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New Diabetes Drug Could Save on Costs for Patients and Insurers

Posted on Oct 05, 2012 by Sergio Ulloa ()  | Tags: Diabetes, Diabetes Medication

 On Wednesday, pharmaceutical company Merck announced the results of a clinical trial it conducted for a new once-a-week pill for sufferers of Type II diabetes.

 Although the pill, currently named MK-3102, still has to go through Phase III trials before it can be submitted for government approvals, after 12 weeks of treatments patients who took varying doses of the drug showed a significant lowering of their blood sugar levels.

 As the once-a-week pill is poised to replace current treatments that include daily pills or injections, it is viable to examine the potential effects of its development, not only on the patients it will treat, but also the medical and insurance industries in general.

World Health Organization statistics state that there are currently 346 million people with diabetes worldwide, and that 90% of those people suffer from Type II diabetes.

According to WHO statistics the countries that have the greatest number of diabetes cases in the year 2000 were India with over 31 million, China with over 20 million and the United States with over 17 million. These countries do not even represent the nations with the highest per capita incidences of diabetes. That distinction belongs to countries such as Indonesia, Saudi Arabia, Libya and Iran.

In the country with the highest number of cases of diabetes, India, it is becoming more and more common for the upper class to develop diabetes. In contrast to developed countries like the United States, where lower income families are more prone to obesity due to eating low cost, low quality food, in India it is the rich that eat fattening foods, gain weight and then become diabetic.

Health insurance, however, is not common for people of any social class in India. Although the rich do have the ability to pay for their diabetes-related medical needs for a longer period of time, the long-term costs associated with the disease is crippling families financially. Middle-class diabetics in India can expect to spend 25 percent or more of their income on medical expenses. Even those with health insurance will find that policies generally do not cover diabetes.

Some insurance companies in India, no doubt recognizing the size of the market and the rise in demand, now offer specialized diabetes coverages that cost anywhere between US$900 to $9,000 per month. These providers are shirking the law of averages that would dictate that this type of coverage is not feasible in a country in which 1 out of 8 adults has diabetes and there is a continually rising rate of occurrence. The WHO predicts that people with diabetes in India will number nearly 80 million by 2030.

Certainly new medications that will allow patients to more easily control their diabetes would be welcome in cases such as India's, but cost is going to be a major factor for acceptance of any new drug in a country that is still plagued by poverty in many areas.

Speaking on the new drug, Merck's Head of Diabetes and Endocrinology, Nancy Thornberry, was quoted as saying, "We think this is going to be a very attractive choice for patients who have a high pill burden. Any attempt to simplify the regimen for those patients is helpful."

In the United States, the American Diabetes Association reports that in 2007 diabetes carried a total direct medical cost of US$116 billion, which comes to an average of over $6,500 per case to be covered by individuals and their insurers.

Currently it can be difficult, if not practically impossible, for an individual to obtain health insurance coverage to cover a chronic condition like Type II diabetes because it is considered a pre-existing condition. However, in the United States, starting in 2014, insurance companies will no longer be legally allowed to refuse coverage to children and adults based on the presence of pre-existing conditions. This change is based on the provisions of the Patient Protection and Affordable Care Act signed into law by President Barack Obama.

As this change is going to force insurance providers to accept high-risk customers in much greater numbers, it will be important for them to find low cost solutions to chronic ailments like Type II diabetes since the Act also denies insurance providers the ability to charge more based on whether a customer is sick or not.

Currently, Merck's Type II diabetes pill offerings, Januvia and Janumet, are on track to account for US$6 billion in sales in 2012, but with new competition on the horizon and the US government alleging a connection between Januvia/Janumet and pancreatitis in its users, it is understandable that Merck would be interested in finding a replacement for its current offerings and push to quickly move MK-3102 forward.

According to biotechnology and pharmaceuticals analyst, Jon LeCroy, M.D., he expects MK-3102 to launch in 2015 and have worldwide sales of US$450 million in 2016. This figure pales in comparison to current sales of Januvia and Janumet, but whether the difference is related to a lower cost for the new drug, or simply due to low availability, remains to be seen. LeCroy also added that the drug "could become a mega-blockbuster."

As MK-3102 is not yet on the market, it is only possible to look at new drugs in general and the medical savings that are associated with their use. Dr. Frank Lichtenberg of Columbia Business School, who has won numerous awards for his research on the economic impact of various drugs, states that "the reduction in nondrug spending from using newer drugs is 122 percent larger than the increase in drug spending."

Seeing as Merck's new drug would drastically reduce the frequency with which patients would take medication, combined with the potential for some Type II diabetes sufferers to be able to switch from injections to oral medication for treatment, it is easy to imagine that savings could be significant to insurers and policyholders globally. If not immediately in the cost of the drug, then in the other costs surrounding the disease.

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