I. Are cancer treatment costs justified?

“Unregulated Growth: A neoliberal’s wet dream” — Keguro Macharia

Cancer is commonly known as a problem of cellular proliferation. It is a disease that arises when cells grow out of control, resulting in disruption of the tissue where it grows, inevitably leading to more systemic issues.

Striking parallels can be observed in the growth of the cancer treatment market. The global market for cancer treatments reached $107 billion in 2015 with 70 new treatments launched between 2010–15; over 500 companies are involved in oncology drug development. This growth is accompanied by an annual increase of 11.5% percent in oncology drugs. This is not surprising given the rising cost of cancer drugs. Between 1995–2003, average launch price for 58 anticancer drugs rose 10% annually, after adjusting for inflation and health benefits. However, the big leaps in cancer prices started post-2000 as shown by average price increase per year of new drugs. Average drug price was <$10,000/year pre-2000 and then went up to $30–50,000/ year by 2005. In 2012, 12 out 13 new drugs released were priced above $100,000 for therapy. Standard chemotherapy drugs, such as carboplatin, costs $9,500/dose, even without patent protection (the same drug costs $200/dose for treating cancer in dogs — so why does it cost so much more for humans?). The targeted therapy drugs (small molecule inhibitors & monoclonal antibodies), hailed as the promised “magic bullet” at their inception, have similar if not higher price tags. For example, trastuzumab (Herceptin, the poster child for targeted therapy against breast cancer) and bevacizumab (Avastin, widely prescribed for colon cancer) cost $5,300/month, imatinib (Gleevec, used for chronic myeloid leukemia) costs $92,000/year. However, these drugs have done little to improve overall survival and quality of life for patients, e.g. — bevacizumab increases life expectancy only by 6 weeks. Pertuzumab (Perjeta, used for metatstatic HER2+ breast cancer, $5,900/month) showed increased cardiotoxicity and tumor response did not correlate with overall survival in clinical trials, although it did get approved for early stage treatment setting. The next breakthrough drugs — immunotherapeutic agents, seemed to have made even a further leap in their prices. Keytruda (a drug that helps make cancer cells recognizable to immune cells) costs $150,000/year, and the latest approved chimeric antigen receptor-T cell therapy (CAR-T) by Novartis (Kymriah) and Gilead (Yescarta) cost $475,000 and $373,000, respectively, for single use.

Based on such pricing, drug spending constitutes 20% of total cancer spending for commercially insured individuals. Even with paying 20–30% out-of-pocket for these drugs, that comes down to patients paying $20–30,000/year, nearly half of the mean annual household income in the US. Low-income patients are offered free drugs, but that only serves the pharma companies on the larger scale as charity drugs allow further tax deductions and getting rid off extra stockpiles while accumulating social capital. Unsurprisingly, patients suffer from financial toxicity where severe financial distress resulting from high treatment costs leads to bankruptcy and discontinuation of treatments (estimated 10–20% of patients). People with a cancer diagnosis are 2.5 times more likely to file for bankruptcy than those without, and these patients are more likely to be younger, female and nonwhite. A 2006 national survey found that almost 1 out of 4 privately insured patients had exhausted all or most of their personal savings to pay for cancer care, and 13% of patients reported being hounded for payments by collection agencies. This financial insolvency was found to be positively associated with early mortality among patients, highlighting the irony that the treatment meant to cure can lead to earlier death. Given that most Americans are insured through their workplace, this brings into the question of whether patients undergoing cancer treatment can remain insured in the long run. It’s to be noted that up to 89% of lifetime treatment cost per patient can come from indirect loss of productivity.

Multiple justifications have been provided for such astronomical price tags that include high costs of drug development (industry claims it takes at least $1 billion to bring a drug to the market), cost-effectiveness of drugs (more expensive drugs lead to improved outcomes, as exemplified by the case of new CAR-T therapies), reliance on free market forces stabilize price, and that price regulation stifles innovation & research. On the surface, these reasons sound convincing from economic & social standpoints. However, a closer inspection reveals the shaky foundations on which such claims are based. Drug development, while an undoubtedly expensive and lengthy process from basic to clinical stages, does not cost as much as the industry claims it to be — cost of development can be as low as 10% of what is reported. Cost-benefit analysis shows no correlation between price of a cancer drug and objective measures of patient benefit such as quality of life or overall survival (consider that the hepatitis C drug sofosbuvir costs $65,000 for 12-week course but has significant benefits whereas bevacizumab, $5,300/month, only increases life expectancy by 6 weeks). An analysis of 277 cancer drugs in clinical trials between 2011–15 reveal that only 15% of the treatments led to improvements in quality of life and patient survival. In fact, there might be an inverse correlation between cost of drug and clinical benefit. The idea that free market forces will bring prices down to a reasonable level in the US is a fantasy since pharma companies regularly employ tactics to establish monopoly pricing, a phenomenon where implicit collusion between oligopolistic firms refrain them from price competition. Monopoly pricing results in deadweight loss that adds a greater burden on the public, and average price increase from patent protection beyond marginal cost is ~400%. Additionally, they delay the introduction of generics into the US market by using strategies such as “pay-to-delay”, a good example being when Novartis pushed back against generics of Gleevec from coming into the US market after its patent expired in 2014. Even the packaging of the drugs by the manufacturers are made with the intent to profit, as shown by the waste of $3 billion a year by Medicare participants and privately insured patients due to the size of the vial.

Public policy in the US is increasingly proving to be corporation-friendly, and regulation has done little to stifle innovation or the profits made. A look at comparative prices of cancer drugs across nations reveal stark differences in drug prices — imatinib that costs $92,000/year in the US, costs $46,000 in Canada and $29,000 in Mexico, bevacizumab costs $3,000 in Israel but $5,300 per month in the US. And companies are still making profits at these prices in those countries. In fact, it seems that pharma companies have used public policy to their advantage. The Medicare Reform Act of 2003 prevents price negotiation and a 2006 amendment added prescription drug benefits, a move that saw soaring profits and bonuses/salaries to pharma CEOs. The Patient-Centered Outcomes Research Institute is prevented from considering cost comparisons and effectiveness, thus muting the role that patients can play in the drug pricing scheme. On top of all these, US laws forbid the import of prescription drugs from abroad, even for personal use, thus effectively restricting the patients to “exchanges of desperation” in a market that is rigged against them. Of course, all these political maneuvers come with a hefty price — in 2012, pharma companies were represented by 2500 lobbyists with $306 millions spent in lobbying, far more than that employed by defense, aerospace and oil and gas industries. This points to “benefit hoarding” by the pharma companies as they have successfully managed to skew the benefits of public policy towards them rather than the people the policies were meant to help. The collusion between the industry and the government becomes clearer in a global context — the overall annual increase in post-licensing drug price in the UK was 0.24% compared to 8.8% in the US. The UK, Germany, France, New Zealand, Canada & other nations have pharmaceutical price regulation schemes in place that makes drugs more affordable and accessible. Given that federal funding plays a major role in bringing drugs to the market, all this evidence points to policy failure on the part of the state.

It’s not only pharma companies that are benefiting from policy failure — under a federal program, healthcare providers can buy cancer drugs for half the price that private oncologists would have to pay. Cancer patients and their insurers have to buy their medication from the healthcare providers, and based on how cancer drug payments are processed, they end up paying twice the amount to hospitals and their doctors compared to what they would have paid to an independent oncologist. This should raise concerns as healthcare providers increasingly push private oncologists out of practice. Additionally, pharmacies and hospitals have been shown to mark up cancer drugs above the average sale price by 6%, thus furthering their profits.

The public outcry over exorbitant drug prices, especially the novel CAR-T therapies, has prompted pharma companies to announce payment plans, subsidies & reimbursements to help patients, but these plans are far away from being implemented in the complicated US healthcare system. On a more public level, President Trump re-affirmed his promise of lowering drug prices at the 2018 State of the Union speech. However, one is left to wonder how committed he is to this promise and how such a feat will be achieved when his Human & Health Service (HHS) appointee, Alex Azar, is known for raising insulin prices as a top Eli Lilly executive. On another note, pharma-bro Martin Shrkeli went to prison for lying to his investors, and not for jacking up the price of an AIDS drug by 5,000%. So, again, one is left to wonder what kind of protection the legal system can offer to victims of profiteering tactics by pharma companies that cannot hold such actions accountable.