Innovation of Therapies vs Disruptive Pricing


A panel of experts debate the cost of innovation vs disruptive pricing of therapy.

Mark Socinski, MD: Let me bring up a slightly different perspective. In lung cancer, I can’t remember the last time—I think it was probably bevacizumab—that a cooperative group led to drug approval. We’ve transitioned from our government, and I think this happened, in my opinion, when Bristol Myers Squibb acquired paclitaxel in the 1980s. Drug development went from the NCI [National Cancer Institute] to the pharmaceutical industry, so if I were on the industry side, I would say, “Do you know how many dollars we spend on negative trials that never become FDA approved?” I don’t know what that figure is, but I’m sure it’s eye-popping in terms of the dollars that are spent on clinical trials for the development of drugs that never reach FDA approval, and therefore are never able to be reimbursed. So, how do you balance? We ask industry to be innovative and to bring us all these new drugs. For industry, many of the large companies are as good as any academic medical center we can think of; they have a cadre of PhD-type people who figure this out, much like our great universities and cancer centers do. How much do we balance this innovation and say, “Well, OK. We want you to be innovative, but we want cheap drugs at the same time.”

Gilberto Lopes, MD: We don’t want cheap drugs, we want drugs that are fairly priced. The way we have the system today, drugs aren’t fairly priced. What’s the ideal price of a movie theater ticket? We know what that is because there’s an open market. There’s not only 1 company making movies, there are a number of different companies making movies. You have competition in the market and the market sets that price. We have a right to patent, which is the way we used to incentivize those pharmaceutical companies to bring those drugs to the market, but we cannot abuse that patent process. We have to be cognizant that we need to bring competition to the market, and the place to bring competition is where we have several drugs for the same indication. Historically, companies have protected their turf by not bringing the prices of those drugs down. We will need new entrants that have more to win. We will need new companies not in the medium to be able to break that stalemate.

Afsaneh Barzi, MD, Ph: I want to add one comment. There’s something in health economics that’s called “price elasticity.” Price elasticity for the pharmaceutical industry does not exist. What does that mean? It means that the competition doesn’t set the price for the pharmaceutical industry. The reason for that is the way the pharmaceutical industry is set up. They aren’t set up to sell to an individual, which would then drive the market to set the price. They are set up with big contracts that the individual, who is the end user, is not able to influence. So if you look back at the hypertension market, which is a big market, the lack of price elasticity is actually well described in the antihypertensive market. In oncology, we’re getting there, but price elasticity doesn’t exist. The only thing that can change that, I think, with the competition between the United States and the European market, is the introduction of Chinese companies bringing forward products with cost differences that can be drastic. Giving an example, going from $10,000 to $5,000, would redirect the contracts, and is the only thing that can potentially introduce price elasticity to a market that isn’t open to this competition to set the price of drugs.

Mark Socinski, MD: Let me ask you 2 questions. Do you believe that will impact innovation? And do you believe that it will have an impact on how quickly we get those drugs to market?

Afsaneh Barzi, MD, Ph: If you look at the global market as innovation—the entire globe and how we innovate—it won’t change the innovation because there will be other companies in other countries with lower running costs that would still bring new products to the market. If you look at the United States, potentially, I think one thing that needs to be looked at is the cost of running the trials. When I wrote my first investigator-initiated trial in 2011, the cost per patient for the trial was in the $5000 to $8000 range, and that was with biomarkers. Now, we are talking about a cost of $30,000 to $40,000 per patient.

Gilberto Lopes, MD: I started at $1500. Mark probably started at less than that.

Afsaneh Barzi, MD, Ph: That’s the problem, and we’re generating data that we aren’t using. The FDA is asking for PRO [patient-reported outcome] and quality of life that we aren’t using. We have to step back and ask, “How much of the data that we are generating are we actually using?” Maybe we should take the waste off the plate in the design of our trials. That may result in keeping the innovative market in place without impacting the cost and financial toxicity.

Mark Socinski, MD: And the speed to market.

Afsaneh Barzi, MD, Ph: And the speed to market, yes. We’re generating this massive amount of data but we never go back to use it.

Mark Socinski, MD: I think that’s getting back to your point about flooding the market with other choices. It was part of the strategy with the FDA, to allow submission of external United States data in considerations for the drug, particularly in the PD-1, PD-L1space, where we have all these antibodies. That seems to be the most effective strategy, assuming that someone takes that first step and changes the price of the drug. If everyone has the same price because no one wants to take the step forward, then I don’t think we can get anywhere in this setting.

Gilberto Lopes, MD: I agree with Afsaneh. I think it’s going to take disruptors from outside of the United States and Western Europe, and it could be China, it could be India, or it could be Brazil. However, it looks like it’s going to be China.

Afsaneh Barzi, MD, Ph: The other issue is that when they come forward, what pricing would they put on their product? Are they going to select pricing that looks at the United States market, and therefore it’s not going to make a big change? Or are they going to come in with prices that are truly different?

Gilberto Lopes, MD: Time will tell, and if they do, are we going to take them?

Afsaneh Barzi, MD, Ph: I don’t know. Remember, we are not the decision-makers. That’s the complexity of health care, there are so many layers that it makes it hard for any of these things to happen.

Mark Socinski, MD: How do we think about this in terms of moving beyond cancer? We have a bunch of diseases, such as rheumatologic diseases. There are so many TV [television] commercial for psoriasis. It’s incredible how many there are, I can’t keep track of them. I should keep a list of TV commercials that I see of all these other diseases, but I think the same issue is ongoing in other areas.

Transcript edited for clarity.

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