Many health researchers have sought different kinds of solutions to the problem. One such proposal that gained traction after being published in March by The BMJ suggested significant cost savings could be realized by requiring drug companies to offer drugs in multiple vial sizes to reduce waste.
According to author Peter Bach, MD, director of the Center for Health Policy and Outcomes at New York-based Memorial Sloan Kettering Cancer Center, and his colleagues, chemotherapy dosing is based on body size. The standard vial size for some drugs may contain enough of the active ingredient for a large person, but a significant amount ends up being wasted during the treatment of a smaller person. If the cost of the excess drug that is thrown out is proportional to the amount of the drug in the package, the cost of the wasted drug is substantial, Dr. Bach wrote. A better solution, according to Dr. Bach et al, is to size vials proportionally to the proper dose for a specific patient.
However, for three primary reasons, this solution is predicated on a flawed assumption, according to a Health Affairs blog.
1. It is wrong to assume that product cost is proportional to package size, according to the report. This is because the product development, marketing, distribution, testing, packaging and labeling that goes into the drug’s cost is “entirely or nearly invariant to unit size,” according to the report. The cost of the product itself is relatively low compared to these fixed costs.
2. Dr. Bach and his colleagues’ analysis also fails to account for the fact that patented drugs are government-designed monopolies, according to the report. A drugmaker holding a patent will price its drug at the highest price payers are willing to pay for it. Therefore, the most profitable way for a drug manufacturer to price drugs would be to set the price based on payers’ willingness to pay, then ship the drug in whatever size of packages are most economical. If the marginal cost of the drug is high, that might mean shipping it in different sized vials, but if it’s low, as it is for most chemotherapy drugs, it could be least costly to ship a limited number of vials and allow the excess drug to be wasted.
3. If we required drugmakers to sell drugs in more vial sizes, they would choose prices for the various sizes that maximized their total revenue after figuring the costs of production. The cost of production would be higher while consumers’ willingness to pay would remain the same, the consumer would end up paying the same amount for a course of treatment, according to Health Affairs.
“Pharmaceutical pricing is a tangled issue, requiring tough tradeoffs that are politically challenging. Unfortunately, we’re not likely to avoid those challenges with a clever shortcut,” the article concluded.
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