Why Are Cancer Drugs So Expensive?

cancer drugs are more expensive than ever

Doctors from the Mayo Clinic and MD Anderson Cancer Center have taken a close look at why cancer drugs are so expensive for Americans, and it's not because of the reasons drug companies report.

Consider:
In the United States, the average price of cancer drugs for about a year of therapy increased from $5000 to $10,000 before 2000 to more than $100,000 by 2012.

Americans with cancer pay 50% to 100% more for the same patented drug than patients in other countries.

The doctors studied four common reasons given for high cancer drug costs, and found them to be little more than myths that allow drug companies to increase their profits from cancer patients.

Myth #1 - High Cost of Research & Drug Development
The $1 billion price tag often quoted to research and develop a new drug has been found to be overinflated, with costs actually as low as 10% of that number. In reality, 85% of cancer basic research is funded through taxpayers’ money, not drug company money.

Myth #2 - High Cost is Due to Great Benefit
"A cost-benefit analysis reveals no correlation between price and benefits when measured by objective criteria such as survival or quality of life. One drug may prolong life by years and another by days, yet both carry similar price tags."

Myth #3 - Competition Between Drug Companies Will Lead to Reasonable Prices
With so few cancer drugs available from only a handful of companies, drug companies have avoided competing with lower prices. Instead they all keep prices artificially high, so all companies benefit. This creates a virtual monopoly. "Further, in many instances, patients may need to be treated with each of the approved drugs sequentially because many cancers are still incurable and each drug stops working after a period of time."

Myth #4 - Controlling Prices Stifles Innovation
"High profits are often channeled toward higher salaries and bonuses of drug companies’ CEOs, not invested back into cancer research. In a Forbes editorial, Peter Bach outlined how high drug prices may in fact stifle innovation. Sovaldi, the new hepatitis C drug, was estimated by Pharmasset, Inc, the original company that developed it, to sell at about $34,000 for a course of treatment. This was the price of the innovation. Gilead Sciences, Inc bought Pharmasset at an 89% premium, figuring they could charge any price they wished for Sovaldi, regardless of the consequences to patients. Gilead now charges $80,000 to $160,000 for a 3- to 6-month course of the drug. The added premium price is money diverted from innovation (investing in future research) as a result of distorted market mentality. The cost of drug production for a treatment course is only $138; outside the United States (India, Egypt, Spain), the price of a course of treatment is $900."

The doctors gave several recommendations to reduce cancer drug costs, including allowing Medicare to negotiate drug prices, allowing experts to consider the efficacy of various drugs when determining their value, eliminate drug companies' ability to pay competitors not to produce a similar drug, allow importation of cancer drugs from other countries, and others. They also recommend drug companies be held to a mission of helping patients, not just maximizing profits.

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