In 1995, cancer drugs cost $54,100 for each year of life they were estimated to add. By 2013, these drugs shot up to $207,000, according to a new MIT study.
It’s no mystery that drug costs are on the rise – but when you quantify these numbers, they’re numbingly high: Since 1995, a group of 58 drugs have had a 10 percent cost increase annually – about $8,500 higher each year. The paper does point out that patients seem to be getting what they pay for: The more effective the drug, the more costly it is. But it’s a small gain – outcomes are still measured in months, not years, when it comes to patient lifespan improvements. The study included this chart:
So why the steep year-over-year cost increases? Part of the reason’s that drug companies can increase the cost of their drugs at launch, thanks to market dynamics. When a company introduces a cancer drug that’s incrementally better, it’ll make the cost incrementally higher. Government-mandated helps drugmakers keep the costs higher, actually – and insurers tend to bear the brunt of the cancer drug costs. That’s because many late-stage cancer patients hit their payment maximums quickly, and then insurers wind up paying the full costs of the cancer drugs. This makes patients indifferent about whether they’re using a $20,000 drug or a $100,000 – even if the health benefits are minimal.
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“If insurers restricted coverage to drugs that improved survival time by an economically significant amount, perhaps there would be more of them,” the study says.
Some argue that even though cancer patient lifespans have only increased incrementally in two decades, the body of scientific knowledge has grown exponentially in the same timeframe – and ultimately, this will help researchers develop truly effective drugs. However, critics say that the current patent and reimbursement issues could stymie manufacturers’ interest in developing drugs that have more meaningful survival rates. The study sums up the problem quite succinctly:
To supporters of the US health care system, new anticancer drugs are a potent symbol of progress and represent the type of innovation that would be squelched if Medicare and other US insurers denied coverage to costly treatments. To critics, the pricing of new anticancer drugs represents the worst excesses of a system that provides few checks on drug companies’ pricing power and prioritizes gains in health, however small, over cost control. Policymakers are quick to agree that the health system should discourage use of ineffective treatments, but it is unclear how regulators, insurers, and physicians should approach treatments that are more costly but also offer small incremental benefits.
The study points out, however, that this all represents a greater social tolerance for rising health-related spending. People are getting used to this trend.
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“I think the value of good health has really increased enormously over the last few decades,” Ernst Berndt, an MIT economics professor and co-author to the study, said in a statement. “We treasure it and are willing to pay a fair bit for that.”
