The Cost of High Prices: Embedding an Ethic of Expense into the Standard of Care

Abstract

It is not profound to say that the American health care enterprise is in a state of flux. Since the passage of the Patient Protection and Affordable Care Act (ACA), the administration and delivery of health care in the country has undergone fundamental change. And this change continues unabated, as the Obama administration looks for ways to improve health care access and quality while limiting cost. It is a riddle that America has sought to solve for decades.

In the midst of this rapid and radical change, America’s crown jewel public health insurance program of Medicare faces an intensifying cost crisis, due to a past of uncontrolled prices and a future of booming enrollment. Garnering particular media attention, an example of the cost challenge facing Medicare has been the price that Medicare pays for pharmaceutical drugs under Part B of the program. Drug pricing within Medicare remains a policy challenge, with proposed solutions from the Centers for Medicare and Medicaid Services subject to heavy criticism from Congress. Historically, Congressional action has hamstrung Medicare’s own ability to limit costs, and as a result, the program is increasingly forced to pass on costs of the drugs — through copays and coinsurance — to its elderly beneficiaries. Public outrage has followed recent stories of pharmaceutical companies seeking to increase their prices, and policymakers have called for increased regulation.

But there may be other, better solutions to Medicare’s pharmaceutical drug cost crisis. Recognition of a new phenomenon — “financial toxicity” — which is defined as the effect of a pharmaceutical drug’s price on the health, and mortality, of the patient undergoing treatment, provides a potential new foothold for health care regulation. Just like any other side effect, if the price of a pharmaceutical negatively impacts one’s rate of survival, then the cost of the drug could be an important component of clinical decision-making, and, presumably, the standard of care. Linking the cost of a drug to its clinical efficacy could have a dramatic impact on which drugs providers choose — giving Medicare a tool in its efforts to become a better gatekeeper of the public fisc — without relying on bureaucratic hard power or legal enforcement.

Using the burgeoning field of new governance, this piece focuses on how law and policy must shift to reflect the new understanding of financial toxicity. Arguing that the phenomenon finally provides a connection between cost and quality, this piece advocates for an instantiation of cost within the ethic of care. And like other quality control regulation, this new understanding could push providers into a gatekeeping role that could prove invaluable. As has been seen, this may provide a potential opening for a limitation on the ever-increasing price of pharmaceutical drugs, and — indeed, provides a powerful yet unarticulated legal signal that pharmaceutical drugs that cost too much harm the quality of care that American patients receive.

Keywords: health law finance, standard of care, health care fraud