COMMENTARY

Peter Bach: Cancer Drugs Not Working Hard Enough for the Money

Kathy D. Miller, MD; Peter B. Bach, MD

Disclosures

July 10, 2017

Kathy D. Miller, MD: Hi. I am Kathy Miller, professor of medicine at the Indiana University School of Medicine in Indianapolis. Welcome to Medscape Oncology Insights, coming to you from the floor of the 2017 annual meeting of the American Society of Clinical Oncology (ASCO).

What a difference a year makes. Last year, Vice President Biden attended ASCO to launch a federally funded Moonshot to cure cancer. While we haven't cured cancer yet, we have seen several major developments at this meeting that offer real advances in the control of cancer with less side effects, at least compared with chemotherapy. But we have a huge problem because these new therapies are wickedly expensive. We need to tackle the cost of healthcare and get new therapies to our patients.

I am joined today by Dr Peter Bach, writer, physician, epidemiologist, and director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York. Peter, I know that you have thought a lot about different ways of evaluating the cost of healthcare.

Peter B. Bach, MD: Yes, I have. It's a really exciting time and it's posing all sorts of new challenges, not just within the oncology world but in the healthcare system more generally.

Cancer Drugs: Do We Get What We Pay for?

Dr Miller: We talk a lot about finding value in our medicines. How do we know when something is of value? Or when it's a good deal?

Value is declining very rapidly in a way that almost ensures that what scientific advances we can make will be outstripped by our spending.

Dr Bach: It's hard. There are two questions for that—a relative one and an absolute one. The absolute question is much harder: How much are we willing to divert social resources and tax dollars into healthcare, particularly marginally effective therapies, when those dollars could be deployed in other ways like in education? The narrower question is: Given that we are going to spend a lot on healthcare, are we allocating our funds appropriately? That is a relative question and it's quite easy to see that value is declining very rapidly in a way that almost ensures that what scientific advances we can make will be outstripped by our spending, massively. Let me give you a couple of examples.

We've been tracking the price of cancer drugs. We started about 10 years ago but we've gone all the way back to the beginning of the Medicare program.[1] After you adjust for inflation and other things, like standard dosing, the price of cancer drugs at introduction has risen 100-fold since the beginning of Medicare. You can say, "That's great. We're making progress." But 100 times is a big number. Have we seen that much benefit? We wrote a paper a couple of years ago looking at that exact question.[2] Along with that rapid rise of a 100-fold increase over 50 years, we honed in on the most recent 20 years. For each new drug that has been introduced, the number of life-years it delivers per dollar decline by 80%. It costs five times as much today for a life-year, if you will, as it did 20 years ago.

We both know that the posters [presented at ASCO] are exciting, and the survival curves projected on these huge screens are exciting, but they tend to show marginal gains, with lots of patients at the beginning of those curves not benefitting. What we do know is that the costs are astronomical. We cannot sustain the rapid rise of inflation on the cost of prescription drugs, which is rising more quickly than any other area of healthcare spending, and still do other things we care about.

Dr Miller: To make this very simple, the medicines are costing 80-100 times as much, but we're not doing 80-100 times better in terms of patient outcome.

The pharmaceutical industry has government-granted monopoly pricing power.

Dr Bach: That's right. If patients were not doing better at all, there would be zero value. Value brings into account both how much patients are benefiting and how much you're paying for those benefits. And that ratio is declining. That is not true in truly innovative industries, and that's not true in competitive market places where you can see things both getting better and cheaper—such as flat screen televisions, for example. The pharmaceutical industry has government-granted monopoly pricing power and market protection, so they are able to charge essentially whatever they choose. They can ensure that as prices rise, irrespective of the size of their drug's benefits, they can continue to capture more taxpayer and patient dollars. And that's what they are doing.

Determining Overall Patient Benefit

Dr Miller: Focusing only on the drug costs is easy. But there are other costs of healthcare utilization and there might be other benefits. Patients who are able to continue working and continue their family roles have some economic benefit. Have we been able to evaluate those things that are perhaps equally important but tougher to put a number on?

Dr Bach: Those are really important things for patients. But to a dispassionate, economic thinker, those things don't get close to re-monetizing the excessive costs of drugs, not even by a log scale or order of magnitude. It's a wonderful thing that more patients are able to return to work because therapies are less toxic. But let's face it: That important event happened when we developed supportive-care drugs and got patients out of the hospital. That was the pivotal moment in oncology. All of these other things tend to be on the margin.

Dr Miller: How do we address this? Our drugs are getting better and more effective, if marginally so. But if you keep building up marginal advances you do make progress, and if you continue research you do sometimes make a larger leap. How do we do that if we can't pay for any of these things?

Dr Bach: It's a bit of a false dichotomy or a false choice you're proposing. You have characterized progress in oncology pretty accurately. Years ago I wrote an essay[3] about a very different topic, but I characterized progress in cancer as a long slog with a poorly functioning compass. I think that's what we see every year at ASCO. We do need those gains. In a survey of oncology drugs that have been approved by the US Food and Drug Administration (FDA) over the past 10 years, the median improvement in either progression-free survival or overall survival, whatever the approvable endpoint was, was 2.2 months.[4] As we stack those on top of one another, we are improving outcomes for cancer. We've lowered the mortality rate from cancer primarily through smoking cessation and behavioral interventions but also through better treatment. We are making progress.

Pharmaceutical Industry and Monopoly Pricing Power

Dr Bach: The reason we can't afford [new cancer drugs] is not because progress is so expensive, but because we have this unusual system whereby we give monopoly pricing power to the pharmaceutical industry. Because they need to grow revenues, they charge higher prices and then raise drug prices even after the drugs are approved. The price of Gleevec® (imatinib) is up more than threefold since it launched, after adjusting for inflation. It's the exact same tablet, but because this market is permissive, more and more money continues to flow through Gleevec to Novartis. Meanwhile, in France, the price of Gleevec launched lower than it did in the United States and has declined.

These are not just forces of nature that we must confront. We have a broken market in which monopoly pricing power lets companies extract maximum dollars. That is what is causing the crisis, not the challenges of science. Those are evergreen.

Dr Miller: If you could make one change in the way our system works—or, as you would probably argue, doesn't work—what would that one change be?

Dr Bach: If I were going to quibble, I'd quibble with the word "system."

Dr Miller: Fair enough. We don't actually have a system.

Dr Bach: There isn't a system-ness by any stretch; there is no coordination, and there is no common goal. We have advanced an approach called value-based pricing whereby drugs in oncology would be priced based on how well they worked and other features, such as how rare or common the disease is, or the population health burden. You would pay more for drugs that were scientifically innovative and pay less for ones that are not. We have created a platform in which that kind of approach could be pursued. The DrugAbacus on our website is a version of that thought experiment and also lays out a variety of policies that would attach to value-based pricing.

Drugs would have appropriate value-based prices, so their prices would be low if they didn't work well or were very toxic and high if they did work well or had good side-effect profiles. Once they have those prices, they would be included in insurance and would have low co-payments. Patients would have ready access to them, which is a problem we have.

A recent study[5] showed that of the nine most economically developed countries in the world, we spend the most on cancer drugs per diagnosed cancer patient and we have the worst access to treatment per diagnosed cancer patient. That's because of our system, or lack of system, and the fact that prices are two to three times higher in the United States than in any other country.

Dr Miller: Is this a problem unique to oncology or do you see these same pricing issues and disconnect between price and value across medical fields?

Dr Bach: It's fairly unusual. Oncology has sort of led the way, and every year except 2014, when we had the hepatitis C spike, the increase in spending by specialty categories has been dominated by oncology. Cancer is special. It seems politically dicey to object to the cancer drug crisis. The cancer landscape is such that lobbyists have managed to write into the law that Medicare must cover every cancer drug, not only based on what the FDA says the drug works for, but also in compendia. If something is listed in the National Comprehensive Cancer Network, Medicare must cover it.

In the United States, most state insurance is regulated by similar laws that have been passed by lobbyists from the pharmaceutical industry. Once you have a market in which every payer who either is required to or wants to participate must pay for every cancer drug, you have no natural check on prices. Oncology is pretty much alone in that, although other sectors are starting to follow. The connective tissue disease space and treatments for diabetes are coming along in that sense. Even regular old insulin has seen huge price hikes. The tricks of the trade, if you will, have been passed on to other specialty drug areas.

Dr Miller: Adopting value-based pricing really makes sense. If [a drug] works better and has fewer side effects, we will pay more for it. If it does not work very well and makes you sick, we are not going to pay so much. What does that do to the total costs for our patients or the total costs of cancer care?

Dr Bach: The idea is to "true-up" the prices so that they match in how well the therapies work. We don't have a free market. People say that this is a free market, but this [argument] would fail in the first lecture on free-market economics. There is asymmetry of information, there are monopolies. It's not a free market.

We need to find a way that, if you come on the market, you don't drive revenue by better marketing or by suing your competitor, but by having a better product. That's how the regular marketplace works, that's how competition works, and we can achieve that if we use value-based pricing.

Pharmaceutical Industry and Monopoly Pricing Power

Dr Bach: The reason we can't afford [new cancer drugs] is not because progress is so expensive, but because we have this unusual system whereby we give monopoly pricing power to the pharmaceutical industry. Because they need to grow revenues, they charge higher prices and then raise drug prices even after the drugs are approved. The price of Gleevec® (imatinib) is up more than threefold since it launched, after adjusting for inflation. It's the exact same tablet, but because this market is permissive, more and more money continues to flow through Gleevec to Novartis. Meanwhile, in France, the price of Gleevec launched lower than it did in the United States and has declined.

These are not just forces of nature that we must confront. We have a broken market in which monopoly pricing power lets companies extract maximum dollars. That is what is causing the crisis, not the challenges of science. Those are evergreen.

Dr Miller: If you could make one change in the way our system works—or, as you would probably argue, doesn't work—what would that one change be?

Dr Bach: If I were going to quibble, I'd quibble with the word "system."

Dr Miller: Fair enough. We don't actually have a system.

Dr Bach: There isn't a system-ness by any stretch; there is no coordination, and there is no common goal. We have advanced an approach called value-based pricing whereby drugs in oncology would be priced based on how well they worked and other features, such as how rare or common the disease is, or the population health burden. You would pay more for drugs that were scientifically innovative and pay less for ones that are not. We have created a platform in which that kind of approach could be pursued. The DrugAbacus on our website is a version of that thought experiment and also lays out a variety of policies that would attach to value-based pricing.

Drugs would have appropriate value-based prices, so their prices would be low if they didn't work well or were very toxic and high if they did work well or had good side-effect profiles. Once they have those prices, they would be included in insurance and would have low co-payments. Patients would have ready access to them, which is a problem we have.

A recent study[5] showed that of the nine most economically developed countries in the world, we spend the most on cancer drugs per diagnosed cancer patient and we have the worst access to treatment per diagnosed cancer patient. That's because of our system, or lack of system, and the fact that prices are two to three times higher in the United States than in any other country.

Dr Miller: Is this a problem unique to oncology or do you see these same pricing issues and disconnect between price and value across medical fields?

Dr Bach: It's fairly unusual. Oncology has sort of led the way, and every year except 2014, when we had the hepatitis C spike, the increase in spending by specialty categories has been dominated by oncology. Cancer is special. It seems politically dicey to object to the cancer drug crisis. The cancer landscape is such that lobbyists have managed to write into the law that Medicare must cover every cancer drug, not only based on what the FDA says the drug works for, but also in compendia. If something is listed in the National Comprehensive Cancer Network, Medicare must cover it.

In the United States, most state insurance is regulated by similar laws that have been passed by lobbyists from the pharmaceutical industry. Once you have a market in which every payer who either is required to or wants to participate must pay for every cancer drug, you have no natural check on prices. Oncology is pretty much alone in that, although other sectors are starting to follow. The connective tissue disease space and treatments for diabetes are coming along in that sense. Even regular old insulin has seen huge price hikes. The tricks of the trade, if you will, have been passed on to other specialty drug areas.

Dr Miller: Adopting value-based pricing really makes sense. If [a drug] works better and has fewer side effects, we will pay more for it. If it does not work very well and makes you sick, we are not going to pay so much. What does that do to the total costs for our patients or the total costs of cancer care?

Dr Bach: The idea is to "true-up" the prices so that they match in how well the therapies work. We don't have a free market. People say that this is a free market, but this [argument] would fail in the first lecture on free-market economics. There is asymmetry of information, there are monopolies. It's not a free market.

We need to find a way that, if you come on the market, you don't drive revenue by better marketing or by suing your competitor, but by having a better product. That's how the regular marketplace works, that's how competition works, and we can achieve that if we use value-based pricing.

Are Physicians and Patients Aware of the True Cost of Drugs?

Dr Miller: How much of this problem, and this unusual incentive, is facilitated by patients and the physicians who prescribe these drugs not really knowing what drugs cost?

Dr Bach: I'm not a fan of having doctors make discretionary choices regarding who gets what based on price. That may seem counter to many trends right now, but I worry a lot about inequities. We have a couple of decades of research suggesting that doctors differentially treat their patients based on basic features, like what they expect the patient understands, the patient's level of medical literacy, even patient race or gender.[6] I don't want to add drug rationing to the suite of things that could be inequitably distributed.

We need effective drugs to have appropriate prices.

The problem is not that we need to cut back on our use of effective drugs. We need effective drugs to have appropriate prices and we need access like they do in every European country. They have solved these problems and they spend half as much on healthcare as we do. Companies that are marketing their products for two to three times more in the United States as they are in those other countries are still selling them in those other countries. They can make it work at those lower price points.

Dr Miller: I wasn't suggesting that physicians make decisions based on the cost, though in some ways we already do in a perverse way, because differences in what you prescribe might change outcomes in ways that favor your practice rather than your patient. We already ration access to these things by where you live, who your doctor is, where you work, and what insurance you have. I was thinking more that if physicians and patients are not aware of the true cost that we are all paying for these medicines, then they can't join you in their outrage to try to change the pricing structure and get to something that most might agree is more reasonable.

Dr Bach: I agree. I'm certainly not the only doctor out there noting that prices are leading to lack of access. There's been a large number of people in the oncology community who have raised concerns about this issue. A patient group that is not funded by the pharmaceutical industry, Patients for Affordable Drugs, is focused on pricing as well. But something like 85% of patient groups are actually funded by the industry. Even if they don't support the pricing practices, they're generally mute on it because a major funding stream comes from there.

I do think this is a major problem that will take political action. During the presidential campaign, both Secretary Clinton and now President Trump said that prices are too high and that we need the government to do something about it. We'll see how that plays out.

Dr Miller: Peter, thank you very much for coming in and taking us through this difficult topic. To our listeners, thank you for joining us today. This is Dr Kathy Miller, reporting from ASCO 2017.

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