[Ip-health] New York Magazine feature on cancer drugs: The Cost of Living

Dzintars Gotham dzintarsgotham at gmail.com
Sat Oct 26 12:32:51 PDT 2013


Not sure if everyone's already seen this or not, but this is a pretty beautiful deconstruction of the oft-quoted 1.3 bio figure:

http://uaemevidence.files.wordpress.com/2013/10/biosocieties_2011_myths_of_high_drug_research_costs.pdf

Dzintars Gotham
UK European Coordinator
Universities Allied for Essential Medicines

email:	dzintarsgotham at gmail.com
mobile:	07908178639 (UK)
Skype:	dzintarsgotham

On 24 Oct 2013, at 18:07, Rigel Hope (né Christian) <rigelc at gmail.com> wrote:

> You think that's a big increase...
> 
> http://www.forbes.com/sites/matthewherper/2013/08/11/how-the-staggering-cost-of-inventing-new-drugs-is-shaping-the-future-of-medicine/
> On Oct 23, 2013 12:39 PM, "Michael H Davis" <m.davis at csuohio.edu> wrote:
> 
>> The cost of developing new drugs is more than "contested." When I started
>> in this field almost thirty years ago, the cost was claimed to be $100-200
>> million. Now they claim--with no reliable data to support the claim--that
>> it costs $1.3 billion. It could almost be funny. It's chutzpah on a giant
>> scale. Using the $200 million figure, that's an increase of 650% in 30
>> years, which amounts to 22% increase annually--around ten times the rate of
>> inflation!
>> 
>> It is simply not possible and to call it a criminal lie is not
>> unreasonable, in my view. Laboratory work has become more, not less
>> efficient, we simply know more, the government subsidizes the big drugs,
>> and economies of scale due to consolidation in the industry all tell us
>> that the cost of developing drugs is probably going down, not up.
>> 
>> What's going up is the  willingness of the industry to spread even bigger
>> deceptions to maintain their grip on this golden goose. There is an answer
>> although the industry throws up it's hands in mock frustration over it. The
>> government should be doing all this work , in a transparent way. Watch
>> those numbers fall....
>> 
>> 
>> 
>> Michael H. Davis
>> Professor of Law
>> Cleveland State University
>> College of Law
>> Cleveland, OH 44115
>> 216-687-2228
>> 917-771-0235
>> 
>> Admitted Attorney, U.S. Patent and Trademark Office, Reg. No. 45,863
>> 
>> Ruth Lopert <ruth.lopert at gmail.com> wrote:
>> 
>> 
>> "Fueled by his concern for both patients and the health-care system,
>> .. Kantarjian
>> favors the creation of a
>> governmental “value-based system” to set drug prices on the basis of
>> medical benefit. … Such a committee already exists in England. Its
>> technical name is the
>> National Institute for Health and Clinical Excellence, or NICE, and it
>> considers not only the benefit but also the cost in deciding what drugs
>> will be covered by the U.K.’s National Health Service. "
>> 
>> And existed 10 years before that in Australia. Thank goodness.
>> 
>> 
>> 
>> 
>> On Tue, Oct 22, 2013 at 8:10 PM, Thiru Balasubramaniam
>> <thiru at keionline.org>wrote:
>> 
>>> http://nymag.com/news/features/cancer-drugs-2013-10/
>>> 
>>> The Cost of LivingNew drugs could extend cancer patients’ lives—by days.
>> At
>>> a cost of thousands and thousands of dollars. Prompting some doctors to
>>> refuse to use them.
>>> 
>>>   - By Stephen S. Hall
>>>   - Published Oct 20, 2013
>>> 
>>> 
>>> 
>>> On August 3, 2012, the Food and Drug Administration approved a new cancer
>>> drug called Zaltrap as a safe and effective treatment for patients with
>>> advanced colon cancer. The approval was based on a large-scale clinical
>>> trial that showed that Zaltrap, given in combination with three
>> previously
>>> approved drugs to patients who had failed initial therapy, extended
>> median
>>> overall survival by 42 days.
>>> 
>>> No one knew the price of Zaltrap at that point, but Leonard Saltz, who
>>> heads the gastrointestinal oncology group at Memorial Sloan-Kettering
>>> Cancer Center, had a sense of what was coming. Zaltrap’s effectiveness,
>> in
>>> his opinion, was almost identical to that of Avastin, an FDA-approved
>>> cancer drug that had also been targeted at that same patient population.
>>> Several weeks earlier, Saltz had traveled to Chicago to inflict a little
>>> premonitory sticker shock on his medical colleagues. He reviewed the
>> recent
>>> clinical results of both Zaltrap and Avastin when used as a “second line”
>>> treatment, after initial treatment had failed. As Saltz reminded the
>> other
>>> oncologists, Avastin was modestly effective as a second-line treatment—it
>>> extended median overall survival by 42 days, the same as Zaltrap—but it
>>> cost about $5,000 a month and, like Zaltrap, would have to be taken for
>>> many months to achieve that modest clinical benefit. The overall cost was
>>> so high that Saltz devoted the end of his talk to a back-of-the-envelope
>>> calculation, delivered via PowerPoint, that recast the question in terms
>> of
>>> health-care costs: If you extended the 42 days survival to a year, “what
>> is
>>> the cost of Avastin for one year of human life saved?”
>>> 
>>> The answer was astounding, even to doctors who have grown inured to the
>>> zero-gravity economics of cancer pharmaceuticals. As Saltz worked his way
>>> through slide 73 of 78, he arrived at the bottom line: $303,000.
>>> 
>>> “Now, that’s essentially the cost of the bare-bones drug,” Saltz later
>>> explained to me in his office at Sloan-Kettering. “It’s parts, not labor.
>>> No money for doctors; no money for nurses; no money for pharmacists; no
>>> money for real estate, heat, and lights; no money for the needles, the IV
>>> tubing, the IV fluids, the anti-nausea medicines, the other
>> chemotherapies
>>> that are given, because Avastin doesn’t do anything by itself. It has to
>> be
>>> given with other drugs … I want to emphasize it’s not that we can have a
>>> year of life saved for $303,000. That’s probably less than half of what
>> the
>>> actual cost would be when you factor in everything.” Zaltrap, he figured,
>>> was probably going to be in the same range.
>>> 
>>> Saltz’s message was not entirely unexpected. He has been warning about
>> the
>>> danger of rising drug prices, to patients and to the health-care system
>> in
>>> general, for the last decade. Having made this point to his colleagues,
>>> Saltz packed up his computer, took the next flight back to New York, and,
>>> after the FDA approved Zaltrap in early August, began to prepare—“not
>> with
>>> great enthusiasm,” he conceded—the Zaltrap presentation he would deliver
>> to
>>> the hospital committee responsible for approving any new drugs for
>>> Sloan-­Kettering’s pharmacy.
>>> 
>>> Then, on August 31, he received an e-mail from a pharmacist at the
>> hospital
>>> about the price that Zaltrap’s manufacturers, Sanofi and Regeneron
>>> Pharmaceuticals, had set. The pharmacist said, in effect, “Are you aware
>>> that this drug is twice as expensive as Avastin?”
>>> 
>>> “No,” Saltz replied, “I wasn’t aware.”
>>> 
>>> The pharmacist e-mailed the numbers, and Saltz stared at the figures on
>> his
>>> computer screen. Zaltrap, the drug that was extremely similar to Avastin,
>>> cost roughly $11,000 a month. (And because that extra 42 days wouldn’t be
>>> possible without taking the drug for, say, seven months before—which was
>>> roughly what was happening in clinical trials—the price for that six-week
>>> life extension could be as high as $75,000.)
>>> 
>>> “Wow,” he said to himself, “that’s a deal-changer for me.”
>>> 
>>> That may not seem like a heretical statement, but the unspoken rule in
>>> American health care is that doctors should never consider the cost of a
>>> medicine that might be beneficial to patients. When the FDA approves a
>> new
>>> cancer drug, it analyzes safety and effectiveness only. Medicare is
>> obliged
>>> to reimburse payment for the drug, and private insurers in most states
>> must
>>> cover the cost. Any doctor who considers cost—or the *value* of a costly
>>> drug—risks being accused of “rationing” health care.
>>> 
>>> Saltz felt compelled to consider the cost. He didn’t see any medical
>>> advantage to Zaltrap for his patients—or any disadvantage, for that
>>> matter—but, as he contemplated its price, he thought, *I can’t see why I
>>> would use this*.
>>> 
>>> That same day, he sent an e-mail to every physician at the hospital who
>>> treated patients with colon cancer. “I said, essentially, ‘You all know
>> the
>>> data. You were at the meetings. You know what the situation is. What I
>> just
>>> learned is this issue regarding the price. Within this context, I can’t
>>> envision a scenario where I would plan to use this drug. Can you?’ ”
>>> 
>>> None of the sixteen colon-cancer physicians at Sloan-Kettering who
>> replied
>>> to Saltz’s query said they could see a reason for using the drug.
>>> 
>>> The hospital’s Pharmacy and Therapeutics Committee met in September 2012
>> to
>>> decide whether to include Zaltrap in their list of medications, and
>> Saltz,
>>> who chairs the committee, informed his colleagues of the price and
>>> recommended not carrying the drug. The committee agreed. Sloan-Kettering,
>>> one of the country’s preeminent cancer hospitals, would not be offering
>>> Zaltrap to its patients.
>>> 
>>> When Saltz called upstairs to inform Peter B. Bach, director of the
>> Center
>>> for Health Policy and Outcomes at Sloan-Kettering, of the decision, Bach
>>> wanted to know the reason.
>>> 
>>> “Because of the price,” Saltz told him.
>>> 
>>> As soon as he heard that, Bach, who has been documenting the dizzying
>> rise
>>> of cancer-drug prices since 2009, immediately jumped into an elevator to
>> go
>>> to Saltz’s office to learn more about the unprecedented decision. Why the
>>> rush? “C’mon!” Bach explained to me recently. “It’s never happened
>> before!
>>> Sloan-Kettering isn’t including a drug because of its *price*?”
>>> 
>>> Thus began the first physician-initiated revolt in anyone’s memory
>> against
>>> the skyrocketing cost of cancer drugs.
>>> 
>>> “Everybody agrees: The prices are *unsustainable,*” Saltz said. “And I
>>> often try to invite myself or people having these discussions to complete
>>> the thought: If it’s unsustainable, what happens when it’s unsustained?
>> Do
>>> we have an adjusted, steady correction? Or do we have an implosion and a
>>> crash?”
>>> 
>>> Every time there is a public debate about drug prices, the pharmaceutical
>>> industry replies, as it did to the Zaltrap episode, with several
>>> fundamental arguments: The cost of bringing a new drug to market is
>>> enormous—$1.3 billion per drug, according to one often-cited (but
>>> often-contested) academic study; the drugs provide value and address
>> unmet
>>> patient needs; and, perhaps most important, high prices—and profits—are
>>> necessary to subsidize the innovation that allows the industry to bring
>>> newer, better medicines to market. After Sloan-Kettering’s decision,
>> Sanofi
>>> also pointed out in a statement that Zaltrap demonstrated “important
>>> survival benefits” for patients with metastatic colon cancer and provided
>>> an important treatment option (a company spokesperson declined to answer
>>> any further questions about the pricing of Zaltrap for this story).
>>> Usually, after these arguments are made, the debate dies down and prices
>>> continue to go up.
>>> 
>>> Cancer drugs have become a very big business, even though they serve what
>>> one expert has described as a “boutique” market. An estimated 1.7 million
>>> Americans will be diagnosed with cancer this year, according to the
>>> National Cancer Institute, and more than 580,000 people will die from
>> some
>>> form of malignancy. In 2012, the overall market for “oncologics” reached
>>> nearly $26 billion a year in the U.S. alone, and annual global sales are
>>> projected to total $85 billion by 2016, according to the IMS Institute
>> for
>>> Health Informatics.
>>> 
>>> What is sobering about this booming business is that, as a group of
>>> oncologists wrote earlier this year, “most anti-cancer drugs provide
>> minor
>>> survival benefits, if at all.” They often (but not always) reduce the
>> size
>>> of inoperable tumors, but they rarely eradicate the disease. For
>> relatively
>>> uncommon malignancies like testicular cancer, some forms of leukemia, and
>>> lymphoma, drugs effectively cure the disease; for the common “solid
>> tumor”
>>> cancers (lung, breast, colon, prostate, and so on), which account for the
>>> vast majority of annual cases, drugs buy some time—precious time, to be
>>> sure, but time usually measured in weeks and months rather than years.
>> And
>>> even though many of the newer drugs are less toxic, they often still have
>>> to be given with older drugs whose side effects include nausea, hair
>> loss,
>>> fatigue, and decreasing blood counts. One anti-cancer drug produces a
>> skin
>>> rash so severe and disturbing, according to Saltz, that some patients
>> have
>>> been asked by employers not to come to work.
>>> 
>>> In 1965, at the dawn of Medicare, the chemotherapy drug Vinblastine cost
>>> $78 a month, according to a widely cited Sloan-Kettering price
>> compendium.
>>> In 2011, Bristol-Myers Squibb introduced a new melanoma drug called
>> Yervoy
>>> at a cost of about $38,000 a month. Yervoy followed, by about a year, a
>> new
>>> prostate-cancer therapy called Provenge that cost $93,000 per course of
>>> treatment. Even an ancient chemotherapy like nitrogen mustards, cousins
>> to
>>> World War I’s mustard gas and in use since 1949, have gotten caught in
>> the
>>> cost updraft; in 2006, a course of treatment experienced a thirteen­fold
>>> price increase, from $33 a month to $420 a month.
>>> 
>>> And it’s not just that the price of cancer drugs has doubled in the last
>>> decade—it’s that the rise in prices, according to cancer doctors, has far
>>> exceeded the drugs’ effectiveness. In 1994, the median survival rate for
>>> someone with advanced colon cancer was eleven months, according to Saltz,
>>> and the lifetime costs of the drugs used to treat the average patient
>> would
>>> be about $500 at today’s prices. By 2004, the median survival rate had
>>> increased twofold, to 22 months, but Saltz says the drug costs had
>>> increased hundreds of times for that extra eleven months.
>>> 
>>> Richard Larson, an oncologist at the University of Chicago Hospital, says
>>> the Zaltrap episode was “a shot across the bow” of the health-care
>>> community, “making people start to think that there needs to be some sort
>>> of limit on costs,” especially for drugs with “such a marginal benefit.”
>>> But the problem, according to Saltz, is much bigger than one drug.
>> “Zaltrap
>>> is simply a little piece of the puzzle,” he says. “The prices of cancer
>>> drugs in general, I believe, are inappropriately high.”
>>> 
>>> Explaining how cancer-drug prices have become “inappropriately high” is
>>> complicated, and there is more than one explanation. To a colon-cancer
>>> expert like Saltz, it is the story of drugs that cost too much and do too
>>> little. To a leukemia expert like Hagop Kantarjian, of MD Anderson Cancer
>>> Center in Houston, it is conversely the story of drugs that are
>>> spectacularly effective but cost so much that they threaten to bankrupt
>> the
>>> patients whose lives they have miraculously prolonged. To a
>>> health-care-policy analyst like Peter Bach, it is the story of a market
>> so
>>> jerry-rigged with regulations that, as a graduate-school professor once
>>> told him, “the beautiful thing about health care is that it has every
>>> market failure you’ve ever heard of—plus two or three more.”
>>> 
>>> To an oncologist like Deborah Schrag, of the Dana-Farber Cancer Institute
>>> in Boston, who first warned nine years ago in a *New England Journal of
>>> Medicine*editorial that increases in prices of colon-cancer drugs were
>> far
>>> outstripping increases in clinical benefit, it is the story of a kind of
>>> reimbursement shell game, where most patients are buffered from the high
>>> cost of drugs (and health care in general) by third-party payers. As the
>>> Affordable Care Act begins its fitful rollout, some health-care experts
>> are
>>> expressing concern about a crazy quilt of plans on health-insurance
>>> exchanges where patients enrolled in some state plans may pay modest
>>> amounts for drugs (New York plans call for a $70 co-pay on cancer drugs),
>>> while patients in other states might pay considerably higher rates.
>>> 
>>> And because the economics of cancer drugs have always been colored by
>>> emotion, where patients facing a grim prognosis are desperate to try
>>> anything (as are their doctors), it is also a story of misunderstanding
>>> what many of these drugs can and can’t do. Last year, Schrag published a
>>> stunning study in the *New England Journal of Medicine* reporting that 81
>>> percent of patients with advanced colon cancer (and 69 percent of
>> patients
>>> with advanced lung cancer) did not understand that the drugs used in
>> their
>>> treatment would not cure them. “People really anchor on cancer as a
>> disease
>>> that causes so much suffering that patients are willing to bankrupt
>>> themselves to try something,” says Rena Conti, a health-care economist at
>>> the University of Chicago. “There is an irrationality about it, which is
>>> quite natural but feeds into this willingness to pay for anything.”
>>> 
>>> For those reasons and others, the average price of cancer drugs has gone
>>> “through the roof,” according to George W. Sledge Jr., former president
>> of
>>> the American Society of Clinical Oncology. “What predicts the price of
>> the
>>> next cancer drug is the price of the last cancer drug,” says Bach. “The
>>> only check on the system is corporate chutzpah.”
>>> 
>>> In 1957, a chemotherapy drug named 5-fluorouracil was patented, and by
>> the
>>> sixties “5-FU,” as the drug is commonly called, had quickly become the
>>> first choice of oncologists in treating colon cancers and related
>>> gastrointestinal malignancies. It usually didn’t cure the disease once
>> the
>>> cancer had spread; it temporarily blunted the disease’s progression. Over
>>> the ensuing decades, massive amounts of 5-FU have been used to treat
>> colon
>>> cancer, which strikes about 145,000 Americans each year.
>>> 
>>> The same year 5-FU was patented, Saltz was born in New York. He grew up
>> in
>>> Westchester County, went to Horace Mann, attended Stanford, got his
>> medical
>>> degree at Yale, began to specialize in oncology, and since 1989, has
>>> treated colon-cancer patients at Memorial Sloan-Kettering. And 5-FU,
>> Saltz
>>> admits, is “a drug that’s very embarrassing to people like me.”
>>> 
>>> Now 56 years old, just like Saltz, the drug continues to be “the best and
>>> most important drug we have to treat colorectal cancer,” he says. “Every
>>> drug that has come along since was designed to replace it and failed and
>>> wound up finding a niche by adding to it.” The newer
>> medications—including
>>> Avastin and Zaltrap—have become part of combination therapies, but, as
>>> Saltz says,* drug cocktail* has come to mean “a combination of drugs that
>>> don’t work well enough to do the job by themselves.”
>>> 
>>> That didn’t stop pharmaceutical companies from charging top dollar for
>> new
>>> colon-cancer drugs that did not live up to expectations. The FDA approved
>>> Camptosar in 1996; until it went generic, the Pfizer drug cost about
>> $5,300
>>> a month, and it extends median overall survival by, at best, 90 days,
>>> according to Saltz. Avastin was approved in 2004; the Genentech drug now
>>> costs about $5,000 a month (based on Sloan-Kettering’s analysis), and it
>>> extends average survival by, at best, 141 days as a first-line treatment
>>> and by about 42 days as a second-line treatment. ImClone, a biotech
>>> company, won approval for Erbitux in 2004; Bristol-Myers Squibb and Eli
>>> Lilly, which acquired ImClone, now market the drug for about $8,400 a
>>> month; the best-case study, according to Saltz, extends median survival
>> by
>>> 120 days. Some follow-up studies, he adds, show less of an overall
>> survival
>>> benefit. Moreover, virtually none of the newer drugs extends survival
>>> without being used with other chemotherapy, usually 5-FU, which currently
>>> costs about $30 per treatment. The IV apparatus, Saltz says, is probably
>>> more expensive than the drug.
>>> 
>>> Saltz acknowledges that cancer research is incredibly difficult and that
>>> progress is neither easy nor cheap, but he once believed that the drugs
>>> developed over the last twenty years, based on elegant new molecular
>>> biology, would revolutionize treatment and make the use of 5-FU and other
>>> chemotherapies seem like an archaic practice by medical Druids. “These
>> were
>>> going to make us look back and say, ‘Can you believe we used to give
>> drugs
>>> to people that made their blood counts drop and made them vomit and made
>>> their hair fall out? Now we block the blood supply to the tumor! We turn
>>> off the growth-factor receptor! It’s so much better! It’s so much less
>>> toxic! It’s *so* much more effective!’ ” Saltz says. “That’s what we all
>>> envisioned. That’s not what happened.”
>>> 
>>> The only part of the vision that came true was that the drugs were so
>> much
>>> more expensive. “When these drugs failed—and they did fail—to replace the
>>> drugs before them,” Saltz says, “the fallback position was: Let’s see if
>>> the [old] drugs plus the new drug are better than the [old] drugs alone.
>>> And that’s how these drugs come to market … We start out with a new drug
>>> and get excited about it. We do big expensive studies with high hopes for
>>> it. And the drug winds up doing less than we hoped it would, but it gets
>> on
>>> the market, and then it is both hyped and billed as if it did what we
>> hoped
>>> it would do in the first place.” (Pharmaceutical companies, not
>>> surprisingly, disagree with Saltz. “A person diagnosed with advanced
>>> colorectal cancer can now be expected to live for two years, and each of
>>> these medicines have contributed to that,” says Charlotte Arnold, a
>>> spokesperson for Genentech, which manufactures Avastin. “I think that
>> when
>>> we talk about what we gain as a society, we should be looking at the big
>>> picture. As a society, our investment in new drugs and new medicines has
>>> been paying off.”)
>>> 
>>> In the battle against terminal illness, of course, a patient’s calculus
>> of
>>> cost effectiveness often has more to do with living to see a child’s
>>> graduation or a spouse’s birthday than with the median survival benefit,
>>> and reaching those milestones is worth every penny. But as Saltz and
>> other
>>> doctors are increasingly pointing out, the cost is steep both to society
>>> (in terms of those third-party pennies) and to patients (in terms of
>>> quality of life). “You might live 60 days longer,” says Bruce Hillner of
>>> Virginia Commonwealth University, “but the evidence suggests that each of
>>> those 60 days was diminished in some meaningful way” by the side effects
>> of
>>> the drugs. Just last week, a *New England Journal of Medicine* editorial
>>> characterized high drug prices as a form of “financial toxicity.”
>>> 
>>> Saltz takes these failures a little personally, because he played a major
>>> role in bringing some of these medicines to market. He led key clinical
>>> trials resulting in FDA approval for two of them (Camptosar and Erbitux)
>>> and has conducted clinical trials with Avastin, too. And, like many
>>> oncologists, he keenly feels the emotional cost of resorting to
>> treatments
>>> he wishes were more effective. Hence, these words—mind you, from the
>>> chairman of the Pharmacy and Therapeutics Committee at a hospital that
>>> likes to think of itself as the premier cancer center in the world:
>>> “Whereas we had hoped that small, incremental gains would be a
>> springboard
>>> to something bigger and more productive, I fear those small, incremental
>>> gains have become a business model. Right now, it is safer for a
>>> pharmaceutical company to strategize for large-scale clinical trials that
>>> look for small, incremental gains that will get a drug to market, than to
>>> swing for the fences and try for the big advance.”
>>> 
>>> It’s not just that the skewed market for cancer drugs rewards mediocre
>>> products, he says. “Mediocrity is *so* well rewarded that it’s a better
>>> risk than aiming higher.”
>>> 
>>> Alot of what determines the price of cancer drugs can be attributed to
>> the
>>> byzantine economics of health care: markets that don’t behave the way
>> “real
>>> world” markets do; artificial price supports that are called something
>>> else; government regulations that remove any downward pressures on
>> pricing;
>>> and, until Medicare reforms kicked in, in 2005, arcane reimbursement
>>> policies that actually rewarded oncologists who used higher-priced drugs,
>>> because it would increase the profit margins of their practices. You
>>> practically have to become a health-care economist to understand how it
>>> works, which is exactly how Bach, who trained as a pulmonary physician,
>>> became Sloan-­Kettering’s in-house expert on cancer-drug pricing.
>>> 
>>> In 2009, Bach published an article on cancer-drug prices in the *New
>>> England Journal of Medicine *that documented their dramatic rise and
>> tried
>>> to explain the reason for it. The article laid out the tangled, almost
>> Rube
>>> Goldberg regulatory strictures that shape—or, more accurately,
>> distort—the
>>> cancer-drug market. The foundation for that market is the patent system,
>>> which rewards innovation by granting monopoly status to a new drug and
>>> essentially allows drug companies to name their price during the period
>> of
>>> market exclusivity, generally seven to twelve years. It continues with
>>> federal limitations on Medicare that prevent the government’s largest
>>> purchaser of cancer drugs from negotiating with drug-makers on price.
>>> 
>>> The centerpiece of the 2009 article was a chart tracking the price of
>> every
>>> cancer drug approved by the FDA since 1965 (now regularly updated by Bach
>>> and his colleague Geoffrey Schnorr). In preparing it, Bach discovered
>>> several dirty secrets about drug pricing. The first is that there is no
>>> fixed price. The “sticker price” of a cancer drug is listed in a
>> compendium
>>> called the *Red Book**, *but no one pays that price, according to
>> experts.
>>> Drug companies can, and do, offer undisclosed discounts to
>> health-insurance
>>> companies, hospitals, and middlemen in the health-care market. So prices
>>> vary widely. The Sloan-Kettering compendium pegs its cancer-drug prices
>> to
>>> Medicare reimbursements, which give an indication of the real marketplace
>>> price (and the cost to taxpayers). These prices are lower than those in
>> the
>>> *Red Book, *but still, according to Bach, are “astronomical.”
>>> 
>>> Second, the chart documents a recent sea change in pricing. It shows a
>> very
>>> slight uptick in prices until the mid-­eighties, when the rise becomes
>> more
>>> substantial, and then bends sharply upward around 2000. Beginning about
>>> twenty years ago, the graph also shows a series of dots way above the
>> curve
>>> of average prices, indicating drugs that, in effect, have broken the
>> sound
>>> barrier on price since the nineties.
>>> 
>>> “Then one day I looked at the whole landscape,” Bach recalled, “and
>>> thought,
>>> *Huh, I now know why cancer-drug prices are so high.* Because the entire
>>> regulatory environment is structured in a way where there are no downward
>>> pressures and there are no standards. Medicare—and most private insurers,
>>> who want to do business in most states—have to include every drug in
>>> coverage. And they have to pay the producer’s price. It’s kind of that
>>> simple.”
>>> 
>>> Bach, incidentally, doesn’t fault the pharmaceutical companies for
>>> continuing to push the envelope on pricing. They have a responsibility to
>>> shareholders to maximize their profits, he says, and “are responding in a
>>> logical way” to an illogical system that, in terms of prices, has “no
>> upper
>>> limits. They’re just going to creep up as fast as they can get away
>> with.”
>>> 
>>> He also realized that one of the few downward-market pressures on
>>> pharmaceutical prices was what he calls “headline risk”—an economist’s
>> way
>>> of saying “negative publicity.” And that’s why he raced down to the tenth
>>> floor when Saltz called him about the Zaltrap decision. It was an
>>> opportunity to make some public noise in the drug-price debate.
>>> 
>>> Saltz proposed writing a joint commentary about Sloan-Kettering’s Zaltrap
>>> decision for the *Journal of Clinical Oncology,* where cancer doctors
>> have
>>> been venting about high prices for years. (In a 2009 *JCO* editorial,
>>> Hillner and his colleague Thomas J. Smith criticized the rise in
>>> cancer-drug prices with this statement: “Profiteering, the act of making
>> a
>>> profit by methods considered unethical, such as raising prices after a
>>> natural disaster, is a pejorative term that we believe can be applied to
>>> this recent trend where a life-threatening disease is the natural
>>> disaster.”)
>>> 
>>> Despite this rising discontent in the medical literature, Bach knew that
>> no
>>> one besides doctors would read a medical journal, so he argued instead
>> for
>>> approaching the *Times* with the idea of announcing Sloan-Kettering’s
>>> Zaltrap decision as an op-ed piece signed by Saltz, Bach, and Robert
>>> Wittes, then physician-in-chief of the hospital. In the piece, which
>>> appeared last October, they wrote, “When choosing treatments for a
>> patient,
>>> we have to consider the financial strains they may cause alongside the
>>> benefits they might deliver.”
>>> 
>>> Several weeks later, citing “market resistance,” Sanofi cut the price by
>> 50
>>> percent—an unprecedented discount for a cancer drug. Sloan-Kettering
>> still
>>> does not carry Zaltrap.
>>> 
>>> When Hagop Kantarjian, who heads the Department of Leukemia at the
>>> University of Texas’s MD Anderson, saw the op-ed, and the effect it had
>> on
>>> the drug’s price, he was both surprised and heartened. “Before that,” he
>>> says, “all the previous efforts by doctors had been halfhearted and not
>>> successful.” As several health-care economists pointed out in the wake of
>>> the Zaltrap episode, hospitals could use their pharmacies as a way to
>> hold
>>> the line on drug prices, and physicians could take the lead in
>> highlighting
>>> the problem. So Kantarjian said to himself, “What if you took one
>> disease,
>>> and all of the experts in the field advocated against high drug prices?
>> If
>>> they could do it, why not us?” *Us* was an international group of experts
>>> on leukemia. But these doctors picked an entirely different fight with
>> the
>>> pharmaceutical industry: They wanted to highlight the problem of high
>>> prices for really effective drugs.
>>> 
>>> Over the past decade, Kantarjian watched in disbelief as the cost of a
>>> successful leukemia drug called Gleevec rose. “I was shocked that it had
>>> tripled since 2001,” he says, “and there was no reason for the increase
>> in
>>> price, except that the companies could do it and nobody could do anything
>>> about it.” Kantarjian, as established a figure as there is in American
>>> oncology, suddenly became radicalized.
>>> 
>>> He drafted a letter protesting the high prices of certain leukemia drugs
>>> and began showing it to colleagues, including Richard T. Silver of New
>> York
>>> Presbyterian–Weill Cornell Medical Center. The issue clearly touched a
>>> nerve with other doctors. “At first the group was kind of small,” Silver
>>> says, “and then everybody wanted to be on the bandwagon.” By the time the
>>> letter appeared last April in *Blood,* the field’s primary journal,
>>> Kantarjian had collected 119 signatories on six continents, including
>>> doctors at Massachusetts General Hospital, the Mayo Clinic, and the Fred
>>> Hutchinson Cancer Research Center in Seattle.
>>> 
>>> The doctors confined their argument to drugs for chronic myelogenous
>>> leukemia (CML), a cancer of the blood that strikes roughly 5,000
>> Americans
>>> each year. But they suggested that the pricing of CML drugs bordered on
>>> profiteering, because patients now have to take these very expensive
>> drugs
>>> continuously, for years, if they want to stay alive. When Gleevec, the
>>> first successful CML drug, came out in 2001, the annual sticker price was
>>> $30,000, they noted; by 2012, it had risen to $92,000 a year. Moreover,
>>> Kantarjian said, three new second-generation CML drugs, approved in 2012,
>>> all have list prices around $100,000 a year. (The Sloan-Kettering
>> analysts
>>> price these drugs at less than the *Blood* editorialists, although Bach
>>> agrees that the prices for CML drugs are exceptionally high.) “The
>>> financial picture is completely different from ten years ago,” Kantarjian
>>> says.
>>> 
>>> Unlike the drugs with “modest” colon-cancer benefits, Gleevec is arguably
>>> the biggest success story in cancer therapy in the last fifteen years.
>>> Practically overnight, it changed chronic myelogenous leukemia from a
>>> devastatingly fatal disease in which less than 20 percent of patients
>> were
>>> still alive ten years after diagnosis to essentially a chronic illness in
>>> which more than 80 percent of those diagnosed are alive ten years later.
>> “A
>>> *hugely* successful drug,” says Ellin Berman, a CML expert at
>>> Sloan-Kettering. “Really a home run.”
>>> 
>>> So why would more than 100 international leukemia experts, including
>>> Berman, sign the *Blood* editorial and take the pharmaceutical industry
>> to
>>> task about such a marvelous class of drugs? One reason, of course, was
>> the
>>> sheer financial burden of having to take a $100,000-a-year drug for the
>>> rest of one’s suddenly extended life. But the biography of Gleevec also
>>> undermines two key arguments used by the drug industry to justify high
>>> prices: that those revenues justifiably reward innovation and that the
>> free
>>> market ultimately establishes a fair price.
>>> 
>>> The compound now known as Gleevec was originally designed by chemists at
>>> the Swiss company Ciba-Geigy (which later merged with another company to
>>> form Novartis). But Ciba-Geigy balked at developing the drug because it
>>> considered the CML market too small, even though enterprising research by
>>> physician Brian Druker, first at Harvard and then at the Oregon Health &
>>> Science University, showed the drug to be remarkably effective against
>>> human leukemia cells. “To me, this was the innovation, and this was the
>>> risk,” Druker told me recently, “and I was dealing with one of the most
>>> risk-averse companies in the world.” For nearly five years, Druker
>>> relentlessly pressured Ciba-Geigy, and then Novartis, to allow him to
>> test
>>> the drug in human patients. For five years, the companies refused.
>>> 
>>> Finally, in 1998, after Druker essentially challenged Novartis to test
>> the
>>> drug or license it to a company that would, the company relented, fully
>>> expecting the drug to fail, according to Druker and others. But even the
>>> early Phase I results, usually limited to establishing safe dosages,
>>> produced spectacular results: Higher doses of the drug sent 53 of 54
>>> patients with a previously incurable form of cancer into remission. Last
>>> year alone, Gleevec racked up sales of about $4.7 billion for Novartis,
>> and
>>> the success of the drug opened the door to the development of five
>>> second-generation CML drugs—all with a sticker price around $100,000.
>>> 
>>> This early history is one of the reasons Druker is so frustrated by the
>>> current pricing situation and why he, too, signed the *Blood *editorial.
>> “I
>>> would have thought more drugs would have meant more competition, and that
>>> more competition would have meant prices coming down. But here, prices
>> keep
>>> going up.” If you want to see how a free market operates for Gleevec-like
>>> drugs, Kantarjian suggests looking at South Korea. That’s because a South
>>> Korean drug company independently patented and developed a
>>> second-generation CML drug and priced it at about $21,500 a year,
>> according
>>> to Kantarjian. As a result, all the competing CML drugs are priced
>> between
>>> $21,000 and $28,000—a quarter of what the same drugs cost for American
>>> cancer patients.
>>> 
>>> And these high prices in the U.S. may now be having negative
>> consequences,
>>> both financial and medical. Patients with cancer are 2.5 times as likely
>> to
>>> declare bankruptcy as the general population, according to a recent study
>>> led by Scott Ramsey of the Fred Hutchinson Cancer Research Center.
>> Monthly
>>> co-pays for an $8,000-a-month drug can be financially onerous, especially
>>> for people known as “naked patients”—those who aren’t wealthy enough to
>>> have supplemental health insurance and not poor enough to qualify for
>>> Medicaid. Kantarjian said a disturbing new trend has emerged; some
>>> middle-class patients saddled with these continuing co-­payments—up to 10
>>> percent of CML patients, by his estimation—are beginning to discontinue a
>>> lifesaving treatment because of the out-of-pocket cost, after which the
>>> cancer develops resistance to the drug and they can no longer be treated.
>>> 
>>> In response to the *Blood *editorial, Novartis issued a statement saying
>>> that sustainability of the health-care system is a “complex topic” and
>> that
>>> the company’s “critical role … is to discover and develop innovative
>>> treatments.” Novartis also noted its “patient access programs,” which
>> help
>>> patients cover the high cost of their medications. Many pharmaceutical
>>> companies have such patient-assistance programs. Economists like Bach
>>> consider these programs a form of artificial price supports that allow
>> the
>>> companies to keep overall prices high.
>>> 
>>> It was precisely these financial issues that led to a little literary
>> tiff
>>> between Kantarjian and Silver over the wording of the *Blood* editorial.
>>> Kantarjian insisted that the high prices of CML drugs were forcing
>> doctors
>>> to violate the Hippocratic oath (“First, do no harm”). Silver disagreed.
>>> 
>>> “I thought using the Hippocratic oath was inappropriate,” Silver says, so
>>> he told Kantarjian: “Hippocrates meant ‘Do no harm’ from a medical point
>> of
>>> view.” Kantarjian replied, “If you kill a patient financially, that
>> counts
>>> too.”
>>> 
>>> Kantarjian has brought a rhetoric to the price debate that is unusual for
>>> such a prominent figure in oncology. He accuses the pharmaceutical
>> industry
>>> of “greed” in its pricing of CML drugs, argues that “there is zero
>>> correlation—*zero*—between how effective a drug is and the cost of the
>>> drug,” and becomes especially indignant when pharmaceutical-industry
>>> spokespeople suggest that any effort to contain drug prices will curtail
>>> innovation, calling it a form of “blackmailing” against the national
>>> interest. He’s pretty exasperated with his fellow oncologists, too. “In
>> the
>>> last decade, we have become glorified employees of the drug companies,”
>> he
>>> says.
>>> 
>>> Since the *Blood* editorial, Kantarjian has begun to talk to other
>>> disgruntled physicians, including a doctor concerned about the price of a
>>> new drug for a blood disorder called paroxysmal nocturnal hemoglobinuria
>>> (which costs a staggering $523,000 a year) and a pair of cystic-fibrosis
>>> physicians who published an editorial in the *Journal of the American
>>> Medical Association* on October 2 lamenting the $311,000-a-year cost of a
>>> “personalized medicine” drug for the disorder. Kantarjian, meanwhile, is
>>> trying to spread his “cut the price” gospel. He’s going to be speaking
>> to a
>>> group of health-care executives at the end of October in Chicago and
>> wants
>>> to enlist oncologists who specialize in the skin cancer melanoma. Yervoy
>>> now costs about $39,000 a month, and a promising new class of drugs
>> called
>>> PD-1 inhibitors, currently in advanced testing, is expected to cost even
>>> more. (“I mean, why not?” Bach says. “No one is going to stop them.”)
>>> “We’ve come to an intolerable situation,” says Kantarjian.
>>> 
>>> Fueled by his concern for both patients and the health-care system, he is
>>> helping to organize a meeting in Washington, D.C., in December of what he
>>> calls “stakeholders” in the drug-price debate—doctors, patients, health
>>> insurers, federal regulators, and, of course, the drug companies—to
>> “begin
>>> the dialogue” about high drug prices; the Leukemia & Lymphoma Society is
>>> planning a similar initiative. Kantarjian favors the creation of a
>>> governmental “value-based system” to set drug prices on the basis of
>>> medical benefit. “New drugs should be evaluated by a committee of
>> experts,”
>>> he says, “who can say, ‘This is how much it improves survival, and this
>> is
>>> how much the price should be.’ ”
>>> 
>>> Such a committee already exists in England. Its technical name is the
>>> National Institute for Health and Clinical Excellence, or NICE, and it
>>> considers not only the benefit but also the cost in deciding what drugs
>>> will be covered by the U.K.’s National Health Service. Its decisions
>> allow
>>> an implicit form of government negotiating over the price of drugs,
>> because
>>> when NICE has turned down a drug as having too little clinical bang for
>> the
>>> buck, companies have often come back to the panel with a lower price.
>>> 
>>> As a result, a British cancer patient usually pays substantially less
>> than
>>> American patients. Gleevec costs about $33,500 a year in England,
>> according
>>> to NICE; the U.S. price ranges up to $92,000 (according to the *Blood*
>>> editorial).
>>> Tasigna, a newer CML drug, costs about $51,000 in England, while the U.S.
>>> price ranges up to $115,000. Sprycel, another new CML drug, costs nearly
>>> $49,000 a year in England, while the U.S. price ranges up to $123,000.
>>> 
>>> More to the point, NICE has recently said no where Medicare has been
>> forced
>>> to say yes. In January 2012, NICE declined to approve Avastin for both
>>> colon and breast cancer, and last June, NICE reached the same conclusion
>>> about Zaltrap as Sloan-Kettering’s physicians—it declined to cover the
>> use
>>> of the drug, considering it too expensive.
>>> 
>>> “One of my many politically incorrect opinions,” Saltz says, “is that
>> NICE
>>> is an undesirable but necessary inevitability.” The notion that something
>>> like NICE could be imported to this country is anathema to the
>>> pharmaceutical industry and a pipe dream to most American health-care
>>> economists, but Saltz believes we need to start talking about the price
>>> tag.
>>> 
>>> “There is a number in people’s minds,” he says. “If you say to people, ‘I
>>> have a drug that extends life by one day at a billion dollars; shouldn’t
>> we
>>> as a society pay for it?,’ I’m pretty confident most people would say no.
>>> If I say, ‘I have a drug that extends life by three years at a cost of
>>> $1.50,’ I’m pretty confident everybody would say, ‘Of course!’ Somewhere
>> in
>>> there is a number, a tipping point, where we say, ‘No, we can’t.’ Right
>>> now, we’re unwilling as a society to *explore* where that point is. And I
>>> would argue that we have to. Wherever it may be, we have to find it.”
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