Cancer Drugs—Is there a Just Price?

Terrific article in the Journal of Clinical Oncology from May 6, Cancer Drugs in the United States: Justum Pretium—The Just Price by Kanturjian, Fojo, Mathisen and Zwelling .  The point of the article is that there is a disconnect between cancer drug prices and efficacy.  The authors propose a value based system for drug pricing. 

The paper notes the size of the U.S. health market, 2.7 trillion dollars/year, and the fact that we spend 18% of GDP on health care, $8,000/year/person.  This compares unfavorably with the costs in other industrialized countries which are at 6-9% of GDP.  When one considers the relative competitive advantage of one economic setting with another, this disparity is damning to U.S. competiveness. 

Yet the drug industry’s main goal is not an improvement in health care, or health care costs, but rather increased profits.  They have the protection of a generation long patent monopoly and the sky’s the limit if they can market the drug, even mediocre drugs, aggressively to users and physicians.  The point of the article is that physicians have some responsibility to look at prices and efficacy when prescribing.  They make the case for the revolutionary (sic) concept that there should be “value” in medicine.

They note:

  The prices of new anticancer agents seem to be decided by pharmaceutical companies according to what the market will bear.There is little correlation between the actual efficacy of a new drug and its price, as measured by cost-efficacy (CE) ratios, prolongation of patient life in years, or quality-adjusted life-years (QALYs).Compared with a decade ago, the price range of newanticancer agents has more than doubled, from$4,500 to more than $10,000 per month

Drug companies maintain that it now costs a billion dollars to bring a new drug to market.  This is an entirely made up figure without documentation and apparently includes “ancillary expenses, salaries, bonuses, and other indirect costs not related to research or development as well as an 11% compounded discount rate over 10 years based on stock market returns on capital investment.”  Yes 11%/year.

In the 70s cancer drugs cost a patient a couple of hundred dollars/month.  The price didn’t change much until the 90’s when new drugs approximated $1000/month.  By the early 2000’s prices were rapidly increasing so that today we’re in the range or $10,,000-$20,000/month and more for drugs, often of limited, if any, efficacy.    What’s missing from is the reality of a competitive market.   With the government handout of patent protection, drug companies have little competition or incentive to price new medications realistically.   It is a fact that we lead the world by a wide margin in the price we pay for most new cancer drugs

Other countries have kept their costs down by simply telling drug companies no on their pricing.  The companies then do the reasonable thing and charge less in order to be able to get into that countries market.  Guess what, they still make money, and lots of it.   In the world market, the U.S. is the big stooge, paying whatever is demanded without considering  value or for that matter the actual cost of development—but that’s another story. 

Medicynical Note:  Health reform will moderate drug pricing over time as we eventually adopt an approach that discriminates in favor of treatments that actually work. We need to  understand that costly drugs are not necessarily better.

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