But what’s truly amazing is that in Cancerland these drugs—billed at $60,000 a treatment course and $26,000 a year, respectively—aren’t even notably expensive. Prices can go much, much higher. In 2018 the average price per treatment course for new cancer drugs was an astonishing $150,000.
Believe it or not, there was a time when a $4,000 a year price tag drew criticism—when Taxol, a transformative breast cancer drug, entered the market in 1992. New barriers were quickly broken as prices rapidly climbed—to $20,000 a year for Herceptin (also breast cancer) in 1998, and $100,000 a year for Erbitux (colon cancer) in 2002.
In fact, in the years leading up to 2000, the median monthly cost of a new cancer drug was under $2000. After that, prices began to skyrocket. By the early 2010s, median monthly price broke $10,000. And by 2017, a trade publication was noting with alarm that every new cancer therapy introduced that year was priced above $100,000.
These skyrocketing prices are not, typically, paired with astonishing cures or extensions of survival. While there have been some major advances around specific cancers, the price of new drugs is not associated with clinical benefit. Indeed, a study by Donald Light and Hagop Kantarjian found that only one of the 12 drugs approved in 2012 provided more than two months of survival gains.
So why are these increases so off the charts, given the limited benefits? Again, as with everything in this space, there are many factors at play—not least of which are the horribleness of cancer, and people’s willingness to try pretty much anything to extend life. I’ve discussed some of these factors already. But I want to introduce one additional element that hasn’t yet come up: the economics of cancer centers.
It’s clear why pharmaceutical companies would charge as much as possible for their drugs. And insurers are required to cover cancer treatment, and pressured not to drop particular drugs. PBMs—pharmaceutical benefit managers—play a role, too, for oral (as opposed to injectable) cancer drugs.
But another important player is cancer centers themselves. As this very interesting chapter discusses, comprehensive cancer centers—the 51 nationally designated institutions that provide a disproportionate amount of cancer care and are responsible for much of our clinical research—receive a high markup on the drugs they provide, making those drugs’ prescription among the centers’ most profitable activities. At the same time, reimbursements for services like prevention, ongoing management, mental health, and end-of-life care do not cover costs, even as more people are living with cancer and its extended treatment, rather than simply being “cured” or dying quickly.
What this means is that cancer centers are not neutral players when it comes to drug prices. It is obvious to the casual observer how physicians’ insulation from prices might be a factor in allowing costs to rise. And it is pretty well recognized that hospitals make money from expensive diagnostic tools and from surgeries. But I, at least, was surprised that drugs were such a profit center for cancer centers.
This raises two themes that I want to think about more. One is how to think about governing systems in which price incentives are very distorted, and cross-subsidization serves important functions. The other obvious case, from my vantage point, is higher education. Most people don’t pay the full cost of tuition, tuition generally doesn’t cover the cost of college, and universities do lots of things that we value but that don’t pay for themselves and aren’t fully covered by government.
The other is care. Last week I wrote about how frustrating it is, as a patient, to be caught in a system in which care is undervalued, and treatment is heavily drug-centered. Although I did not start writing about drug prices as a means to return to this theme, the conclusion is inevitable: as valuable as drugs are, our system is so tilted toward them that they have become a substitute for care—despite the fact that they are subsidizing its provision.
There is one final topic I want to touch on before (maybe?) moving beyond pricing: the broader policy/regulatory environment that has made this broad set of developments possible—what legal scholar Robin Feldman has called “regulatory failure by success.” Next, we tackle that.