The high cost of new cancer drugs

ASCO Post

In Search of ‘Just’ Prices: Questioning the High Cost of New Cancer Drugs

A Conversation With Hagop M. Kantarjian, MD

By Ronald Piana
April 25, 2015, Volume 6, Issue 7



Hagop M. Kantarjian, MD

As the oncology community begins the slow and often difficult-to-define transition from volume to value in the delivery of cancer care, the relationship between the price and value of certain high-priced cancer drugs is getting more scrutiny. We generally correlate the efficacy of a new drug and its price by complicated cost-efficacy ratios or quality-adjusted life-years. To shed light on this important issue, The ASCO Post recently spoke with nationally regarded leukemia expert Hagop M. ­Kantarjian, MD, Professor, Department of Leukemia, The University of Texas MD Anderson Cancer Center, Houston.

Defining Benefit

In our cost-constrained health-care system, what counts as a benefit in cancer treatment?

Even as we are looking at treatment value, it is important to note that in most cancers we are far from curing patients with effective and optimal therapies that produce maximum efficacy with minimal toxicity. Therefore, I would consider a benefit in cancer treatment as any metric that improves survival or other parameters important to the patient, such as improved well-being and quality-of-life measures.

We should not restrict our evaluation of benefit to one parameter. It needs to be an across-the-board assessment of multiple clinical endpoints that determine the treatment’s overall contribution to the condition of the patient.

Cost and Decision-Making

How much should cost of oncologic agents factor into a physician’s treatment decisions?

The data show that cancer patients want their oncologists to make treatment decisions based on the most effective treatment, regardless of the price. Everyone understands that the rising costs of cancer treatments contribute to the fiscal dangers faced by our health-care system. But in the intimate doctor-patient setting, it’s all about delivering the best care to our vulnerable cancer patients.

Cost discussions should be reserved for the larger public forum. It is an essential public health debate, because currently there is little correlation between the actual cost of a cancer drug and its price.

Free-Market Pricing

A growing number of oncologists have been questioning the high costs of new cancer drugs. What’s your opinion on this difficult issue of pricing in a free-market system?

In many cases, pharmaceutical companies make excessive profits on the cancer drugs marketed in the United States. For example, U.S. drug companies make very good margins in Europe and elsewhere, despite the fact that most countries outside the United States have government- and other entity-sponsored negotiations to reduce and control the price of cancer drugs. We have no such price controls in the United States.

At the recent American Society of Hematology (ASH) meeting, an expert contended that the cost for cancer drugs outside the United States is only 30% lower than in the United States. This is a misleading data point, because it conflates the prices of both patented and generic drugs. Outside the United States, generic drugs are indeed more expensive because they don’t use the average sales price-plus-6% formula in their cost valuation. No matter how you spin the data, U.S. cancer patients pay 50% to 300% more for patented cancer drugs than cancer patients in Europe and other regions.

Furthermore, many of the patented cancer drugs entering the U.S. market are priced at more than $100,000 per year. In my opinion, no cancer drug should cost more than $40,000 per year. That would be an equitable price for a drug that prolongs life for 1 year and would offer the drug company reasonable profits without crossing the line into profiteering from an unjust price.

The current drugs that cost more than $100,000 are priced in excess of their value, and this unwarranted pricing trend is harming our patients and causing personal and social injustice. Depending on the value in survival and/or quality of life, cancer drugs should be priced from about $10,000 to $40,000.

Research and Development Costs

Pharmaceutical companies routinely justify the high costs of their drugs as necessary to defray the large investment in research and development (R&D). Do you feel that explanation accurately explains the costs of new cancer therapies?

I believe that the R&D outlay as it relates to drug costs is misinformation. Many companies have used $1 billion as their cost to bring a drug from the lab to the market; however, many pharmaceutical company CEOs are now backtracking from that extraordinary number because it includes, among other things, 11% compounded interest annually for 15 years.

It also includes government rebates for such things as orphan drugs, and it cites the mean cost of developing the drug as opposed to the median, which increases the cost by another 30%. I’ve studied and written on this subject, and I’d venture that the cost of R&D is about 10% of what numerous companies cite.

Instead of justifying high costs of drugs because of R&D expenses, companies should be exploring ways to reduce their R&D costs, such as developing more intelligent trial designs, having discussions with the U.S. Food and Drug Administration (FDA) about reducing unnecessary administrative work, and other factors that slow the process and add superfluous costs. There are many ways to reduce cost that won’t compromise the quality of the drug development process.

Bar for Approval

Many of the new biologics have been approved based on endpoints other than overall survival, such as objective response or progression-free survival. Some argue that these endpoints allow drugs with little true benefit for survival or symptom relief to reach the market; therefore, we should raise the bar for approval. What is your opinion on this issue?

I would argue the opposite; I think we should lower the approval bar and get more drugs to the market. For example, in acute myeloid leukemia (AML), because the approval bar has been raised so high, the FDA has not approved a single drug for AML in more than 3 decades.

I believe that overall survival should not be the only endpoint for approval. We should consider event-free survival, response rate, quality-of-life parameters, and other factors. We should have as many FDA-approved agents on the market as possible, because once drugs are approved, they are available to outside investigators to explore using the drugs in different combinations and other tumors, which could lead to discoveries that were missed by the original researchers.

Out-of-Pocket Expenses

Medical debt is a growing problem in today’s health-care environment. Out-of-pocket copays for expensive cancer drugs are a real challenge for many patients. Is there a way to challenge the status quo that sets the prices of cancer drugs?

As mentioned, most of the new drugs being approved cost more than $100,000 per year, so out-of-pocket copay expenses for, say, the average family income of $48,000 is a crushing financial burden. If you look at seniors, whose average annual income is about $32,000, their copays for cancer drugs have driven many into bankruptcy. In short, out-of-pocket expenses for cancer care are preventing some patients from accessing care and harming many others.

In my opinion, we should vigorously find ways to totally eliminate out-of-pocket expenses for cancer patients. This isn’t a unique idea. For example, in my home country of Lebanon, cancer care is delivered without any out-of-pocket expenses. If patients can’t pay for the drugs, the government foots the bill. I think in the United States, we should find a way to achieve zero out-of-pocket expenses for patented cancer drugs.

Social Responsibility

Any last thoughts on drug pricing?

It’s not as complicated an issue as it might seem. But as a growing number of oncologists voice concern about the costs of cancer drugs, we’ll see a public relations campaign by the pharmaceutical industry to justify the prices of these drugs. The central argument is that if they are constrained in pricing, it will stifle valuable innovation. The reality is that since 2000, the pharmaceutical industry has discarded their social responsibility to provide cancer therapies at a just pricing level that patients can afford.

Nobody is against reasonable profit, but since the Medicare Modernization Act of 2003 and the legislation of Medicare Part D, which made drug companies the sole arbiter on pricing, we’ve seen an alarming increase in drug prices that is harming our patients and our health-care system. As physicians guided by the Hippocratic oath, it is up to us to stand up for our patients and counter the people and institutions that have a vested interest in keeping cancer drugs priced at an artificially inflated rate. As doctors, we should be strong advocates for our patients. ■

Disclosure: Dr. Kantarjian reported no potential conflicts of interest.