Price of New Cancer Drugs as High as Market Can Bear

Zosia Chustecka

August 19, 2014

Several times over the past year, oncologists have highlighted the outrageously high prices that are being charged for new cancer drugs, and have speculated that the pharmaceutical industry is charging prices as high as the market will bear, rather than basing them on the cost of development.

Now comes another take on that argument. Taking the example of a recently launched new lung cancer drug, a prominent oncologist argues that the high price tag has "nothing to do with what it took to bring it to the market, it has to do with when it came onto the market."

"Today's tolerance for high drug prices is just greater than it was 3 years ago, and much greater than it was a decade ago," comments Peter Bach, MD, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York City.

The pharmaceutical industry says that the high prices reflect the rising costs of drug development and the business risks involved when testing new drugs, he writes in a guest post in Forbes.

"I think they charge what they think they can get away with, which goes up every year," Dr. Bach writes.

He illustrates the point by focusing on a new entry into the lung cancer market, ceritinib (Zykadia, Novartis), which was approved in the United States in April. It was second drug in a class of agents that specifically target non-small cell lung cancer that is positive for the ALK gene rearrangement. As such, it was approved for second-line use in patients who had previously been treated with crizotinib (Xalkori, Pfizer).

Crizotinib was the first drug developed in this category of specific ALK-targeted agents, and was approved in the United States in August 2011.

Dr. Bach points out that crizotinib costs $11,500 per month. But ceritinib costs nearly $2000 per month more than that, at $13,200 per month, and he goes on to comment why he believes this higher price is not justified.

However, in a comment to the article posted on the Forbes Web site, the Novartis oncology team takes issue with the price that is quoted, and points out that the price of ceritinib, unlike that of crizotinib, is based on the dose that is used. "The monthly cost of ceritinib ranges from $8100 to $13,500, depending on the dose," they write, and add that the average dose used in clinical trials was 635 mg, which would cost $11,428 per month, which is about 5% lower than crizotinib (at $11,500 per month).

Comparing the Data

Although the 2 drugs have not been compared directly, the clinical data available suggest that the response rates to both drugs are comparable, and that the adverse effects are similar but a number of them occur more frequently with ceritinib than with crizotinib, Dr. Bach comments. A table in the article shows that diarrhea was reported by 6% and nausea and vomiting reported by 4% of patients on ceritinib, whereas all 3 adverse events are reported at a frequency of 1% or less with crizotinib.

Dr. Bach argues that crizotinib, as the first drug in the class, was riskier to develop than ceritinib. It also required more clinical data in order to gain approval (2 trials with crizotinib with a total of 255 patients vs 1 trial with ceritinib in 165 patients).

He also points out that Pfizer needed to invest in both educating physicians about ALK-associated lung cancer and developing a companion diagnostic test that would identify ALK-positive lung cancer, while Novartis did neither.

So all of these arguments would suggest that Novartis actually spent less in developing ceritinib and yet it is charging substantially more for the drug because it can get away with it. He suggests that it was launched 3 years later, when there is a greater tolerance for high prices.

A decade ago, cancer drugs cost around $5000 per month, but that has now doubled to more than $10,000 per month, Dr. Bach writes.

This point was also underscored recently by a group of leukemia experts in an explosive report published in Blood last year. They highlighted the "astronomical prices" being charged for new cancer drugs, and noted that 11 of the 12 new cancer drugs approved in the United States in 2012 were priced at more than $100,000 per year.

It is not only oncology that has seen this phenomenon of ever-rising drug prices; there has been outrage over the price of the new hepatitis C drug sofosbuvir (Sovaldi, Gilead), which costs $30,000 per month, and also a new treatment for cystic fibrosis, ivacaftor (Kalydeco, Vertex), which costs $26,000 per month.

"The pricing of new drugs for cancer and now other common diseases has come unglued from the rationale the industry has long espoused. Instead, pricing is explained by a phenomenon of increasing boldness by the industry against a backdrop of regulators and insurers who have no legal authority to dictate or even propose alternative pricing models," Dr. Bach comments.

"We are going to have to take some difficult steps, and do so at a time when the healthcare dialogue is polarized not only over the Affordable Care Act's implementation, but over whether or not there is a distinction between rationality and rationing," he concludes.


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