July 2015, Special ASCO Edition

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Searching for the Tipping Point in Drug Pricing

Value-Based Cancer Care

Leonard Saltz, MD, Chief of Gastrointestinal Oncology Service, Memorial Sloan Kettering Cancer Center, New York City, was given a prominent soapbox from which to voice his concerns about the rising cost of cancer care. At the plenary session, Saltz was asked to share his perspective on the rising costs of care.

“There’s a tipping point that we have to be willing to search for,” he said.

Costs are unsustainable on both the national and individual levels. He figured that the cost of treating 1 patient with a new combination immunotherapy regimen could hit $1 million, and that the typical patient’s out-of-pocket expense for this treatment would be $60,000.

Patients are increasingly unable to meet the demands of high co-pays and high deductibles, he pointed out. “This year, the premium for a family insurance plan plus out-of-pocket healthcare costs will equal approximately half the average US household income,” he noted. “If we carry this to its illogical extreme, by 2028, 100% of household income would be needed to cover insurance premiums plus out-of-pocket costs.”

Cancer Drugs Launch at Higher and Higher Prices

Two decades ago, the median monthly cost for a new cancer drug was only $1770. That rose to $7000 for the years 2005 to 2009 and had nearly topped $10,000 a month by 2010. The programmed death-1 inhibitor pembroliz­umab, at its indicated dose of 2 mg/kg, was priced at $16,700 a month—but higher doses are pushing the price even higher, he noted.

Why the high price tag? It has been argued that profit will help drive future innovations. However, Saltz was not convinced, pointing out that the full investment cost for the hepatitis C drug sofosbuvir was recouped within the first year of sales. And it’s not just innovative drugs that cost so much; there is no difference between the median price of a new drug and a “me too” drug, he indicated.

Of 51 drugs approved for 63 indications between 2009 and 2013, fewer than half had a novel mechanism of action, and 30 were next-in-class drugs. Their median price per year of treatment was $116,100 and $119,765, respectively.

Nor do prices reflect the development cost or the cost of competition. A good case in point is imatinib. Since entering the market, its price has steadily risen, despite the entry of new drugs and an expanding market with new indications. The drug’s average cost per day jumped from less than $100 in 2004 to more than $225 in 2013, he noted.

Finally, cost is clearly not related to efficacy in terms of progression-free or overall survival, he emphasized.

“Results suggest that current pricing models are not rational but simply reflect what the market will bear,” Saltz concluded.

Is a Year of Life Priceless?

“Value” and “benefit,” he noted, are not the same thing. “We get enormous benefit from these drugs, but value is not just about benefit. It’s not a direct equation. It’s more a ratio and approximation. The more the benefit, the more the value, but the downside in value is toxicities and cost. We cannot realistically discuss value unless we look at all these components.”

Saltz further questioned how much society will be willing to pay for a year of life gained. He noted that the acceptable cost for an additional year of life has risen $8500 a year since 1995. At that time, based on the price of drugs, the cost to gain 1 year of life was $54,000. At the end of 2014, that cost had risen to $224,000, he pointed out. “There is no reason to believe this trend won’t continue,” he said.

Putting this all together, he concluded, “Cancer drug prices are not related to the value of the drug, but rather, what has come before, and what the seller believes the market will bear.”

Solving the Problem

The problem has been percolating over several decades, and it involves the FDA as gatekeeper (which is forbidden from considering price in the approval process), the Centers for Medicare & Medicaid Services (CMS) as major purchaser (which is forbidden from negotiating price with Pharma), and Congress (which writes the laws that define the roles of the FDA and CMS and is heavily influenced by lobbyists).

In brief, his suggestions for tackling the cost issue are to acknowledge that there must be some upper limit to how much society will pay to treat cancer; that discussions of value and cost must be encouraged within industry, government, patients, and amongst ourselves; and that alternative payment strategies must be adopted that do not incentivize around the cost of drugs.

“What can we [oncologists] do?” he asked. “We can embrace our responsibility to deliver high-value, cost-effective care. That means choosing wisely, and choosing not to deliver lower-value, cost-ineffective care.”

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