the Health Care Institute of New Jersey, said. He also says that cost includes the price of innovation.

“Drug development is an incredibly expensive, incredibly risky, incredibly lengthy process,” Paranicas said. “The typical prescription drug takes on average $2.6 billion and 12 to 15 years to develop. Now, that just represents the drug that actually succeeds in getting into the marketplace. Only about 12 percent of the drug candidates that even get into clinical trials are ultimately approved by the FDA.”

Legislation enacted in November allows pharmacists to make substitutions for pricey biological medications, which are more complex than traditional chemical compounds. Assemblyman Benson sponsored the bill. He says it will allow more patients to access treatment.