Pharm infla

Last year, specialty drugs added countless years to the lives of America’s sick and billions of dollars to its national debt.

Spending on specialty medications in the U.S. rose by 30.9 percent in 2014, the highest such increase ever recorded, according to recent report by the nation’s largest pharmacy benefit manager.

The class of drugs most responsible for that jump was a new breed of high-cost, curative treatments for hepatitis C. Drugs like Gilead’s Harvoni and AbbVie Inc.’s Viekira Pak boasted launch prices of over $80,000 for a 12-week course of treatment. Such figures weren’t unheard of in the specialty market, but they’d never come attached to drugs for so common an ailment; over 3 million Americans suffer from hepatitis C.

Still, as poster pills for the threat of pharmaceutical inflation, Harvoni and Viekira Pak actually tell too sanguine a story.

Because these drugs proved equally effective for the most common form of hepatitis C, insurers and employers were free to cover one drug but not the other. This allowed payers to extract deep discounts from Gilead and AbbVie, in exchange for exclusive access to their patients. By the end of 2015, Harvoni is expected to sell at 54 percent of its wholesale price.

So while the sticker prices of these drugs remain eye-popping, their actual costs are falling precipitously. And the value of the medications is difficult to overstate; for over 90 percent of users, they provide a cure to a potentially fatal disease.

The same cannot be said of cancer drugs, which now cost upwards of $100,000 per treatment year. No commercial insurer has found a way of curbing the cost of new oncology medications, even as their prices rise entirely out of proportion with the benefits they provide. Barring presently untenable changes to government policy, America may soon be forced to choose between ballooning Medicare costs, and denying many of the nation’s cancer sufferers access to the best possible care.

No Competition

 The trouble with cancer is that there is no cure. Medications like Imbruvica, Opdivo, and Keytruda have proven successful at staunching the growth of cancer cells, adding months to patients’ lives while afflicting them with fewer side effects than chemotherapy. But because none offer a cure and most become less effective over time, the use of any one drug doesn’t preclude the simultaneous or subsequent need for another.

A 2012 report from the National Institute of Health found that when doctors write prescriptions for their cancer patients, they “do not choose the most cost-effective option; they only decide the timing at which each option is used.”

This means that when a new cancer drug comes to market, it can actually make the treatment of that cancer more expensive, not less.

In 2011, Bristol Myers-Squibb’s obtained FDA approval for the first immuno-oncology drug targeting late-stage melanoma. Yervoy inhibits the growth of metastatic melanoma by leveraging the power of the body’s own immune system. The drug was priced at $120,000 for a course of treatment. When Merck obtained FDA approval for its own immuno-oncology drug in 2014, the price of Yervoy remained the same. Now, clinical trials are suggesting that the two drugs may be more effective when taken together than either is in isolation. If that proves true, Merck’s entrance into the immuno-oncology market will have raised the wholesale cost of metastatic melanoma treatment to $270,000 a year.

Price-gouging on the Priceless

 The pharmaceutical industry’s largest trade group claims such costs reflect the extraordinary benefits of their latest innovations.

“A point that’s always left out of the conversation is the value that these medicines provide to patients,” said Holly Cambell, a director of communications for the Pharmaceutical Researchers and Manufacturers of America (PhRMA). “These patients are living longer, healthier, more productive lives.”

But for cancer patients, the cost of attaining such lives has risen enormously.

A report released this January by the National Bureau of Economic Research found that the price of cancer drugs rose 12 percent a year, every year between 1995 and 2013, even when adjusting for inflation and increased survival benefits.

In 1995, cancer patients paid $54,100 for each extra year of life secured through medication. In 2013, they paid $207,000 for that same benefit.


second cance

Malignant Growth

 As the population ages, NIH expects the incidence of cancer to climb from 1.6 million in 2010 to 2.3 million by 2030, when it will become the nation’s leading cause of death.

The cancer patients of tomorrow will almost certainly live longer and take more medications than those living today. Dr. Peter Schauer, an oncologist in Hartford, Connecticut, says he’s already seeing a transformation in the way his patients relate to their condition.

“With melanoma, it’s almost like diabetes now,” Schauer said. “A lot of cancers are becoming more like chronic diseases.”

Pharmaceutical manufacturers have 900 cancer drugs in some stage of development. Dr. Rena Conti, a health economist at the University of Chicago, believes that at least a few of those “will provide significant benefits if not outright cures for certain types of cancer.” She believes manufacturers will price those drugs accordingly.

“I think it’s just a matter of time before we see launch prices of $200,000 per patient per treated year,” she said.

In 2014, the American Society of Clinical Oncology estimated that the annual cost of cancer care would reach $172 billion by 2020. If drug prices rise at the rate Conti expects, that cost could be far greater.

For patients in Medicare Advantage, the yearly cap on out-of-pocket expenses varies between plans, but none are higher than $6,700. Between Medicare, catastrophic coverage provisions from commercial insurers, and charities that focus on funding treatment for the poor, the full weight of $200,000 a year drugs won’t be felt by cancer patients themselves. But $6,700 is enough to impoverish many seniors on fixed incomes. And it’s far from clear whether Medicare benefits will remain so generous when there are more than 2 million cancer patients seeking chronic, six-figure treatment.

But to Holly Campbell of PhRMA, to fixate on the cost of care is misguided, even vulgar.

“At the end of the day, you just can’t put a price on the value of these medicines,” she said.






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