Why are the new cancer drugs so expensive?

Health and medicine explained.
June 23 2004 2:04 PM

Strange Medicine

Why are the new cancer drugs so expensive?

pills
Prices make for a bitter pill to swallow

At the recent annual gathering of the American Society of Clinical Oncology, which 27,000 cancer specialists attended, much of the news coverage focused on the new "targeted therapies" and much of the talk in the hallways on the astonishing prices drug companies are charging for them. For years, we've been hearing about the "magic bullet" drugs that will expand cancer treatment beyond the long-standing triad of surgery, radiation, and chemotherapy (often derisively called slash, burn, and poison). A few of these new drugs have won FDA approval and come to market, but the prices are so high that many patients who might benefit will not get them.

Traditional chemotherapy drugs are indeed poisons. Most often, they kill all dividing cells; in addition to cancer cells, these often include hair follicles and the cells lining the intestine. This is why, during chemotherapy, a patient's hair often falls out and he or she becomes desperately nauseated. Targeted therapies, as the oft-used metaphor goes, "fix what is broken." Ideally they reverse molecular changes specifically in cancerous cells—with fewer side effects and greater efficacy. 

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Erbitux, a targeted therapy for colon cancer, might be forever known as the drug that led to Martha Stewart's downfall. (ImClone, the biotechnology company founded by her friend Sam Waksal, made the drug.) But recently Eribitux has acquired a new, and perhaps more ominous, distinction. At $17,000 a month, Erbitux is one of the most expensive cancer drugs ever made. For the record, it is not the most expensive. That distinction is currently held by Zevalin, a $24,000-a-month treatment for a relatively rare type of lymphoma. But the prevalence of colon cancer—the disease strikes 106,000 Americans a year—makes the price of Erbitux especially troubling. Avastin, a second targeted therapy for colon cancer approved by the FDA in February, costs $4,400 a month—still an enormous amount for a drug. A recent editorial in the New England Journal of Medicine calculated that adding Avastin alone to the regimen for treating advanced colon cancer would add $1.5 billion a year in new national health costs.  Erbitux, obviously, could increase national health costs by many times that figure.

Why are these drugs so expensive? It's hard to know exactly, since drug pricing is a sacred prerogative protected by acts of Congress and the details remain shrouded in trade secrets. But the simplest answer is that drug companies can charge whatever price they want. Erbitux and Avastin are both laboratory-produced antibodies (Erbitux blocks a chemical signal that tells cells to grow; Avastin cuts off blood supply to tumors). True, these antibodies are more expensive to produce than most pills, but only slightly—the technology can be replicated in any college biology lab. Production costs amount to few dollars a dose at most.

Pharmaceutical giant Bristol-Myers Squibb (whose products include Excedrin for headaches, Glucophage for diabetes, Pravachol for lowering cholesterol, and Sustiva for HIV) markets Erbitux under an agreement with ImClone, and BMS sets the price. Avastin is made by Genentech. Like all pharmaceutical companies, BMS and Genentech cite research costs and the huge risks involved in drug development (many drugs fail; clinical trials are expensive ... but haven't we heard it all?) as explanations for the high prices of their drugs. But the real reason is that market forces do not apply to drugs.

Few individuals purchase these drugs as they would a head of lettuce, say, or a refrigerator. In the case of cancer drugs, health-insurance companies are the consumers. For those lucky enough to have insurance, their plan might pay; and indeed, oncologists say that, surprisingly, so far few have balked.

One reason for this is that Medicare, which does not cover most medications, does pay for cancer drugs, and insurance companies tend to follow guidelines for reimbursement set by the federal government's Centers for Medicare and Medicaid Services. So far, CMS has simply picked up the tab, no questions asked. (Officials in the agency, though, worry that escalating cancer drug prices might help bankrupt the Medicare trust fund.) The agency has, however, responded to the drug prices by convening a panel to discuss limiting payment for so-called  "off label" uses (giving the drug other than as strictly approved by the FDA), which would cut costs.

It is worth noting that the FDA is prohibited by law from considering price when it approves a drug. However, CMS does control most medical costs by setting the fees paid under Medicare for almost all physician and hospital procedures (which private insurers then follow). And yet the agency, now headed by former FDA Commissioner Mark McClellan, currently shows little interest in controlling the prices of drugs it pays for. This means that the agency has abandoned its pivotal role in controlling drug costs. If CMS does not set boundaries, private insurers will establish their own, limiting the situations where they pay for these drugs. Then it will not just be the uninsured but also those with insurance who find themselves unable to get drugs they believe might treat their cancer.

Isn't any price worth it to save a life? Perhaps, but these drugs often accomplish far less. The FDA approved Erbitux under new guidelines designed to get drugs on the market for life-threatening diseases, even if the drugs show only slight efficacy (and remember FDA does not think about price). Erbitux alone caused tumors to shrink in 10 percent of patients with advanced colon cancer, and, in combination with a chemotherapy drug called Irinotecan, in 22 percent of patients. There was no evidence that Erbitux prolongs life. Avastin combined with standard chemotherapy performed slightly better, prolonging life by an average of 4.4 months.  It is possible of course that with some tinkering, by giving the drugs earlier in the disease and in different combinations, researchers will find greater benefits. But even the current meager benefit will encourage all cancer patients to seek them, and those who cannot get them, because they lack health insurance or their plan won't pay, to feel cheated. And a marketplace with absolutely no price control will only propel the drug companies to charge even more for future drugs, some of which may offer even less benefit.

Robert Bazell is chief science correspondent for NBC News.