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Cancer drugs have become increasingly expensive in recent years. No one blinks anymore when a new lung cancer or colon cancer treatment comes to market priced at more than $100,000 per patient. In part, we don’t blink because we have simply gotten used to such prices – the shock has worn off. Moreover, many of these new treatments are targeted therapies that only work for patients whose cancers express specific mutations, targeting the specific genetics underlying their neoplasms. Because these treatments are targeted, we know that only a subset of patients will receive them, thereby limiting the overall cost of the therapies. We are willing to give pharmaceutical companies some leeway in pricing these drugs, because we recognize that such targeted therapies limit the pool of patients pharmaceutical companies can count on to recoup their investments. In fact, due to such precision targeting, we even hope that the new treatments will be so much more effective against cancers they will justify their high prices.
Unfortunately, a study by David H. Howard and colleagues shows that new cancer treatments, on average, are less cost-effective than older ones. The price of cancer drugs is rising faster than the effectiveness.
In the simplest terms, cost-effectiveness quantifies the ratio between how much an intervention raises healthcare costs and how much it improves health outcomes. For advanced cancers, one important outcome is whether the treatment increases patient survival. A $100,000 treatment that increases life expectancy by an average of, say, six months would have a cost-effectiveness of around $200,000 per life year. (The actual cost effectiveness could differ, depending on how the drug influences other healthcare costs.) That $200,000 per life year cost-effectiveness ratio is on the border of what health policy experts think is worth spending for a year of life. And if that extra year of life is of low quality, the intervention would be deemed even less cost-effective.
Rigorous cost-effectiveness analyses translate all health outcomes into Quality Adjusted Life Years, but that’s further into the weeds than the authors of the current study waded. Instead, they stuck with the most basic outcomes measure – years of life – and plotted cost-effectiveness over time. They found that the price of an extra year of life has risen over the last two decades, even after adjusting for inflation. Whereas in the mid-nineties, cancer drugs generally provided an extra year of life for less than $100,000, most new treatments typically provide a year of life for as much as $150,000 or even $200,000:
This declining cost-effectiveness is a disturbing trend. And the outliers on this graph are even more disturbing, providing a year of life at $350,000, $400,000, or even $800,000. That is unacceptable. We need to demand value out of medical interventions. High prices should reflect large benefits. Pharmaceutical companies can price their products any way they want to, but health insurers and government payers like Medicare should not be expected to cover treatments that don’t bring benefits at a reasonable price.
