This Drug Didn’t Work for Me. May I Have My $88,000 Back, Please?

6/30/11

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possibly invasive tests, or at least a fair amount of paperwork. For relatively cheap medicines, these expenses would likely cost more than the drug itself. Drug manufacturers would also want to protect themselves from scammers who benefited from the drug, but seek refunds anyway to get it for free. Therefore, the burden would be on the patient (or more likely, his or her physician) to provide assurances that the drug did not work. This policy need not be mandated, either, but a money-back guarantee would certainly help convince an insurance company to pay for a particular treatment.

The primary difficulty here, of course, is coming up with an agreed-upon definition of whether or not the patient has “responded well” to the drug. Getting a clear, unambiguous agreement that would be acceptable to patients, the drug seller, and the insurance company will certainly be a challenge. While this is not a trivial issue, it should be a solvable problem. It should certainly be easier than the challenge of coming up with the drug in the first place. And suppose the initial diagnosis was wrong? Drug companies wouldn’t want to eat the expense of refunding medicines that didn’t work because the patient was misdiagnosed. However, this expense would be wrapped into the overall cost of doing business, lumped in with unproductive research programs and failed clinical trials.

Would linking drug performance to cost reimbursement result in an increase in the price of our drugs? One could argue that as the percentage of patients paying for a drug decreases, then the cost of the drug would necessarily increase. This would be balanced, to some degree, by an increase in the number of patients (financed by their insurance companies) willing to try the drug knowing that the expense would be reimbursed if it didn’t work. In countries where there are strict cost controls on the health care system, expensive drugs are effectively rationed and must demonstrate great benefit in order to be sold there.

Another question would be whether to apply this reimbursement policy to drugs sold for approved indications as well as “off label” uses. For example, many expensive drugs (e.g. TNF inhibitors for rheumatoid arthritis patients) are quite effective in a majority of patients, but provide no benefit to a smaller percentage. Venture capitalist Steve Burrill was recently cited as stating that 90 percent of drugs work in just 30 to 50 percent of patients. Why not refund the cost of their drugs to this latter group as well?

I have no hard answers here, but believe the subject is worth examining in greater detail as more and more high priced medicines come to market. Drug makers are currently focused on creating medicines that are more likely to be effective against smaller, well defined subsets of patients (e.g. those identified by using biomarkers) with particular diseases. Smaller patient populations will translate into higher priced drugs, but the model is viable. Some of Genzyme’s medicines, for example, can cost $200,000 dollars a year and up. Furthermore, it is increasingly likely that treating some diseases, such as cancer, will be done by prescribing a combination of drugs that hone in on specific targets, raising the potential cost of treatment to what many fear will be prohibitive rates.

Many drug are given away to doctors as free samples, so the idea of giving out medications on a trial basis is well established in clinical practice. And virtually all drug makers are happy to obtain the extra revenues earned when their drugs are prescribed for either legitimate (e.g. testing an anti-cancer medicine against a rare tumor) or illegitimate (e.g. use of epo by Tour de France cyclists) “off label” uses. We like to think that in a fair society, payment for a job is directly linked to performance. Perhaps the time has come for drug payments to be linked in the same manner.

Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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  • steve

    I can envision several benefits to such a proposal and at least one unintended benefit

    - greater job opportunities for unemployed and underemployed attorneys. Going after drug companies for reimbursement plus punitive and pain and suffering damages might be quite lucrative.

  • Simo

    If you bought a pineapple and it turned out you were allergic, would you expect the grocery store to refund your money? If it cost $88k, maybe you would. But the real problem is that the drug costs that much even though it costs only a few dollars to manufacture. Which gets back to the way our government grants patent monopolies, how we fund pharmaceutical research, and how we provide health care to our citizens.

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  • Orla

    This is a ridiculous suggestion. Pharma companies are already forced to cut their spending on discovery research, by shareholder demands by the way, not by the people working there. They stop making money, they go out of business; end of story. You think generic drug comapnies develop new drugs? No, because the failure rate of potential therapeutics is astronomical; only a fraction of a percentage even make it to clinical trials. Should we stop looking for these needles in haystacks that do work? Of course not. But it costs money to look and the consumer has to pay for that search, not just the manufacturing costs of the sucessful drugs.

  • http://www.lymanbiopharma.com Stewart Lyman

    Thanks to Steve, Simo, and Orla for taking the time to comment. Yes, some drugs are very expensive, but the foundations of our drug discovery and pricing system are too large a topic to cover in a short op-ed piece. My focus here was to propose a possible solution for how some very expensive drugs might be paid for by insurance companies if the firms selling them are willing to put their money where their mouths are and assume some of the risk. While Medicare and Medicaid have announced that they will continue to pay for Avastin even if the FDA removes its approval for breast cancer patients, an unknown number of insurance companies are likely to stop paying for what will then be an unapproved use. While Orla thought my suggestion wass ridiculous, Janssen-Cilag adopted it. They must have thought that the money-back proposal put forth by NICE was worth their while, or they never would have accepted it. Let’s set aside for the moment the general issue of astronomical prices of cancer medicines, many of which are going to need to be given in combination to be more-than-just-a-little-bit effective. Medicine is just on the verge of beginning to identify patients who may benefit from a drug, and segregate them from patients who won’t benefit. For most drugs, however, this type of personalized medicine approach is still down the road. Are there other suggestions out there for making expensive drugs available to patients wishing to try them when they aren’t covered by insurance? How do you affordably get new medicines out to a potentially small subset of patients who may benefit from them before the technology exists to identify these patients up-front?

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  • http://www.linkedin.com/profile/view?id=57527&trk=tab_pro Marc Samet

    You have such a valid point that NICE…the National Institute for Clinical Excellence…the UK equivalent of the FDA…has approved reimburesment for some cancer drugs ONLY if they do something in extending the life of patients receiving the medications….if nothing happens then the UK system won’t pay for the drug and/or will demand a refund….RIGHT ON!!!!