20 Expensive Drugs That Could Bankrupt Medicare

Last Updated Jun 29, 2011 9:00 AM EDT

It's not until you see the list of the 20 most expensive drugs in the U.S. that the reason why Medicare will become insolvent in 2024 hits home: As Medicare is banned by law from negotiating drug prices, and must accept whatever pharmaceutical companies charge, it is no wonder that companies are announcing prices in excess of $400,000 for one year's treatment.

The most expensive drug in the U.S. is Soliris, from Alexion (ALXN). It costs $409,500 a year, and treats a rare disorder in which the immune system destroys red blood cells at night.

Many of the most expensive drugs -- such as Soliris -- treat rare diseases that only a few hundred people suffer from. Those drugs aren't the real problem. Rather, it's the drugs in the $20,000 to $100,000 range, which mainly treat cancer and multiple sclerosis. Those diseases are very common in the elderly population.

These drugs are also frequently delivered by infusion rather than in a pill form, which forces Medicare to reimburse them at 100 percent of the asking price.

Dendreon (DNDN)'s Provenge is one of four prostate cancer drugs costing between $21,500 and $93,000 a year. Similarly, Sanofi (SNY) will soon launch Lemtrada (alemtuzumab), an M.S. treatment that costs $60,000 per year. It will compete against Gilenya from Novartis (NVS), which is already on the market at $40,000 per year.

Medicare spending is out of control
Slowly but surely, healthcare policy makers are waking up to the fact that Medicare will bankrupt us all if drug prices run unchecked. The debate currently revolves around the Independent Payment Advisory Board established in President Obama's healthcare reform act. IPAB will review Medicare expenditure and in 2014 submit a raft of proposals to rein in spending, mainly through eliminating waste. It is specifically prohibited from rationing care.

If Medicare spending is still out of control -- and as drug companies show no sign of moderating their pricing policies, it will be -- Congress must then either accept the IPAB cuts or implement cuts of its own.

Some Republicans regard IPAB as Obama's long-promised death panel. Rep. Phil Gingrey, R-Ga., said last week:
But under this IPAB we described that the Democrats put in Obamacare, where a bunch of bureaucrats decide whether you get care, such as continuing on dialysis or cancer chemotherapy, I guarantee you when you withdraw that the patient is going to die ... It's rationing.
Oddly, the Republican alternative involves a far more extreme form of rationing that will kill anyone on dialysis or cancer therapy who suddenly runs out of money: A Medicare voucher system in which the vouchers progressively lose their value. No part of Wisconsin Rep. Paul Ryan's plan calls for curbing drug prices. Remember, those prices are not subject to free market competition because Medicare provides them with corporate welfare. That welfare has led to Americans paying twice as much as Canadians for their drugs.

Worse, there is a shortage of cheap, generic cancer medicines. Again, because U.S. prices are uncontrolled, companies cannot make a profit manufacturing them. It would actually make both business and public health sense to mandate a small rise in the price of generics -- guaranteeing companies a viable margin -- and a cut in the price of new drugs.

That sort of Big Gummint meddling may be beyond the pale for both Congress and the U.S. electorate, however. Which will lead inevitably to the worst type of rationing of all, when Medicare goes belly up completely with no alternative plan in place.
Image by Flickr user Ivy Dawned, CC.
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