The Current Cost of Cancer Drugs: Physician, Payer and Government Concerns Grow

The August 2015 edition of the Mayo Clinic Proceedings featured an article entitled, “In Support of a Patient-Driven Initiative and Petition to Lower the High Price of Cancer Drugs”.1 In that article, the authors highlighted the rapidly escalating cost of cancer therapies and pointed out the growing financial hardship that many cancer patients face. The authors conclude, “Given the rising incidence of cancer in our aging population, high cancer drug prices will affect millions of Americans and their immediate families, often repeatedly.”1 In addition to battling a life-threatening disease and the toxicities of therapy, cancer patients are now faced with a new type of toxicity—financial toxicity. Ultimately, the authors call for a grassroots patient movement to advocate against the high cost of cancer drugs.1

Cancer Drug Costs Are In The Spotlight

The authors of the Mayo Clinic Proceedings article are not alone in expressing concern over the cost of cancer drugs. It was recently reported by IMS Health2 that worldwide cancer drug sales surpassed $100 billion in 2014.The IMS Health report also noted that 34 new cancer agents were launched in the United States between 2010 and 2014, which had a median monthly price of more than $10,400.2 Although these astonishing numbers are a direct concern to those who must manage the pharmacy benefit, they have not gone unnoticed by other sectors of the healthcare community.

Leonard Saltz, MD, a prominent oncologist from Memorial Sloan Kettering Cancer Center (New York, NY), delivered a speech heard by thousands of doctors at the annual meeting of the American Society of Clinical Oncology (ASCO) in May. In this speech, he sharply criticized the cost of new cancer treatments, stating, “Cancer-drug prices are not related to the value of the drug. Prices are based on what has come before and what the seller believes the market will bear.”3 Saltz continued, “The unsustainably high prices of cancer drugs is a big problem, and it’s our problem.” He called on industry, physicians and insurers to work together with government to address the issue.3

Other speakers at the ASCO meeting similarly expressed their displeasure with the current system, arguing that the US healthcare system should explicitly consider cost-effectiveness in the drug approval and insurance coverage processes.4 “There is no clearly defined value in the United States for what society is willing to pay for cancer treatment,” said Daniel Goldstein, a fellow in the Department of Hematology and Medical Oncology Department at the Winship Cancer Institute, Emory University, Atlanta, GA. “As soon as FDA approval occurs, the cost of the drug is essentially set. There’s no time to wait for published data.”4

Pharmaceutical manufacturers often counter arguments that cancer agents are overpriced by citing data showing the escalating cost of drug development in the current era. In 2014, the Tufts Center for the Study of Drug Development announced that it had calculated a cost to pharmaceutical companies of $2.6 billion to develop a new drug—up from the Center’s estimate of $802 million in 2003.5 However, that figure has been challenged by Jerry Avorn, MD, in a May 2015 article in the New England Journal of Medicine.6 Avorn noted that the new findings were presented at a media event that offered limited information regarding the methods used to arrive at this figure, making it difficult to know much about the soundness of the approach used or the validity of the reported number.6 He went on to state, “Because we cannot know which compounds were studied, it is hard to evaluate the key assumption that more than 80% of new compounds are abandoned at some point during their development—a key driver of the findings.”6

Recently, an article in the Boston Globe reported that in Massachusetts: “An alliance of lawmakers, consumers, and health insurers is pushing for a law that would force biotechnology and pharmaceutical companies to justify their prices by disclosing how much they spend on research, production, and marketing. It also would allow the state’s Health Policy Commission to limit the prices of especially costly drugs, something not done anywhere in the country.”7 A similar article appeared in The New York Times, noting that similar transparency legislation has been proposed in at least six other states.8 That article also points out that similar federal legislative efforts may be initiated this year.

Is The Time Right For New Reimbursement Methodologies?

Because of the high cost of cancer drugs and the projected growth of that sector at a rate of more than 6.5% per year, discussions about setting pricing for some cancer drugs based on how well they work are growing. The effort is part of a growing push for pay-for-performance programs to be extended to drug therapy. The basis of this approach is the argument by payers that they should pay less when drugs don’t work well in certain patients.

As reported in The Wall Street Journal,9 a variant of this approach was proposed by Peter Bach, MD, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, New York, NY. Bach’s proposal outlines an indication-based pricing model, in which the price of the drug is based on the effectiveness of the drug for a specific indication. For example, the drug Erbitux, which costs over $10,000 per patient for colorectal cancer, would be priced at ~$470 per patient if used to treat head and neck cancer, for which it is also indicated but is less effective.9

The path to such alternative reimbursement systems is often difficult, however. For example, pay-for-performance contracts often involve tracking certain health measures and outcomes in specific patients, and the cost and complexity of such tracking can offset the benefits. Thus, the number of such deals in the United States to date has been relatively small.10

A Call To Action

In light of the continued and projected rise in the costs associated with treating cancer, it is imperative that all stakeholders engage in an open dialogue about the rising cost of cancer drugs. This dialogue must focus on preserving innovation within the industry while maintaining access to affordable drugs. There must be open communication among all of the stakeholders and avoidance of actions that may ultimately be counter-productive (for example, knee-jerk legislation or price controls). Pharmaceutical manufacturers must be held accountable for the methods used to derive the price of a product, and pricing methodology should be based on measured outcomes, such as how the drug performs versus the standard of care. Likewise, governmental agencies should consider the impact of legislative action on access and innovation before finalizing any regulatory activity. Finally, those who must pay for these drugs—including the Centers for Medicare and Medicaid Services, private payers, and employers—need to be engaged in the process in order to ensure that benefit designs are not placing an undue financial hardship on patients, which can result in medication discontinuation and negatively impact health outcomes.

The time for these collaborative actions is now; it is clear that the current unrelenting spiral of increased cost for newer cancer drug treatments is unsustainable. In an era of rapidly growing medical costs, all of the stakeholders need to work together to control medical cost growth in order to ensure that access is available to all patients who need these potentially life-saving treatments. 



1.    Tefferi A, Kantarjian H, Rajkumar SV, et al. In support of a patient-driven initiative and petition to lower the high price of cancer drugs. Mayo Clinic Proceedings 2015; 90(8):996–1000.

2.    IMS Institute for Healthcare Informatics. Developments in Cancer Treatments, Market Dynamics, Patient Access and Value: Global Oncology Trend Report 2015. Published May 2015. Accessed August 9, 2015.

3.    Walker J. High Prices for Drugs Attacked at Meeting. The Wall Street Journal. June 1, 2015. Accessed August 6, 2015.

4.    Rice S, Johnson SR. Oncologists urge frank evaluation of cancer drugs’ costs and value. Modern Healthcare. June 2, 2015. Accessed August 9, 2015.

5.    Tufts Center for the Study of Drug Development. How the Tufts Center for the Study of Drug Development pegged the cost of a new drug at $2.6 billion. Published November 18, 2014. Accessed August 9, 2015.

6.    Avorn J. The $2.6 Billion Pill—Methodologic and Policy Considerations. N Engl J Med. 2015; 372:1877–1879.

7.    Weisman R. Mass. bill seeks to rein in prices of some drugs. Boston Globe. August 11, 2015.; Accessed August 17, 2015.

8.    Pollack A. Drug Prices Soar, Prompting Calls for Justification. New York Times. July 23, 2015.; Accessed August 9, 2015.

9.    Loftus P. New Push Ties Cost of Drugs to How Well They Work. Wall Street Journal. May 26, 2015.; Accessed August 10, 2015.

10.    Delblanco S. The Payment Reform Landscape: Pay for Performance. Health Blog. March 4, 2014. Accessed 9/22/15.