New Study Confirms Innovative Therapies Will Have Minimal Impact on Healthcare Costs

WASHINGTON, D.C. (April 10, 2007) -- The widening use of new, innovative biopharmaceutical treatments for diseases, such as cancer, multiple sclerosis and heart disease, will have a limited impact on healthcare costs for private healthcare payers over the next several years, according to an independent study released today by the Biotechnology Industry Organization (BIO).

“This well-researched analysis by one of the world’s most respected healthcare actuarial firms is good news for millions of patients who look to the biotechnology industry for revolutionary new therapies for some of society’s most devastating diseases,” said BIO President and CEO Jim Greenwood. “This study underscores the reality that access to innovative therapies, and consequently hope, is within their reach.”

The study, prepared by the international actuarial firm Milliman, Inc. and titled Realizing the Value of FDA-Approved Therapies, found new innovative therapies, including both new drugs and biologics, will add 1 percent to the healthcare costs covered by private commercial payers, such as insurance companies and employer-sponsored health plans. This increase translates to an additional claims cost to private payers of about $5.00 per member per month.

Moreover, the study found that private payers can make minor changes in their benefit plans to assure the affordability of innovative therapies for their members.

The Milliman study reports that the costs of innovative therapies will generally not create a large cost burden relative to other costs for private healthcare payers by 2011. The total cost for all innovative therapies (existing and new) approved by the U.S. Food and Drug Administration (FDA) is estimated to be about 6 percent of total private commercial payer costs by 2011. This compares to about 5 percent for 2006.

“The largest healthcare expense borne by payers is not prescription drug and biologic costs but hospital and other non-drug costs," stated Bruce Pyenson, Principal and Consulting Actuary, Milliman, and author of the report. "While prescription drug costs account for about 14 percent, non-drug costs account for 86 percent of expense borne by payers, according to Milliman's 2006 Group Health Insurance Survey of HMOs.”

The study points out that innovative therapies may actually bring down health care costs in some cases. The report notes that new and improved medical treatment does not necessarily cost more than traditional treatment: “The current standard of care for certain diseases can be very expensive. Therefore, treatments that replace or modernize the traditional standard of care can reduce a patient’s medical costs, even if the new treatments are themselves very expensive.” As an example, the study said the cost of a hypothetical product that would prevent or cure Alzheimer’s disease would help a patient avoid years of very costly nursing home care. “Even if the therapy is expensive,” the study said, “it will be cheaper than years of institutional care.”

“This study confirms our long-held belief that the cost of innovative therapies, including biologics, has a limited impact on overall health care costs,” said Greenwood. “We hope Congress will look to this data as definitive research as it considers proposals to reduce health care costs. We must be careful we do not inadvertently undermine the ability of the biotechnology industry to develop and deliver innovative biopharmaceutical therapies to the patients who so desperately need them to gain nominal cost savings that do little to impact the aggregate cost of health care.”

The study can be accessed at http://www.bio.org/content/realizing-value-fda-approved-therapies.