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

Thiru Balasubramaniam thiru at keionline.org
Tue Oct 22 02:10:07 PDT 2013


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

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

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

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

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

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

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*
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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