As someone in treatment simultaneously for two cancers, chronic lymphocytic leukemia (CLL) and myelofibrosis (MF, scarring in the bone marrow), I am very conscious of what things cost. In one case, for CLL, I have been receiving infused therapy at the hospital (cycle #4 of 6 coming up). In the MF case, I just take a pill morning and night. The pill spares hospital materials and nursing costs and takes a lot less of my time, the infusions do not.

So I look more carefully at what has become an almost knee-jerk reaction to blame pharmaceutical prices—especially for breakthrough oral medicines—for rising healthcare costs.

Consider this: Private health insurance spending increased $240 billion between 2009 and 2015. So are “skyrocketing drug costs” to blame?  The actual cause may surprise you.

According to the business publication Bloomberg BNA,  “It turns out the biggest contributors to rising health insurance costs are hospitals and health insurance administration expenses.”

Hospital costs alone contributed to half of that increase, and insurance administrative costs contributed as much to that increase as pharmaceutical prices themselves. And even then, drug prices were only 12 percent of that increase in insurance spending.

So you could argue spending money on life-changing new medications has more value to you and me than insurance paperwork.

I am not doing a commercial for pharma, and I know how dedicated my doctors are at hospitals. I don’t know the insurance industry people, and I am always open to hearing their perspective. But the facts from reliable sources seem clear: According to figures published in Cost of Healthcare News, prescription drug spending came in third behind hospitals that were number one, and physicians and clinics at number two. “Put another way, pharmaceuticals are the least expensive part of the healthcare system.”

Not only are hospitals a major driver of healthcare costs, pharmaceuticals can help lower that cost. Thanks to new medicines keeping people healthier and out of the hospital, the average time spent in the hospital by cancer patients declined by 70 percent between 1990 and 2010.   That saved the healthcare system about $250 billion.  

We see this ourselves when I report to you with Esther—clear-headed and pretty energetic—on Facebook Live from locations around the country. I am also reminded of the power of modern medicines every day when I go to the gym or run or bike. And my stable health allows me to run our company, employ people, and all of us pay taxes (not my favorite part!). Obviously, when hospital/clinic care is needed, we are glad it is there. But when we can have an alternative, let’s appreciate the fact that support of medical advances and innovation can save lives and save money.

One other point about drug costs: They don’t always go up—not just because a generic comes out, but also because of competition and innovation. Remember that $1,000-a-pill hepatitis C medication? Aside from the fact that few patients actually paid that amount, in 2014 Express Scripts complained, “What they have done with this particular drug is break the country.”

Fast-forward to today. Kaiser Health News reports a new drug for HEP C has a total treatment cost as much as $70,000 less for a full course of treatment than previous regimens.  Now Express Scripts sings a different tune: “The benefit … is the additional competition, which brings down costs across the class, thus resulting in greater access and affordability.”

As the debate goes on about drug prices, we need to see it in the context of all healthcare costs. And, for drug price itself—as throughout healthcare—we should do everything we can to incentivize innovation, efficiency and value.

Our objective with this weekly perspective on the news is to help patients get the treatments they need at prices we can afford. To do that, it’s important to cut through the political rhetoric to get to the facts.

As always, I welcome your comments. Just email me: andrew@patientpower.info

Andrew Schorr
Co-founder, Patient Power

Please remember the opinions expressed on Patient Power are not necessarily the views of our sponsors, contributors, partners or Patient Power. Our discussions are not a substitute for seeking medical advice or care from your own doctor. That’s how you’ll get care that’s most appropriate for you.