Too Much Money for the Medicine

On Halloween of 2010, David Mitchell got out of bed and immediately fell to the floor with pain so excruciating he was unable to move. A few days later, the results of his MRI showed malignant-appearing lesions up and down his spine and ribs, and he was diagnosed with multiple myeloma.

Multiple myeloma is incurable but treatable, and Mitchell had surgery to stabilize his spine and started an expensive drug therapy. For over five years, he took Revlimid (lenalidomide) manufactured by Bristol Myers Squibb (BMS). Each capsule currently sells for $833 — and cost less than $1 to make. Now he’s on a four-drug combination that costs $900,000 per year. When the three classes of recommended drugs stop working, Mitchell says some oncologists say the outlook might appear to be “dismal.”

“But I don’t look at it that way,” he says. “There are new drugs in development and coming on the market all the time. With each drug, I’m going to get enough additional time to get to the next new drug. So innovation and drug development are vitally important to me — literally life and death.”

Mitchell is not the only patient with cancer whose drugs are expensive. According to Dr. Vincent Rajkumar, hematologist and professor of medicine at Mayo Clinic in Rochester, Minnesota, every single type of cancer is expensive to treat.

“Almost every new cancer drug introduced in the last three years has been priced at more than $100,000 per year,” Rajkumar says. “The median price was approximately $150,000 in 2018.”

Why Are Prices So High?

Medications aren’t the only cost in cancer treatment. Depending on the patient and their diagnosis, therapy can involve surgery, radiation and pharmacological therapy, as well as indirect costs like lodging, transportation, child care, lost wages, special food, fertility treatment or adoption fees. But medications are one of the biggest costs and among the fastest rising. While research and development do take a significant investment, why do they require such aggressive pricing? Or is too much money spent on marketing and advertising, or perhaps on high salaries for executives? These questions are receiving more scrutiny than ever before.

The American Cancer Society (ACS) reports that Americans with cancer paid nearly $4 billion out of pocket in 2014. Employers, insurance companies and taxpayer-funded programs paid roughly $87.8 billion that same year. For patients with multiple myeloma like Mitchell, drugs account for approximately 60% of the cost of care, according to a study published in Blood in 2019.

Rajkumar warns that programs that lower out-of-pocket costs for patients can be helpful but offer only “Band-Aid” solutions that don’t fix the larger problem.

Monopoly

“The reason drug prices in America are so high is because most other countries have governments that negotiate directly with drug companies,” Mitchell says.

“And we have laws and policies in the United States that literally prohibit the government from using its purchasing power through Medicare (the largest payer of medications) to lower drug prices. Consequently, we have a system in which the drug companies have all of the pricing power, and we have none of the purchasing power.”

Mitchell, who is the CEO and founder of Patients for Affordable Drugs, points out that the U.S. government negotiates prices for nearly everything from aircraft carriers to copy paper. Why not for the cost of lifesaving drugs for millions of Americans?

Because of the Medicare Modernization Act. Passed in 2003, this act includes a noninterference clause that states that the secretary of health and human services cannot intervene in negotiations between drug companies and insurance companies’ pharmacy benefit managers. According to Mitchell, Billy Tauzin, who represented Louisiana then as a Republican in the U.S. House of Representatives, and was a primary advocate for the bill, became CEO of a trade association for the pharmaceutical industry earning an annual salary of $2 million in January 2005.

“Basically, Medicare needs to buy the drug for all beneficiaries who need it and pay whatever price pharmaceutical companies set,” Rajkumar says. “That’s the recipe for the problem we have right now.”

For many new drugs, there are no alternatives. These monopolies should be temporary and only until generic competition enters the market when patents expire. However, this often does not happen because by the time the patent ends the drug has already been replaced by a “new and improved” version with a new patent that is now the standard of care.

Stacie Dusetzina, associate professor of health policy and Ingram Associate Professor of Cancer Research at Vanderbilt Medical Center in Nashville, Tennessee, says BMS has been criticized by the Food and Drug Administration (FDA) for withholding samples of Revlimid from generic manufacturers.

“This makes it hard for companies to do the tests they need to do to get a generic on the market,” Dusetzina says. “Other companies do things like create slightly different formulations or use something like an auto-injector or device that can be patented. There’s a whole bag of tricks.”

Even when generics are available, Dusetzina says, people on Medicare can have higher out-of-pocket costs for generics than for brand names because of a loophole in the Medicare Part D benefit.

“This monopoly is completely a function of our laws and the policies that have been purchased with billions of dollars in lobbying and campaign contributions by the drug companies through the years,” Mitchell says.

Rajkumar agrees and noted that pharmaceutical companies and their trade organizations spent $220 million on lobbying in the U.S. in 2018.

Seriousness of the Disease

Patients’ lives are dependent on new innovation of these drugs. Maybe the high costs are necessary to drive development. It takes about 12 years for a drug to go from testing to approval, and only about 10% to 20% ever reach the market.

But this still doesn’t explain why Americans pay at least twice as much for medications as patients do in other countries.

“Some would argue that we can’t make this comparison because not all drugs are available in those countries,” Dusetzina says. “However, you could ask why a certain drug isn’t available in another country; probably because it doesn’t have good value.”

Mitchell agrees that the argument for innovation doesn’t hold up. U.S. drug prices are still drastically inflated.

“A recent study showed that every single one of the drugs approved by the FDA from 2010 to 2019 was based on science paid for by taxpayers through the National Institutes of Health (NIH),” Mitchell points out. “In other words, taxpayers are paying for the early high-risk basic foundational science. When something shows promise, the NIH hands it off to the drug companies.”

How We Fix the Problem

Gwen Darien, who is the executive vice president for patient advocacy and engagement at the National Patient Advocate Foundation, has been diagnosed with cancer three times — in 1993 with non-Hodgkin lymphoma, in 2014 with breast cancer and in 2018 with endometrial cancer. She still remembers the moment in 1994 when she found out the Epogen (epoetin alfa) injections that boost her white blood cells cost $2,000 per shot. She didn’t have to pay the full amount, but her portion was significant.

“I was shocked because it was an integrated part of my care that helped me stay on my chemotherapy schedule,” Darien says. “I had to decide where I was going to take on debt. I didn’t have any medical debt, but I had cost-of-living debt because I chose to pay my medical bills. I put other things, like food, on my credit card.”

The truth of the problem, Mitchell points out, is that drugs don’t work if people can’t afford them.

So what do we do now?

Value-Based Pricing

Most other developed countries have health technology assessment evaluations that look at a new treatment and compare it to the standard of care, then negotiate a fair price based on the benefit it brings over existing treatments. Dusetzina says the U.S. does not do this and coverage is mandatory if a medication is FDA approved. This makes for a lack of fair pricing.

“We have a lot of drugs that don’t improve the quality or length of a patient’s life more than the current standard of care,” Dusetzina says. “So we should think about either not paying as much or not offering them at all. And that’s important: The most powerful negotiations are the ones you can walk away from. As a country, we have a really hard time walking away from the table when it comes to a treatment, even if it doesn’t look like it works.”

The solution is pretty straightforward, according to Rajkumar. “The price of the drug is negotiated and proportional to the value it provides,” he says. “So the drug that works for one month will not be the same price as a drug that works for one or two years.”

Medicare Negotiation

To have a value-based pricing system, Medicare must have the ability to negotiate. These solutions go hand-in-hand.

One study found that if Medicare negotiated prices to those secured by the Veterans Administration hospital system, there would be savings of $14.4 billion on just the top 50 dispensed oral drugs.

Beyond these two big changes, Rajkumar outlines others, including allowing more generics and biosimilars to enter the market and reforming the patent system to stop manufacturers from maintaining monopolies.

“The first step is to curb the drug companies’ unilateral pricing power,” Mitchell says. “And then to ensure that we make adjustments downstream, like with the pharmacy benefits managers (PBMs) who work for insurance companies and do all of their work in secret. There’s no transparency whatsoever. It’s wrong that I can’t know if the preferred drug on a pharmacy plan formulary is the best drug for me, or if it’s the least expensive drug among equally effective options, or if it’s simply there because the PBM got a big rebate from the drug company.”

Robin Yabroff, the scientific vice president of health services research at ACS, says their research shows that when patients have health insurance coverage, they are more likely to receive recommended cancer screening and be diagnosed with earlier-stage disease when the cancer is more treatable. Treating early-stage cancer tends to be much less expensive for patients as well as for payers.

Additionally, people with health insurance coverage who smoke are also more likely to receive support for smoking cessation, which can reduce the risk of developing multiple types of cancer.

“So that is another solution to keeping costs of cancer care down,” Yabroff says. “Ensuring people get access to high-quality, primary care, cancer prevention and screening.”

'House of Cards'

Andrew Schorr received a diagnosis of chronic lymphocytic leukemia in 1996 and myelofibrosis in 2011. Currently, he gets immunoglobulin infusions once a month. When he went on Medicare at 65, his treatment cost him $700 a month, and because he still worked, he did not qualify for patient assistance programs. He had no choice but to struggle through. When his doctor switched drugs, his payment went up to $980 a month. So he took a new job and went back on private insurance with Medicare as secondary. His copay went down to $25 a month. Schorr, who is the executive vice president of Patient Power, says he loves his work and sees it as his calling, but what if he isn’t able to work anymore?

“I would be really concerned about my health,” Schorr says. “Because that would throw me back into Medicare Part D, and Medicare doesn’t negotiate prices. And there’s not anywhere I can get assistance from.”

Because, as Darien says, “If you’re in a house of cards, you can pull out any one of the cards and the rest will come tumbling down.”

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