There is an inconvenient truth when it comes to the cost of new cancer therapies in the United States: The median U.S. household income from 2009 to 2013 was $53,046, according to the United States Census Bureau,1 but many of the most recently approved anti-cancer treatments approved by the United States Food and Drug Administration (FDA) are priced well above $100,000 per year. The average American with cancer can do the math and come to the same conclusion that some oncology experts are coming to: Cancer drugs are priced too high.
“In my clinic, two out of five patients with leukemia are having problems with affording drugs for treatment, so they compromise on their treatment or don’t take it at all,” said Hagop M. Kantarjian, MD, professor and chair of the leukemia department at the University of Texas MD Anderson Cancer Center. “High cancer drug prices cause harm because patients cannot afford them, pay excessively, or die of cancer – creating differential injustice between vulnerable patients who cannot take treatments and will likely die, and wealthy patients who can afford drugs and will likely live.”
Dr. Kantarjian, along with some of his colleagues in the oncology arena, have begun to speak out publicly against the high cost of cancer therapeutics. Although cancer therapeutics is in what many consider to be its greatest period of discovery yet, these experts are worried that the unchecked pricing of cancer drugs as they come to market will become unsustainable to the national health-care system.
In their most recent effort to drive attention to this problem, Dr. Kantarjian has been calling attention to a patient-driven petition on Change.org, “Protest High Cancer Drug Prices so all Patients with Cancer have Access to Affordable Drugs to Save their Lives,” asking the Secretary of Health and Human Services, the U.S. Congress, and President Barack Obama to consider the petition and address high cancer drug prices by implementing a series of outlined strategies (see SIDEBAR).2
ASH Clinical News recently spoke with Dr. Kantarjian and others about advocating on behalf of patients for lower drug prices and the realities of implementing meaningful change in this arena.
Why Are Prices High?
According to a study of the pricing of anti-cancer drugs launched between 1995 and 2013, controlled for inflation and survival benefits, the launch price of anticancer drugs has increased by 12 percent, or about $8,500, per year.3 Investigators, including Rena M. Conti, PhD, a health economist and assistant professor at the University of Chicago departments of pediatrics hematology oncology and public health sciences, also calculated the price per life-year gained (the price per treatment episode in 2013 dollars divided by survival benefits).
“The price per life-year gained can be thought of as a ‘benefit-adjusted’ price,” Dr. Conti told ASH Clinical News. “The sample average is $150,100 per year of life gained. Put another way: In 1995, patients and their insurers paid $54,100 for a year of life; a decade later, in 2005, they paid $139,100 for the same benefit; and, by 2013, they paid $207,000.”
“What that suggests to us is that we are spending much more money now for exactly the same amount of benefit as we received in 1996,” Dr. Conti said.
What forces are responsible for the inflated prices of launching new cancer drugs? According to Dr. Conti, the answer is “generous” insurance coverage that insulates patients from drug prices and strong financial incentives for physicians and hospitals to use novel products. In addition, Medicare is required to cover all “reasonable and necessary” medical services, and, therefore, pays for all anti-cancer drugs, whether they are used for an FDA-approved cancer indication or used off-label.
“Furthermore, the growing 340B Drug Discount program requires drug makers to offer discounts of up to 50 percent on all outpatient drugs to hospitals and clinics that serve indigent populations,” Dr. Conti said, adding that drug makers may offset the profits lost to this program by setting higher prices elsewhere.
Finally, Dr. Conti also suggested that even though physicians “may be reluctant to prescribe medicines with prices that exceed subjective standards of fairness,” doctors can also become “habituated to rising prices,” which gives drug makers the “leeway to set even higher prices in the future” – an incentive called “reference pricing” in the economics literature.
A Drug Maker’s Market
Much of this increase in drug prices can also be pinned on the lack of competition in the cancer drug market. There are few equivalent drugs to treat any given cancer, reducing competitive pricing pressure, according to S. Vincent Rajkumar, MD, the Edward W. and Betty Knight Scripps Professor of Medicine at the Mayo Clinic in Rochester, Minnesota. For example, if there are 20 medications available to treat pneumonia and a patient takes one that is affordable and effective, then the other 19 medications will not sell. But with cancer drugs, he said, there is almost zero relationship between price and quality, and market competition does not factor into pricing.
“If a patient has multiple myeloma and there are four drugs to treat it, it does not mean that the patient can use drug A and doesn’t need drugs B, C, and D,” Dr. Rajkumar further explained. “Each drugs works for a while and then stops working. Drug companies know that and can price their drugs high because every patient will likely have to go through every drug.”
According to Dr. Kantarjian, the trigger for the recent increase in cancer drug prices was the Medicare Prescription Drug, Improvement, and Modernization Act of 2003,4 which prevented Medicare, the largest U.S. payer for anticancer drugs, from negotiating on drug prices for drugs covered under the Part D benefit.
This has made pharmaceutical companies like “a kid in a candy store,” Dr. Kantarjian said, with most newly approved drug prices being set based on “reference pricing” or the use of the price of the last similar drug in the market, plus an increase of about 10 to 20 percent.4
Unfortunately, the increasing drug prices are not necessarily associated with an increased survival benefit, Dr. Rajkumar said. As an example, while one of the most recent drugs approved for multiple myeloma had only modest efficacy with substantive concerns about safety, but is priced at the same level as a life-saving drug that significantly prolongs survival, he said.
Stifling Innovation: A Potential Side Effect to Lowering Prices
“The ability to charge high prices drives pharmaceutical manufacturers’ investment into cancer drugs,” said Dr. Conti. According to recent statistics from the Pharmaceutical Research and Manufacturers of America (PhRMA), she added, “There are nearly 800 novel cancer drugs currently in development.”5
A common justification given for the high cost of cancer drugs is the high cost of research and development that is required to bring a drug to market, with the commonly cited sum of between $800 million and $1 billion.
Over time, manufacturers’ research and development costs have increased as well. As more drugs come to market, the number of unexploited targets for anticancer therapy shrinks, requiring firms to invest more to develop new drugs. “However,” Dr. Conti said, “research and development costs are sunk at the time of product launch, so they ought not to factor into the pricing decisions of a profit-maximizing firm once the product has been developed.”
Drs. Kantarjian and Rajkumar also questioned the accuracy of this drug development price tag, with Dr. Kantarjian estimating that the cost of research and development is about 10 percent of the amount cited by pharmaceutical companies. In addition, these numbers are often inclusive of the costs of developing not only the successful drug, but any other drugs that failed during development.
“The cost of development doesn’t work that way in any other industry,” Dr. Rajkumar said. “Everything costs lots of money to develop and there are winners and losers. That is what capitalism is about.”
A Federal-Level Problem
However, Dr. Rajkumar does not blame pharmaceutical companies for trying to earn as much as the market will bear. Instead, he and others in support of the Change.org petition are advocating for governmental agencies to enact legislation that puts limits on drug prices.
One of the strategies listed in the petition calls for legislation that prevents drug companies from delaying access to generic drugs. The first generic company in the U.S. market to offer a generic drug gets six-month exclusivity on the offering, but instead, pharmaceutical companies may identify the generic manufacturer and offer them incentives to stay out of the market for a period of time.
One example of this flawed system, according to Dr. Kantarjian: The patent on imatinib was originally set to expire in July 2015, but a recent settlement of a patient litigation case between Novartis and the generic manufacturer, Sun Pharmaceuticals, has delayed the generic release until February 2016.6 This seems to be a case of “pay for delay,” he said, and estimated that it could cost the U.S. health-care system another $3 billion.
Another strategy listed in the petition calls for allowing the Centers for Medicare & Medicaid Services (CMS) to negotiate drug prices, a right that the U.S. Department of Veterans Affairs currently has. The petition also suggests that organizations such as the Patient-Centered Outcomes Research Institute (PCORI) be able to include drug prices in their assessment of the value of drugs. The creation of a post-FDA approval mechanism or group that could estimate or propose fair prices for a new treatment based on its value to patients would also be a step in the right direction toward curbing skyrocketing cancer drug costs.
“Right now PCORI is asked to evaluate drugs that are FDA-approved based on their benefits but is not allowed to discuss drug prices,” Dr. Kantarjian explained.
However, Dr. Conti questioned how exactly CMS would act on this suggestion even if given the power to do so by Congress. “The CMS, the FDA, and PCORI have been explicitly prohibited from considering the prices of these drugs when reviewing them for benefits, safety, approval, and coverage decisions,” she said. “From a practical standpoint, it is unclear how they would consider prices and the costs of drugs given the enormity and complexity of their current responsibilities.”
“It also seems unrealistic to give federal agencies these responsibilities when we have institutions in place that do a really good job of extracting discounts and rebates,” she added.
Instead, Dr. Conti suggested that health-care systems take advantage of pharmacy benefit managers and group purchasing organizations (third-party administrators that act as intermediaries in negotiating drug prices for health-care systems), and work to better align physician incentives for expensive new drugs with payers’ incentives through pathway programs and promotion of cost or price awareness relative to outcomes.
“The pharmaceutical industry is poised to introduce many new cancer drugs in the next couple of years — some of these new drugs will provide significant improvements in mortality and quality of life for patients and their families,” Dr. Conti said. “To pursue a set of policies that will act as price controls and stifle innovation at a time when we are just about to see fruition in these investments is counterproductive.”
However, Dr. Rajkumar disagreed that these government agencies could not handle issues of cost.
“We are entrusting the government to decide which drugs to approve and which not to,” he reasoned. “It is not a stretch to say that they be able to set a target price based on what the drug has to offer since they are giving the companies a right to exclusivity for many years. This is what most other developed countries do.”
“Although they work for the government, the people at the U.S. FDA who decide on drug approvals are medical doctors and health professionals – not politicians,” Dr. Rajkumar stated.
Time to Start Advocating for Patients
To date, many physicians have been shielded or sheltered from the issues of cost, but that has to change, according to Dr. Kantarjian. Specifically, the financial toxicity of high anti-cancer drug prices violates an important aspect of the Hippocratic Oath: “First, do no harm.”
“High prices are harmful and unjust, and hematologists have to get involved,” Dr. Kantarjian said. “They have to start advocating for more reasonable drug prices – for patients and the drug manufacturers – that make these drugs available and affordable to all patients with cancer.”
Although it may not affect the price of cancer drugs at its source (the manufacturers), physicians interested in helping improve patient access to high-cost drugs can also get involved in advocating for change. ASH is currently supporting two pieces of legislation that address issues related to the high cost of medical treatments.
First, the new Patients’ Access to Treatments Act (H.R. 1600) is designed to limit cost-sharing requirements for medications placed in specialty tiers.7 Most people are familiar with the pharmacy benefit tier system in place for patients to receive drugs: Tier 1 is generic; Tier 2 is preferred; and Tier 3 is non-preferred/brand name. However, more and more payers are placing expensive or complicated therapies into newly instituted “specialty tiers,” according to Johanna Gray, MPA, vice president of Cavarocchi, Ruscio, Dennis Associates, a government relations, public policy, and strategic development firm that works with ASH.
“Cancer drugs, clotting factors, and other expensive drugs that require special administration tend to appear on specialty tiers,” said Ms. Gray. “This means that instead of a flat dollar co-pay, patients are required to pay a percentage of cost, which can range from 30 to 50 percent. The Patients’ Access to Treatments Act would prohibit insurers from charging more in cost-sharing in Tier 4 or Tier 5 than they do for drugs in Tier 3.”
The second bill looking to curb the high cost of cancer drugs is the Cancer Treatment Parity Act, which would “require a group or individual health plan providing benefits with respect to anticancer medications administered by a health-care provider to provide no less favorable coverage for prescribed, patient-administered anticancer medications used to kill, slow, or prevent the growth of cancerous cells and that have been approved by the FDA.”8
“IV chemotherapy tends to be covered under a plan’s medical benefit with patients paying the office visit co-pay of $20 or $30. Chemotherapy is increasingly patient-administered with either an oral pill or a self-injectable, and those medications are covered under the pharmacy benefit,” Ms. Gray explained. “These medications tend to appear on specialty tiers, requiring patients to cover more of the cost.”
Likelihood of Success
When asked about the likelihood of these patient advocacy efforts having an effect on drug prices, Dr. Kantarjian said that he is confident that the patient-driven petition (if it gathers enough signatures) will bend the curve of high drug prices downward; however, Dr. Rajkumar is not as optimistic about change.
“Almost every one of the suggested solutions in the petition requires an act of Congress, and that is why change may require a grassroots effort,” Dr. Rajkumar said.
Plus, except for a few outspoken physicians and patient advocacy groups, Dr. Rajkumar said that there are no obvious concerned parties fighting for lower drug costs. For physicians in the academic realm, speaking out against drug costs and pharmaceutical companies may be damaging to their careers; physicians in private practice sometimes have financial incentives to give more expensive drugs in their infusion suites. On the other hand, many insured patients do not bear the full brunt of these high prices.
“These patients have paid premiums faithfully their whole life, and when they get cancer they don’t want someone telling them that don’t have access to a drug because it is too expensive,” Dr. Rajkumar said. “People with a $25 co-pay may not be as upset that a drug cost $10,000 per month as those who don’t have insurance or are underinsured.”
But Dr. Kantarjian said that, in reality, everyone should be concerned.
“Cancer affects one in three individuals in their lifetime, and the average nuclear family number is four, so the possibility that cancer will happen within a family is high,” he said. “In almost every family and certainly in every extended family, someone will have cancer. The cost of cancer drugs is affecting them all; it is time that we addressed the issue.” — By Leah Lawrence
1. United States Census Bureau. State & Country QuickFacts. Accessed April 22, 2015 from http://quickfacts.census.gov/qfd/states/00000.html.
2. Change.org. Protest High Cancer Drug Prices so all Patients with Cancer have Access to Affordable Drugs to Save their Lives. Accessed April 22, 2015 from https://www.change.org/p/secretary-of-health-and-human-services-protest-high-cancer-drug-prices-so-all-patients-with-cancer-have-access-to-affordable-drugs-to-save-their-lives?recruiter=239495071&utm.
3. Howard DH, Bach PB, Berndt ER, Conti RM. Pricing in the market for anticancer drugs. National Bureau of Economic Research, 2015.
4. Medicare Prescription Drug, Improvement and Modernization Act of 2003. Public Law 108-173. 108th Congress.
5. Pharmaceutical Research and Manufacturers of America. Medicines in Development: Cancer. PhRMA’s Communications and Public Affairs Department, 2014.
6. Conti RM. “Why are cancer drugs commonly the target of numerous schemes to extend patent exclusivity?” Health Affairs weblog. December 4, 2013. Accessed April 22, 2015 from http://healthaffairs.org/blog/2013/12/04/why-are-cancer-drugs-commonly-the-target-of-schemes-to-extend-patent-exclusivity/.
7. Patients’ Access to Treatments Act of 2015, H.R.1600, 114th Congress (2015-2016).
8. Cancer Treatment Parity Act of 2013, S.1879, 113th Congress (2013-2014).
A Grassroots Movement to Make Life-Saving Cancer Treatments Affordable to all Cancer Patients
In the Change.org petition, “Protest High Cancer Drug Prices so all Patients with Cancer have Access to Affordable Drugs to Save their Lives,” that Hagop M. Kantarjian, MD, has been promoting several strategies to combat high cancer prices are outlined:
- Allow Medicare to negotiate drug prices by removing all current legal restrictions. Allow Medicare to have the same right to negotiate drug prices as the U.S. Department of Veterans Affairs now enjoys.
- Allow the importation of cancer drugs across U.S. borders, for personal use. Prices in Canada are sometimes close to 50 percent less than what we pay for the exact same cancer drugs in the United States.
- Enact and sign into law, new federal legislation that prevents drug companies from delaying access to generic drugs (“Pay-for-Delay”) and extending the life of drug patents (Patent “Evergreening”).
- Create a post–FDA drug approval mechanism/organization/group of concerned parties (that include the strong voice of patients and their advocates) to estimate/propose a fair price for the new treatment, based on its value to patients and health care.
- Allow organizations such as the PCORI – the Patient-Centered Outcomes Research Institute (a nonprofit, nongovernmental organization located in Washington, DC created by the Patient 6. Protection and Affordable Care Act) – to include drug prices in their assessments of the value of drugs and treatments.
- Request that nonprofit organizations that represent cancer specialists and their patients develop guidelines to incorporate prices of drugs relative to treatment value.
Source: Change.org petition