Are drug companies taking advantage of cancer angst?

Source: Business Day                               Published on: 06 January 2017

Cancer treatments are poised to become the biggest earner in the pharmaceutical industry.

Years before becoming a top cancer specialist, Eric Winer used to save money on his own medical care by talking US pharmacists into giving him expired treatments free of charge.

Winer, who has a bleeding disorder known as haemophilia, knew the drugs would still work for a brief time after the official use-by date. The young physician was trying to stay within his insurer’s spending limit and avoid having to pay out of pocket one day. Decades later, he recollects that anxious time as he tries to make sense of the soaring prices of drugs for his own cancer patients.

“Cancer is just viewed differently in our society,” said Winer, 60, who is chief strategy officer and director of the Breast Oncology Centre at the Dana-Farber Cancer Institute. “It evokes more fear. And somehow, I think the manufacturers of these drugs are able to take advantage of that in terms of the prices they set.”

That cancer angst, combined with prices that have surpassed $200,000 a year for revolutionary new treatments, is poised to give oncology medicines the biggest share of the $519bn global pharmaceuticals market this year, eclipsing drugs for cardiovascular and metabolic diseases for the first time. And while drug makers claim the revenue will propel innovation, the costs are stoking patients’ distress and creating a rift between manufacturers, health authorities and payers in many markets.

Take the new lung-cancer drugs from Merck & Co, Bristol-Myers Squibb and Roche, for instance. They are part of a new class of treatments known as immune therapies, which harness the body’s own cells to fight tumours and tantalise doctors with the possibility of defeating one of the most common causes of death in the developed world.

The drugs are a game-changer for some patients, helping them live more than twice as long. They are also expensive: from $12,500 to $13,100 per month of therapy. And now they are being combined with other medicines. Bristol-Myers estimates a cocktail of its Opdivo drug with another immune product Yervoy, for melanoma patients, costs between $145,000 and $256,000 a year. It has received “very little push-back on the pricing,” says chief commercial officer Murdo Gordon, because patients are living long enough to come back for annual checkups for the first time.

“What about the people who can’t get coverage?” Winer asked in December. “Nobody can afford this.” The prices also mean doctors must wrestle with how much benefit is worth the cost, even as they try to focus on which treatment is best for individual patients, he said.

No death sentence

Merck’s Keytruda, which harnesses the immune system and can help patients with a form of skin cancer that was once a death sentence, costs about $12,900 per month. Merck is studying biomarkers in the body to target the patients who will benefit most from the drug, and believes its value is being reflected appropriately, the company said in an e-mailed statement.

Global revenue from branded oncology treatments may rise 12% to surpass $100bn this year, according to a Bloomberg Industries survey of analysts’ estimates, before climbing to about $150bn by 2020.

Costly new medicines should not take all of the blame, because at least two other factors are at play.

Drug makers are taking advantage of the rising tide to lift prices on older treatments as well, and cancer patients live longer, meaning they are left paying for drugs for a longer time.

“That’s a mixed blessing,” said Steven Miller, chief medical officer of Express Scripts Holding, one of the biggest managers of prescription-drug benefits in the US, the world’s largest market for pharmaceuticals. “We’re going to be able to help people who previously weren’t able to be helped, and so we’re very excited about that. On the other hand, it’s going to beg the question: Are we going to be able to afford it?”

Pricing principles

Last year just two drugs, Celgene’s Revlimid and Novartis’s Gleevec, accounted for more than one-fifth of oncology spending through Express Scripts, one of the key intermediaries that negotiate with drug makers for rebates on the list prices on behalf of their customers.

Novartis raised the price of Gleevec 19% in 2015, before it faced generic competition last February, according to Express Scripts. Neither drug is brand-new: Gleevec was first approved in 2003 and Revlimid in 2005.

Celgene said it has “pricing principles” designed to keep developing cutting-edge medicines, but account for varying levels of affluence in countries around the world. Novartis points out that Gleevec’s US price has not budged since 2015 and drug makers need to recoup their research investment and fund further innovation.

Express Scripts and its rivals have started pushing back. CVS Health in August said it will no longer cover some treatments for cancer in 2017, including Novartis’s leukaemia treatment Tasigna, and Medivation’s prostate cancer drug Xtandi. This is the first time brand-name oncology drugs have been taken off its standard formulary list.

Express Scripts, which handles price negotiations on behalf of clients for pills and drugs that patients inject themselves, expects the cancer-drug spending it oversees to spike about 20% annually for the next three years.

Pay for results?

In response, the benefits manager says it is expanding a programme that allows for different prices depending on how effective drugs are, and grants refunds when treatment ends early.

Express Scripts will not disclose details of the drugs involved, but the goal is to cover nearly one-quarter of the oncology pharmacy spending that it will oversee this year, up from 5% in 2016.

Government authorities are taking note — and pushing back as well in some cases. US president-elect Donald Trump has declared himself an opponent of high drug prices, and said he would favour allowing the import of treatments from abroad.

In Germany and the UK, the health systems rely on expert panels to assess whether new medicines help patients more than old ones, and pricing power follows.

The UK’s National Institute for Health and Care Excellence has turned down funding for a handful of new cancer medicines lately, saying their benefits do not justify their cost. It is currently debating a new Roche treatment for breast tumours called Kadcyla.

Pay-for-performance would in theory be a way to maintain prices for cancer medicines that work and winnow out those that do not.

But such a system is hard to introduce in the US, the world’s biggest pharmaceuticals market, where federal and private insurers are often on different reimbursement structures, said Nicolas Dunant, a spokesman for Roche. The company has been in talks with 20 European countries since 2012 on outcomes-based pricing and has already introduced package prices for some cancers in Italy and Switzerland.

“We would welcome a system where we could price a medicine based on how it performs,” Dunant said. “In order to pursue such an approach, we need data.”

In the meantime, patients — and especially those with inadequate insurance — are the ones left juggling financial worries alongside medical ones.

Bloomberg

Source: Business Day