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Publication date: 2018-06-17 06:37

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What is the difference between pricing and reimbursement?
Pricing and reimbursement are entangled to some extent. Drugs may ultimately have several different prices, but the first one is the list price, which comes from the manufacturer. The list price is not necessarily the price that most people pay. In some cases, hardly anyone pays it. But the list price serves as the basis for many subsequent calculations.

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Sometimes, a drug may be used in two different cancer types. In one type, the patient may live six months longer with a great quality of life, justifying the $655,555 price tag. But in the other cancer, the benefit is not as great. But the price for the second disease cannot be changed without also changing the price for the first disease. That’s a big dilemma for companies.

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Larry Morrissey: Everybody's asking the question, "Why is health care so expensive?" Because the fix is in. That's the answer. That's the short answer.

Michigan Drug

Do you agree that drug prices are too high?  
I think there is a way to bring more of a value-based system into pricing and reimbursement. Right now, our reimbursement system imposes a lot of limitations on how creative we can get with pricing. If prices could be based more on value, I think that would address the problem to some extent.  

&ldquo Without giving them that power, we&rsquo re sort of shooting ourselves in the foot,&rdquo Sarpatwari said. &ldquo It is one of the reasons why we don&rsquo t have as low prices as we could during that exclusivity period.&rdquo

Now an independent adviser, Shah spoke with Newsweek about drug prices: where they come from, who negotiates them and how they got so incredibly complicated.

The majority of pushback directly against the pharmaceutical company’s list price comes from the insurer and increasingly from policymakers. For example, Marathon Pharmaceuticals recently halted the launch of its muscular dystrophy drug after Senator Bernie Sanders and other legislators expressed outrage after the company announced an $88,555 price increase.  

Shefali Shah has spent more than 65 years helping pharmaceutical companies navigate issues surrounding the cost of new medications. She has worked with biotech giants like Genentech, small biotechs bringing their first products to market and external consulting firms to pinpoint the magic dollar amount for a given medication.

Don Haviland: Absolutely. It's their company. They own Questcor. They own the business model. And they're not lowering the price.

Pharmaceutical companies often justify the cost of drugs as necessary to support the research and development, or R& D, of innovative treatments. If we want cures for devastating diseases, they say, we have to pay for them. But that explanation does not stand up under scrutiny. Research by the Tufts Center for the Study of Drug Development put the cost of developing a new drug at $ billion. But that research was supported by the pharmaceutical industry, and the estimate has been questioned.  

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