Cancer Drug Pricing Debate: Reducing Financial Burden Among Patients and Their Caregivers

Is it appropriate that some cancer drugs cost patients half their annual incomes or more, even after insurance has paid its share?

Many experts agree it’s not, but that’s where their consensus ends. In a recent panel discussion at the Washington Post’s Chasing Cancer Summit, Peter B. Bach, M.D., Ezekiel J. Emanuel, M.D., Ph.D., and Jennifer Bryant had different ideas about how to make drugs more affordable to those who need treatment for cancer.

Questioning the System

Bach, who is director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York City, said that high cancer drug prices and copays inhibit the ability of patients to get access to treatments.

As an example, Emanuel — who is vice provost for global initiatives and chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania – mentioned the hormone therapy Zytiga (abiraterone), used to treat prostate cancer, noting that health insurers typically bill patients 25 percent of its cost: $2,500 per month.

“That’s 30,000 a year,” Emanuel pointed out. “We often forget that the median income in America — half the families — make under $61,000 per household and half make above that. When a single drug for cancer costs half the median income, cancer care is too expensive.”

Furthermore, the added survival time offered by this and some other novel cancer medications is not significant enough to justify their high price tags, Emanuel and Bach argued. Some cancer drugs extend the time without disease progression but don’t increase survival, and many others prolong survival for a number of months without a potential for cure.

Growth in the cost of medications can also be measured by looking at Medicare expenditures, Emanuel said. In 2012, he explained, drug costs comprised 17 percent of Medicare dollars spent. In 2016, they comprised 23 percent. Drug costs are expected to continue rising, with cancer and anti-inflammatory medications anticipated to rise the most steeply and quickly, he added.

“Cancer is getting hit particularly hard because every new drug being introduced starts out at $120,000,” he said, “and now CAR T (immunotherapy) is at $373,000 per patient.”

Bryant, who is Pharmaceutical Research and Manufacturers of America (PhRMA)’s senior vice president for policy and research, called it a “challenge” that there’s no cap on patient out-of-pocket spending built into the health care system for those on Medicare or who are uninsured. Under President Barack Obama’s health care law, she said, patient spending is capped at $7,000 per year per individual.

That doesn’t help to keep expenses down within the health care system overall, Emanuel argued.

“We are all paying for those exorbitant bills,” he said. “An individual might have a cap of $7,000 in private insurance … but the premiums go up a lot (when people take these expensive medications) because someone’s paying for it, and that’s the insurance company — and we’re paying the insurance company. We pay both through our premiums and through taxes for Medicare and Medicaid.”

Bryant said cost sharing can be helpful when employed properly — for instance, to direct patients to the least expensive, most effective treatments, to keep overall health care spending down — but said that isn’t being done when it comes to cancer medicines. Also problematic, she said, is that costs are being shifted from patients to healthy people.

She added that pharmaceutical earnings keep the drug pipeline active, which generates multiple therapies for different cancer types and ultimately drives price competition.

Whether high or low, no portion of those price tags should be charged to patients by insurance companies, Bach said.

“My starting point (for the cost of cancer drugs to patients) would be zero dollars,” he said. “This is insurance for an unpredictable event that’s catastrophic on multiple dimensions. The last thing we should do is stick patients with bills that ruin them financially on top of it.”

Proposing Changes

Bach proposed that value-based pricing would correct some of the health care system’s deficiencies. That idea would involve setting price ceilings for drugs “based on how well they work: take data about their efficacy and toxicity, figure out how you want to skew those incentives to treat rare diseases rather than large-population health problems and calculate what prices should be, so that innovative companies will know what they’re going to get based on how successful they are.”

This, he noted, could eliminate one factor that drives copays up: health insurers using the payments as leverage against pharmaceutical companies. According to Bach, insurance companies that want to push a drug’s price down might lash out at the company selling it by hiking copays; this results in fewer patients buying the medication.

Alternatively, insurance companies can be part of the solution to high drug prices, Bryant said. She suggested a system under which health care providers, including doctors and pharmaceutical companies, would be paid for a host of services bundled together at a rate based on outcomes. A shared set of clinical pathways, or guidelines, would be used by all the providers to help determine the most appropriate therapies and the desired outcomes for an episode of care — say, a full course of chemotherapy — with payment linked to success in meeting these terms. This type of value-based payment system is being pilot-tested by Medicare, and some private insurers are trying it, too.

“The market for cancer medicines is actually changing rapidly along with the science,” Bryant said. “The market is working, and is going to work better and better. The mantra that the market can’t work in oncology is based on a 1990s model when there were fewer therapies and less ability to substitute one for another.”

The panelists also discussed a pilot program proposed recently by the U.S. Department of Health and Human Services that would rely on an international price index to guide the amount paid by Part B Medicare for drugs.

Bach said the plan would use vendors to supply expensive infused drugs, so that doctors and hospitals would no longer have to buy them; this would end the system of paying doctors and hospitals back the cost of a drug plus a percentage markup. Furthermore, when buying drugs, Medicare would pay pharmaceutical companies prices based on “a blend over time of a basket of what other European countries charge. …The essential idea is to freeload off of other countries’ ability to be serious negotiators (of the price of drugs) when we cannot.” Ultimately, this would cut drug costs for patients, too.

Bryant said it’s concerning that the goal of the program is a 30 percent reduction in spending on medications.

“Common sense says that if you think you can take 30 percent out of anything without having some major market consequences or patient access reduction, think again,” she said. “If you try, in an arbitrary way, to pull in price controls from Greece and the Czech Republic, what we’re really doing is saying that we don’t want the same rate of progress and innovation that we’ve had over the last decade. …There are 1,100 medications in development for oncology, but a lot of those will not go forward if it seems clear that the reimbursement is going to change and will be completely unproductive.”

Emanuel argued that “this notion that exorbitant (drug) prices are necessary to support research is simply untrue.” While the pharmaceutical industry contends that it costs $2.7 billion to develop a drug, he said, no data has been presented to support that. He cited a 2017 paper in JAMA Internal Medicine that found that the cost of developing 10 specific cancer drugs was, on average, $757 million each.

Finally, Emanuel noted that per-person U.S. spending on drugs is $1,445 — the highest of any country. “We could take 30 percent out of what we spend on drugs and the world wouldn’t collapse,” he added.

Emanuel isn’t convinced the price-index plan will come to pass, but said that its proposal highlights the fact that both Republicans and Democrats consider drug pricing a priority issue.

“I do think something is going to happen,” he said. “Democrats are proposing Medicare negotiations. Republicans are proposing price controls. There’s plenty of room between the two to come to some coherent policy. If our drug prices keep going up, affordability is going to be the health care topic of the 2020 election, and I do think that will lead to some action.”