Market Barriers to the Development of Pharmacotherapies for the Treatment of Cocaine Abuse and Addiction: Final Report. Critical Barrier 3: Limited and Uncertain Payment for Treatment


Another critical market barrier is the uncertainty surrounding the reimbursement of cocaine abuse and addiction treatment. The pharmaceutical company respondents, as well as one from a VC firm, voiced their concern over the heavy reliance of the substance abuse market on federal and state government reimbursement. The perception among the drug companies is that many cocaine addicts do not have private insurance and rely on Medicaid for treatment, and that only a portion of those individuals with private insurance use their benefits for drug abuse treatment. This perception is consistent with the 1995 TEDS data (described earlier in report) that found over 68 percent of enrolled cocaine abusers had no health insurance, and an additional 17 percent had Medicaid coverage. One pharmaceutical company noted that substance abuse services continue to be subsumed under mental health benefits of entitlement programs, and that the overall budget for mental health services continues to shrink in light of other competing health priorities.

Reimbursement was an issue for LAAM, naltrexone, and clozapine. Treatment for heroin addiction (e.g., LAAM and naltrexone) has been funded primarily through federal and state budgets, making reimbursement difficult for pharmaceutical companies. In the case of clozapine, many public payers (e.g., Veteran's Administration, several state Medicaid agencies) refused to pay the additional cost of purchasing the Clozaril Patient Monitoring System ($9,000) before Sandoz uncoupled the drug and the monitoring system.

As reported in our market analysis, price sensitivity to a cocaine medication is another aspect of payment that may be a critical market barrier because price resistance may limit market size. As no approved pharmacotherapy for cocaine abuse has been tested on the market, it is not possible to know how sensitive the market would be to such a medication. However, indirect available evidence from other substance abuse medications (e.g., LAAM, naltrexone) and the current nature of cocaine abuse treatment and its financing would appear to indicate that the market would be very sensitive to the price of a cocaine medication. In a market where the average daily treatment cost is a modest $9.00 per outpatient and $23.00 per inpatient, a cocaine pharmacotherapy priced at a daily dose of a few dollars would represent a significant proportionate cost increase. This may be particularly so in the estimation of substance abuse treatment providers that are vested in psychosocial approaches to the exclusion of pharmacotherapy. It is important to note that the price sensitivity of the current treatment system may vary considerably from that of more typical pharmacotherapy markets that involve physician prescribing and distribution through pharmacies.