News & Commentary

New Cancer Drugs Costing a Bundle

Competition has sometimes worked to reduce the cost of some drugs for some diseases. Health insurers and PBMs can bargain with several drug makers for the best price for drugs for the same indication with similar efficacy.

That’s not happening with cancer immunotherapies, though, where some of the oncologic drugs can cost $250,000 a year.

The supply is growing, which should, theoretically, lower prices. The number of cancer drugs in the approval pipeline expanded by 63% between 2005 and 2015, according to QuintilesIMS Institute.

Number of cancer drugs in clinical development

Source: QuintilesIMS Institute

Steve Miller, chief medical officer at Express Scripts, told Reuters that “for cancer drugs in general ... it is hard for us to drive down cost.” Miller said that the makers of immunotherapies benefit from coverage requirements, benefit plan structures, and a dearth of studies that gauge how the new drugs fare in head-to-head competition.

It’s like this, says Aaron Kesselheim, MD, an associate professor at Harvard Medical School and author of several studies of drug pricing: “Cancer drugs don’t compete on price,” he told Reuters. “Drug companies have market exclusivity and we require payers to cover cancer drugs—Medicare has six protected classes, including cancer.”

The five other protected classes are HIV/AIDS, antidepressants, antipsychotics, seizure disorders, and organ transplantation.

The combination of scientific progress and pricing power makes the area an irresistible lure for pharma companies.

Peter Bach, MD, director of Memorial Sloan Kettering’s Center for Health Policy Outcomes in New York, told Reuters: “Most of the strategy on the part of pharmaceutical companies assumes unrestrained pricing power. We don’t see evidence that companies are pursuing cost-effective strategies.”

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