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Report Calls for Drug Pricing Reforms

Tony Hagen @oncobiz
Published: Monday, Mar 16, 2015

Hagop M. Kantarjian, MD

Hagop M. Kantarjian, MD

Dr Vincent Rajkumar

Vincent Rajkumar, MD

A new report has called for broad changes in the way drugs are priced in the United States, saying the law of supply and demand is not doing an effective job of bringing the cost of cancer drugs down to a level comparable with other countries.

In the article, which was published in Mayo Clinic Proceedings, authors Hagop M. Kantarjian, MD, from MD Anderson Cancer Center, and Vincent Rajkumar, MD, from the Mayo Clinic, made several recommendations that could lead to cost reductions. These suggestions included the allowence of medicare negotiated drug prices, treatment pathways based on cost-benefit analyses, FDA and physician group recommended prices, and the importation of cheaper medications from other countries.

The authors stated “the average price of cancer drugs for about a year of therapy increased from between $5000 and $10,000 before 2000 to more than $100,000 by 2012.” In that same time period the average household income has decreased about 8%.

For cancer patients, the cost of treatment can run as high as $20,000 to $30,000 out of pocket each year, amounting to half the average US household income and sometimes exceeding the average income of a senior on Medicare ($23,500), the report states. “About 10% to $20% of patients may decide to compromise on their therapy or to not take it,” the authors wrote. 

The elimination of pay-for-delay strategies, in which lower-cost producers are paid by drug companies not to bring certain generics to market, could result in lower costs, the authors suggested. The FDA estimates that pay-for-delay strategies cost US taxpayers and consumers $3.5 billion a year in higher drug prices.

As an example of this strategy, the authors alleged that Novartis used pay-for-delay tactics to stall the introduction of a generic form of imatinib (Gleevec) to the US market, costing consumers and the US healthcare system an estimated $500 million.

In a statement, Novartis disagreed with this allegation.

“As a result of litigation that Novartis Pharmaceuticals Corp settled last year with Sun Pharmaceuticals Industries Ltd, Novartis will permit generic imatinib to enter the US market on February 1, 2016 – approximately three years in advance of the expiration of other Novartis patents covering Gleevec that expire in 2019,” the company said.

“Imatinib has been a life-changing medicine. Before its availability many patients lived only months to a few years. Today, 9 out of 10 patients with Philadelphia positive chronic myeloid leukemia (Ph+ CML) have a near normal lifespan, allowing them to lead productive lives and giving them more time with family and friends. It has the lowest price of the targeted oral Ph+ CML therapies available in the US.”

Kantarjian and Rajkumar expressed concerns with the oft-cited $1 billion cost of new drug development. The authors suggested this number was overstated and that much of the cost of drugs is borne by the US government, which subsidizes research to a large extent.

In response to this, Novartis said “when setting the prices of our medicines, we consider several factors including the benefits they bring to patients, their positive impact on other healthcare costs, the price of existing treatments and the investments needed to continue to innovate for patients.”

The authors cited a Canadian government study that estimated that US consumers pay 100% more for patented drugs than patients elsewhere. Imatinib, for instance, costs $92,000 per year in the US, $46,000 in Canada, and $29,000 in Mexico, the report said.

The Mayo Clinic Proceedings report authors said a common argument that drugs that extend life should command higher prices is flawed, as they see no clear correlation between cost and benefit in terms of survival and quality of life. “One drug may prolong life by years and another by days, yet both carry similar price tags,” the authors wrote.

“Because the cost of drugs is one of the few transparent healthcare costs, drugs get much public attention, yet are only a small percentage of spending and demonstrate remarkable rewards,” Novartis wrote. “A broader, more balanced discussion on how best to use healthcare resources is needed, with recognition that medicines help to lower healthcare costs over time, providing significant benefits to patients and society. Attention should be paid to issues such as different charges for similar hospital services, costs across the complex healthcare systems and the growing complexity of our public and private payer systems.”

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