Cancer drugs: Why the high and rising prices?

When Americans talk, pharmaceutical companies listen. And what they've heard is that initiatives to contain or regulate medical costs get labeled as "rationing," a word with very un-American connotations.While politicians wring their hands, pricing strategists at pharma and biotech companies take action by charging high and rising prices for products for life-threatening illnesses. Cancer is Exhibit A, with many drugs costing more than $100,000 per year of treatment. A JAMA Oncology paper reviewed wholesale prices for cancer drugs approved over the past five years and found that prices are not correlated with a drug's novelty or efficacy.The authors conclude:

"Our results suggest that current pricing models are not rational but simply reflect what the market will bear."

Now it's possible that there is a greater correlation between actual negotiated prices and novelty or efficacy that isn't showing up in the researchers' data on wholesale prices. Still, the main conclusions are likely to stand, and spending on cancer drugs is sure to grow as more drug developers respond to market signals and develop new products.If those who pay the bills, including private insurers, employers, and the government want to do something about cancer drug prices, they'll need to embrace objective ways to measure cost effectiveness, and not be afraid of an opponent throwing around the "rationing" word. They'll have to couple that approach with a commitment to personalized (or "precision") medicine so that individuals get the specific drugs that are most effective for them, even if they don't work as well for the general population.The outcry over for Hepatitis C has shown that there is at least some appetite to take on drug prices, but I don't expect any dramatic clampdown on cancer drug prices in the near term.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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By healthcare business consultant David E. Williams, president of Health Business Group.