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A recent article in Kaiser Health News has left me thinking about healthcare in the U.S. There are diseases that only affect a small number of people. Cystinosis, which impacts about 500 Americans, is one such life-threatening illness.

This rare disease results in the accumulation of the amino acid cysteine and eventually leads to abnormal amounts of carbohydrates and amino acids in the urine. According to the Cystinosis Research Network, “Cystine crystals accumulate in the kidneys, eyes, liver, muscles, pancreas, brain, and white blood cells. Without specific treatment, children with cystinosis develop end stage kidney failure at approximately age nine.”

How can a for-profit industry like the pharmaceutical sector possibly afford the research and development costs for a drug that can effectively treat such a narrow population? Leave it to American ingenuity. Affected families got together and raised the research costs to find the drug. They then convinced a pharmaceutical manufacturer to steer it through the Food and Drug Administration approval process — a lifeline for children with cystinosis and their families. The FDA cooperated with extended patent life. Great news!

Not so fast. Here is where it gets ugly: The drug was priced at $300,000 per year and the original manufacturer, Raptor Pharmaceuticals, was soon sold to another profiteering entity, Horizon Pharma. They in turn raised the list cost to more than $1,000,000 per year. As the article states, the cost after rebates and discounts to pharmacy benefit managers averages $486,000 per patient annually.

The affected families are relieved to have access to this drug, but astounded at the prices. “I feel like it’s all about the bottom line,” Denice Flerchinger, who has a daughter with cystinosis and was an early fundraiser for the drug, told Kaiser Health News. “I don’t think any of us thought they could do this and get away with it.”

Not to worry though — these costs are paid by the healthcare system and the manufacturer takes care of any deductibles and copays if the patient can’t afford them.

See also: To beat PBMs, Amazon will have to join them first: Pharmacy CEO

I can understand that the manufacturer should be rewarded, but to what extent? And who pays for this excessive profit? We all do — through higher insurance rates, taxes and costs to businesses that must increase their prices in order to pay those premiums. And what about that $514,000 average discount and rebate? That soft and non-transparent excess cost is spread around to PBMs, health plans and insurers.

Clearly this innovation should be recompensed, and I advocate doing so in a transparent manner. How about more reasonable drug costs that don’t create a burden to the health plans unlucky enough to acquire one of these cystinosis patients? Manufacturers should receive a federally funded innovation award. And rebates should be outlawed.

This is a simple solution that can improve the U.S. healthcare system.

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Pharmaceuticals Pharmacy benefits Pharmacy benefit management Healthcare costs Healthcare plans Healthcare industry