Drugs go digital: Implications for the future of drug pricing

The Food and Drug Administration has just approved the first digital pill - a medication embedded with a sensor that digitally tracks if patients have taken their medicine.

Abilify MyCite, approved for a variety of mental illnesses, can tell whether, and when, patients take their medicine. This is a significant advance in the growing field of digital devices designed to monitor medicine intake and address the expensive, longstanding problem of medication adherence.

Approximately 50% of patients don’t take their medications as prescribed, and there are a variety of reasons why -- from lack of health literacy and complex drug regimens to ineffective communication about adverse effects, time constraints, forgetting – and of course the price of drugs.

This comes at a big price for patient health. Researchers believe lack of medication adherence causes about 125,000 deaths a year and at least 10% of hospitalizations. There’s also an immense price tag for the American healthcare system – an estimated $100 billion to $289 billion a year.

This is one of many reasons that everyone - whether an industry executive or a patient - is talking about drug pricing. Patients are demanding more affordable care and pharmaceutical companies are trying to identify the best way to bring drugs to the market in a faster, better, more efficient way. 

When we’re evaluating drug costs it is important to recognize that drug treatment is often cheaper than other medical options. It’s a win-win situation for everyone if you can cure someone with a pill rather than putting them into the health system where they will encounter all the personal and financial costs that come with inpatient hospitals stays, more treatments, and time away from work or family.

Certainly if a drug cures a patient, that value is enormous to the overall patient’s life, their continued care, as well as to the entire healthcare economy. The question then remains, if you can cure someone with a pill, what should that price be and how do you get there? Many elements go into the complex equation of drug pricing, from reducing costs in the innovation phase to bringing cheaper products to market and it’s important to understand what goes into this process.

We recently released a report called Launching Into Value that analyzes the future of drug pricing and looks at if and how value-based contracts, which link the price of a prescription drug to its ‘real-world’ performance, are being used by companies today. We found with the intense pressure on drug pricing, pharmaceutical and life science companies are weighing the options of value-based contracts but that the industry isn’t quite there yet.

Those organizations that want to expand the use of value-based payment models should know they need a higher tolerance for financial risk, regulatory change, and the willingness and flexibility to work in close collaboration with payers, health systems, pharmacy benefits managers and patients.

Under new Commissioner Scott Gottlieb, the FDA is focusing on a more efficient and robust process to bring safe drugs to the market faster. There appears to be recognition that it takes a lot longer to get drugs to market in the US than other parts of the world and this is one reason for the rising cost of drugs.

There is energy and excitement about the re-evaluation of this regulatory process. The removal of unnecessary steps will not only encourage innovation, it will safely get drugs to the patients who need them. This digital pill marks a big step in the right direction.

For more information on what your organization can do to prepare for changes in the pharmaceutical and life sciences industry, visit: https://www.pwc.com/us/en/health-industries/pharma-life-sciences.html