The rising cost of cancer drugs

"Cost of one month of treatment for an adult for each new cancer drug approved by the United States Food and Drug Administration, based on Medicare reimbursement rates and by year of drug approval."

Graph from Memorial Sloan-Kettering Cancer Center.   The following text is excerpted from an excellent article ("The Cost of Living") in New York magazine:

...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...

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...

...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.”..

A lot 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.

...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.”..

“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.”  

This is why there will always have to be "death panels."

More at the link - well worth the read.  Via The Incidental Economist and The Dish.