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Why Do Cancer Drugs Cost More Than Gold?

08/10/2015 04:57 EDT | Updated 08/10/2016 05:59 EDT
Shutterstock / Dimitar Sotirov

QUESTION: I am taking a cancer drug that costs $7,000 a month. I feel fortunate because I have private insurance that covers the cost. But I often think about the people who don't have insurance. If you look at the size of one of my pills, it costs more than its weight in gold! Why are these drugs so expensive?

ANSWER: Your question goes to the heart of one of the most challenging issues facing the health-care system today -- the skyrocketing cost of prescription drugs.

A decade ago, the average bill for a cancer patient's drugs amounted to $2,000 or $3,000 a month, says Dr. Maureen Trudeau, head of medical oncology and hematology at Sunnybrook Health Sciences Centre.

"Now some of the medications cost $6,000, $8,000 or $10,000 a month," she says.

Despite their big price tags, a lot of newer drugs don't actually cure cancer. They simply help the patient to live longer -- sometimes by just a few months -- or will ease the discomfort caused by the disease.

Some patients have insurance -- either public or private -- that covers most or part of their drug expenses. But other patients do not.

In a recent Angus Reid poll, almost a quarter of the respondents said that in the past 12 months they or someone in their home did not take their medicines as prescribed because of the costs.

"I see people who are thinking about selling or mortgaging their homes to pay for their drugs -- and that is so un-Canadian," says Dr. Trudeau.

Dr. Trudeau and other physicians are worried that pharmaceutical prices are heading in a direction that's "unsustainable" for the health-care system.

But this brings us back to your question: why are prescription drugs so expensive? The industry often points to research and development costs as being key drivers behind pharmaceutical prices.

A 2014 report from the Tufts Center for the Study of Drug Development, which gets funding from the pharmaceutical industry, concluded that it costs $2.6 billion (U.S.) to bring a new drug to market. (Almost half that amount was the cost of capital, with some very inflated assumptions about interest rates.)

The researchers who wrote the report said their conclusion is based on access to confidential corporate data. But they are not at liberty to disclose the names of companies, nor the drugs, they looked at.

The report was met with a scathing rebuke in the New England Journal of Medicine.

"The raw numbers on which the analysis is based are not available for transparent review -- and are likely never to be divulged," Dr. Jerry Avorn, a professor from Harvard Medical School, wrote in a commentary published in May 2015. In other words, why should we believe a bunch of numbers that can't be checked and verified?

Dr. Avorn readily acknowledges that drug development can be risky. But he also points out that the "the pharmaceutical and biotech industries remain among the most profitable sectors of the U.S. economy and [they] actually spend only a small fraction of their revenues on truly innovative research."

The pharmaceutical sector has a long history of secrecy -- especially when it comes to the pricing of its products. Health experts say this needs to change.

"We should have a public audit of the records of the manufacturers in order to have a meaningful discussion about pricing as a mechanism for compensating [research and development] costs," says Steve Morgan, a professor in the School of Population and Public Health at the University of British Columbia.

Prof. Morgan notes that drug companies get significant tax breaks on their expenditures. What's more, a lot of the basic science that leads to breakthrough treatments is carried out at publicly-funded institutions such as universities.

"We need to be clear that the taxpayer has already financed the manufacturers," he says.

Many experts believe that drug companies simply charge what the market will bear -- and that's reflected in the wide range of drug costs found in different countries.

The United States tends to have the highest drug costs. Medicare, the U.S. public health insurance plan, has been prohibited by a 2003 law from negotiating lower prices with the drug manufacturers.

Countries that engage in price negotiations on a national level reap substantial savings, says Dr. Joel Lexchin, a professor in the School of Health Policy and Management at York University.

"Take the blockbuster drug Lipitor, for example. A year's supply of the brand-name drug in Canada costs at least $811. In New Zealand, where a public authority negotiates prices on behalf of the entire country, a year's supply of the brand costs just $15. Even the generic version of Lipitor costs at least $140 in Canada, more than nine times more expensive than in New Zealand."

Dr. Lexchin and Prof. Morgan are among the authors of the Pharmacare 2020 report which was recently released by a group of health experts lobbying for universal coverage of medically-necessary prescriptions.

"If you do things together, you increase your purchasing power," say Prof. Morgan.

Without that collective action, he warns, Canada could be facing a huge leap in the cost of so-called "specialty" drugs that are designed for subgroups of patients. Some of the drugs are targeted at individuals who have specific genetic traits, relatively uncommon disorders or chronic conditions.

A recent study of private drug plans in Canada found that specialty drugs account for 2 per cent of all prescriptions, but they added up to nearly a quarter of all the spending on drugs paid for by the private insurance plans.

As more of these drugs come on the market, they could rapidly balloon health care spending.

"Some of these drugs are going to be real breakthrough treatments," says Mona Sabharwal, Executive Director of the pan-Canadian Oncology Drug Review. "But they are going to be effective only if patients, and society, can afford to use them," she adds.

Co-authored by Paul Taylor, Sunnybrook's Patient Navigation Advisor

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