Why can’t we get a handle on these ever-inflating cancer drug costs? Here’s your simplified answer: Fuzzy math.
A top oncologist’s criticisms of cancer drug costs seems to have hit a nerve among the scads of doctors and cancer execs at ASCO. Because at the end of the day, we don’t have a solid grip on what cancer therapies cost, just that:
“These drugs cost too much,” said Leonard Saltz, an oncologist at Memorial Sloan Kettering Cancer Center, according to the Wall Street Journal. He cited some pretty jarring statistics (though they’re ones we’ve all heard) – that the new cancer drugs have more than doubled in cost in a decade. That the cost hikes aren’t reflective of increases in efficacy.
With the Rise of AI, What IP Disputes in Healthcare Are Likely to Emerge?
Munck Wilson Mandala Partner Greg Howison shared his perspective on some of the legal ramifications around AI, IP, connected devices and the data they generate, in response to emailed questions.
“Cancer-drug prices are not related to the value of the drug,” Saltz said. “Prices are based on what has come before and what the seller believes the market will bear.”
That hits the nail on the head. Matthew Herper over at Forbes opined on Saltz’s “blistering talk,” and cites that issue of inexact math:
The fuzziness on this math helps to actually highlight the problem, though. We don’t even have good figures on what these drugs cost! And that’s a result of a healthcare system where the laws of economics can work backward.
Take that widely cited $2.6 billion figure: This is the projected amount it costs these days to develop a drug, according to the Tufts Center for the Study of Drug Development. A recent piece in JAMA criticized the costs for drug development – saying the pharma industry benefits from keeping cost estimates high, because it justifies the practice of continually adding to the costs of drugs.
A Personalized Approach to Medication Nonadherence
At the Abarca Forward conference earlier this year, George Van Antwerp, managing director at Deloitte, discussed how social determinants of health and a personalized member experience can improve medication adherence and health outcomes.
It’s a smoke-and-mirrors approach. Widespread perception that development costs price out at $2.6 billion per drug – up from the Tufts 2003 estimate of $800 million – has helped breed justification for hiking up drug prices to, say, $300,000 a year like Kalydeco. It also helps extend windows for marketing exclusivity, said Dr. Jerry Avorn, the study’s author and a professor of pharmacoeconomics at Harvard:
Since the figure’s release, it has been used to justify the cost of several expensive medications and to support longer periods of marketing exclusivity for new drug products. These arguments are based on the proposition that drug companies (which are major supporters of the Tufts center) must be helped to recoup the huge capital needs required to discover the cures of tomorrow.
The Forbes piece points out that FDA approval is based on a drug’s efficacy – cost doesn’t come into the equation. By extension, Herper points out, the Centers for Medicare and Medicaid Services isn’t even allowed to evaluate cost when it decides which drugs it should cover. It’s clear why we can’t get a handle on drug pricing: There are just too many unknowns. Herper writes:
There is a cut point, [Saltz] likes to say, somewhere between paying $1 billion for a month of life and paying $500 for five years of life. We just need to find it.
I don’t agree that our national inability to face death is the main problem here. Instead, it’s the baroque system of paying for medicines that we’ve created because of our fear of socialist price controls.
Preach.
[Photo: Flickr user AgitPropDevices]
