The High Cost of Specialty Drugs

Generally speaking, the smaller the market for a drug, the more expensive the drug is. That’s because it costs a lot to develop, test, and market a new drug – on the order of $500 million or more. The pharmaceutical company must eventually recover those costs through drug sales or they couldn’t stay in business. As a result, some drugs, called “specialty drugs” because so few patients need them, can cost upwards of $100,000 per year.

Who should pay for the high cost of specialty drugs? Insurance companies argue that these drugs are costing them too much, and they’d like to shift some of the cost to the patients in the form of co-pays on the order of 30% or more. But some patients worry that even at $30,000, they still won’t be able to pay for their drugs. Responding to public pressure from patient’s advocacy groups, at least 20 states have passed or are at least considering laws that would limit the out-of-pocket drug expenses to patients. And they have surprising allies – the very pharmaceutical companies that manufacture and sell these expensive drugs. That’s because the drug companies know that high co-payments discourage patients from taking their medications, thereby lowering drug sales. In some cases pharmaceutical company representatives have even helped state legislators draft the legislation!

The impending federal health care law (now called Obamacare by many politicians) would also set limits how much patients have to pay for drugs. But the law doesn't take full effect until 2014, and right now no one knows whether or not the law will still be in effect by that time. In the meantime, the issue of who pays for really expensive drugs is being resolved state by state.