Some cancer drugs are so expensive that hospitals, like New York’s Memorial Sloan-Kettering Cancer Center, have decided to stop offering them. But it’s not just a matter of astronomical prices, although colon cancer injectable Zaltrap’s $11,000-per-month price tag is indeed prohibitive for all but the wealthiest patients. It’s a question of effectiveness.
Staying Alive – At A Price
Zaltrap, a drug for which manufacturer Sanofi now offers a “discount” program, is no more effective than Avastin. But at nearly twice the price, Sloan-Kettering’s cancer experts thought Zaltrap an option no patient should even consider. In their 2012 New York Times editorial, the doctors pointed out just how different the economics around drugs are from those active in other industries:
“In most industries something that offers no advantage over its competitors and yet sells for twice the price would never even get on the market. But that is not how things work for drugs.”
Government regulators, like the US Food & Drug Administration, and health insurers (the editorial points a finger at Medicare specifically, but leaves room for private insurance companies) are beholden to two standards when they consider prescription drugs: safety and effectiveness. Cost doesn’t factor into their decisions, even though it has a major, and often deleterious, effect on patient’s lives. Medicare, for that matter, is hamstrung by a 2003 law that forces it to pay for cancer drugs at whatever price manufacturers set – effectively justifying their exorbitant costs.
New Treatments Double In Price
Where cancer is concerned, the cost of treatment has skyrocketed over the last decade. Ten years ago, new treatments hit the market at a median cost of $4,500 per month adjusted for inflation. On average, they cost more than double that today, approximately $10,000 every month. That means Zaltrap isn’t even an outlier. At its original price, the colorectal drug sat right in the middle of the market. Truly excessive prices in 2012 were more like $35,000 for a month of treatment.
These prices don’t just place a huge burden on our nation’s health insurance system; they’re often passed directly on to patients. Even cancer patients on Medicare are required to chip in co-pays – around 20% of a drug’s total cost – for every treatment they receive. It’s not surprising that 25% of patients surveyed in 2006 said they had used up “all or most” of their savings paying for cancer treatment, according to this Harvard study.
“Profiteers” Of Personal Disaster
When Hurricane Katrina decimated New Orleans, developers didn’t see a disaster ruining the lives and livelihoods of tens of thousands. They saw a business opportunity. One Republican state rep from nearby Baton Rouge echoed that sentiment, saying: “we finally cleaned up public housing in New Orleans. We couldn’t do it, but God did.”
More than 100,000 residents, predominantly poor African American families, had been displaced. Instead of rebuilding their neighborhoods, the mayor’s reconstruction initiative made communal restoration contingent on people moving back. Of course, as Rachel Riederer notes in New Republic, “people could hardly return to neighborhoods where there was no certainty that the lights would come back on.” So rather than rebuild the city’s affordable housing, money began to flow for mixed-income developments. In one fell-swoop, tens of thousands of people had been priced out of their own communities.
The same logic can be applied to cancer drugs. At least that’s what a group of more than 100 blood cancer experts think, denouncing the cost of cancer treatments as “profiteering” in an article published by the journal Blood. Cancer patients need these drugs to stay alive, but at such high prices, only the wealthy can hope to remain treated indefinitely. Even more perverse, cancer drugs that work better, extending lives longer, cost more than less-effective treatments. Struck by the “personal disaster” of a cancer diagnosis, poor patients get priced out of their own lives.
Drug Market “Highly Distorted”
When Provenge, an immunotherapy drug for people with advanced prostate cancer, was approved in 2010, its manufacturer pegged the price at $23,000 for every extra month of life expectancy it promised patients. The full course of treatment, just three infusions, cost $93,000, meaning Provenge had been found to extend life for around 4 months. Too expensive, say European watchdogs like the UK’s National Institute for Health and Care Excellence, who effectively blocked Provenge from being introduced into British markets.
The drug’s humongous price tag has actually been credited with doing in the company that developed it. Dendreon was bankrupted by the treatment’s slow sales. But it would be a mistake to expect market forces to “control” the cost of pharmaceuticals in any meaningful sense. If drug prices are determined by a market, it’s a “highly distorted market,” argued Jared Bernstein, an economic adviser to VP Biden, in the New York Times on September 23, 2015. Patients who rely on these products for their survival don’t have the option of foregoing a costly purchase, a decision that would decrease demand and eventually force a price decrease.
Since 2012, drug prices have increased across the board, but oncology medications are annexing a larger and larger share of total spending. In 2014, 9% of the $374 billion spent on prescriptions in the US went to purchase cancer drugs. An additional 3% went to supportive care treatments, which mitigate the side effects of chemotherapy medications. But those same cancer drugs are far from the most commonly-prescribed. That’s the opposite of what you would expect in a functioning market, where increases in demand (supply remaining equal) would dictate a price hike.
But Don’t These Drugs Cost A Lot To Make?
That’s what pharmaceutical companies like to say: “our products are expensive, because research and development is so expensive.” Which sounds reasonable, until you dig into their financial records and realize it’s a myth.
In 2008, PLOS found that pharmaceutical companies spend nearly twice as much on promotion, marketing their drugs, as they do on making them. Another study, one that drug companies cite constantly, found that developing a new drug and getting it approved cost on average $1 billion. That’s an extraordinary expense, and it would certainly justify higher costs to consumers. But it’s also false – developing a new drug costs more like $55 million, according to researchers at Princeton.
Now add to this equation the major role public dollars play in bankrolling pharmaceutical industry innovations. A study by Donald W. Light, a fellow at the University of Pennsylvania’s Institute of Health Economics, suggests that around 84% of research into so-called “breakthrough” drugs is funded by governments and public programs.
Much of this government money goes to discover targeted cancer treatments, and that can only increase now that Vice President Biden has declared war on cancer. But it’s become clearer than ever that patients are getting ripped off, usually to pay for treatments they helped fund in the first place.