Pricing cancer drugs: Shouldn’t it be based on indications and outcomes?

There must be a better way to price cancer drugs, a new JAMA editorial says  – and that’s to charge based on indication and efficacy. Right now, costs are based on the pharma’s business plan to recoup research expenses – but that’s not reflective of a drug’s quality, or ability to extend a patient’s life. “When costs are essentially […]

There must be a better way to price cancer drugs, a new JAMA editorial says  – and that’s to charge based on indication and efficacy. Right now, costs are based on the pharma’s business plan to recoup research expenses – but that’s not reflective of a drug’s quality, or ability to extend a patient’s life.

“When costs are essentially the same but benefit differs widely, value is not the same,” author Peter Bach writes.

Spending on specialty drugs – a class largely made up of cancer meds – was $73 billion last year, according to the IMS Institute for Healthcare Informatics. And last year, eight new cancer drugs were approved by the Food and Drug Administration. These new drugs, the JAMA article points out, cost between $7,000 and $12,000 per month.

Even policy makers are now realizing that when dealing with these high-priced drugs, price just isn’t currently linked to its benefits. And maybe it should be. The article says:

Most drugs for cancer, and for other life-threatening conditions, are used for multiple different indications with varying degrees of efficacy. Yet the prices of these drugs are fixed, making whatever value the drug delivers in one indication different from the value it delivers in another.

The American Society of Clinical Oncology recently announced that it will develop scorecards of different cancer treatments, JAMA says, ranking them by their benefits, adverse effects and costs. The National Comprehensive Cancer Network is working to publish treatment costs as well, to use it as a bar to gauge a drug’s efficacy alongside the conventional measures like treatment outcomes, toxicity and the outcomes of the clinical research data.

This (crude, the author concedes) table is (still) pretty illustrative of the argument and hypothetical solution:

Bach offers an alternative:

This system could be modified. Intermediaries, such as pharmaceutical wholesalers or pharmacies, could develop arrangements with manufacturers at agreed-upon prices for each indication, and drugs when sold could be appropriately allocated, with the appropriate charges and co-insurance attached. Prescribing physicians, either through prior authorization, as part of the prescription, or both, would report the indication for each patient.

Categories for ordering, prescribing, price tracking, and reimbursement would be based on the drug with its indication, rather than the drug alone. For instance, for drugs dispensed by a pharmacy, the drugs would be linked to their intended use and price and co-insurance could be reconciled when the drug is dispensed. Infused drugs could be distributed and coded based on their indications, to accommodate the process of physicians and hospitals buying and then billing after the drug is administered.

 

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