The $84,000 pill: weighing the high cost of pharmaceuticals.

• Author: Christensen, Lisa
• Position: Utah Employers Healthcare Summit

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When people talk about healthcare costs, the price of prescriptions and treatments inevitably comes up early and often.

While drug costs represent less than 10 percent of healthcare costs overall, expensive treatments tend to get talked about. Recently, the price jump for a 60-year-old drug that treats taxoplasmosis, an infection from cat parasites that can cause birth defects, from $13.50 to $750 per pill--a 5,000 percent increase--created headlines across the country and sparked outrage on the internet.

Daraprim, the company that bought the rights to the drug and increased its price, is just the latest entry in the ongoing debate about whether some drugs are effective enough to justify the cost.

A financial balancing act

Not all drugs are created equal--nor are they priced the same, according to panelists discussing the subject in The $84,000 Pill, a breakout session at the Utah Employers Healthcare Summit.

Generic drugs, which are usually relatively inexpensive, take the lion's share of the prescription pie, followed by name-brand drugs. Bioengineered specialty drugs take the remaining portion, but represent the greatest prescription costs, says Doug Burgoyne, president of VRX Pharmacy Services and moderator of the panel.

They're the least often dispensed but often the very most expensive, he says.

These drugs typically involve larger material than normal drugs and are thus less stable, and often require special handling, such as refrigeration. This category of drug includes treatments like vaccines, insulin and remedies for conditions with limited treatment options. On average, these treatments can run a patient $5,000 per month.

New cancer drugs, for example, can cost upwards of $121,000 per year, Burgoyne says, which patients and doctors have to weigh against their effect.

The care they receive today is so much better than five or 10 years ago; it really qualifies as a breakthrough, Burgoyne says The only downside is their considerable expense.

There are no generic versions of these drugs, per se, Burgoyne says, but biosimilars exist--though they have to go through the same rigorous FDA approval for the original drug, which includes human trials. The considerable development time for these medications, as well as the strict FDA approval process, factors into the cost.

Only 30 percent of drugs overall recoup their development costs, says Peter Pitts, president for the Center for Medicine in the Public...