Expensive New Drugs:
Are They Worth It?
David Orentlicher, MD, JD
Indiana University Schools of Law and Medicine
May 7, 2010
(With thanks to Paul R. Helft, MD
Indiana University School of Medicine)
Cancer treatment as a
particular area of concern

Cancer treatment in the US cost more than $90
billion in 2006


Just under 5% of total US spending on medical care
From 1990 to 2008, overall costs of treating
cancer more than tripled in nominal dollars and
more than doubled in inflation-adjusted dollars
Elkin and Bach. Cancer’s Next Frontier: Addressing High and Increasing Costs.
JAMA 2010;303:1086-1087.
Nominal and Inflation-Adjusted Direct Medical Spending Attributed to Cancer,
1990-2009
Elkin and Bach. Cancer’s Next Frontier: Addressing High and
Increasing Costs. JAMA 2010;303:1086-1087.
Copyright restrictions may apply.
Cost of treatment for metastatic colon
cancer
(Schrag D. NEJM. 2004;351:317-319)
Reasons for increasing costs of
cancer treatment

Overall increase in spending for cancer care reflects
increases in both price and quantity of care


Between 1991 and 2002, the proportion of breast cancer patients
receiving chemotherapy and the average cost of the
chemotherapy both roughly doubled. Similar trends have been
observed for other types of cancer.
The increases in price and quantity reflect the introduction
of new medical technology

Newer cancer therapies are more expensive than the prior
standard of care; they also expand the pool of treatment
candidates (e.g., because of broader indications, reduced side
effects).
Elkin and Bach. Cancer’s Next Frontier: Addressing High and Increasing Costs. JAMA
2010;303:1086-1087.
Pharmaceutical cost increases
also raise concerns

Spending on drugs rose from $40.3 billion in 1990
to $216 billion in 2006 (more than a three-fold
increase in real dollars)

Drug spending about 10 percent of total health care
expenditures but has been growing faster than costs for
physicians’ services or hospital care

Kaiser Family Foundation, Prescription Drug Trends,
September 2008, www.kff.org/rxdrugs/upload/3057_07.pdf
What drives increased spending
on pharmaceuticals?

Number of prescriptions dispensed (42%)


Types of prescriptions (34%)


Average prescriptions per capita increased from 7.9
to 12.4 between 1994 and 2006
newer, higher-priced drugs replacing older, lessexpensive drugs
Manufacturer price increases for existing drugs
(25%)
Kaiser Family Foundation, Prescription Drug Trends. May 2007 and October 2004,
http://www.kff.org/rxdrugs/upload/3057_06.pdf;
http://www.kff.org/rxdrugs/upload/Prescription-Drug-Trends-October-2004-UPDATE.pdf
Is increased spending on drugs bad?

Prescription drugs can treat—or prevent—serious
illnesses


But there is considerable over-prescribing—many
people receive





Consider, for example, statins to lower cholesterol and the risk
of heart attacks, insulin to control blood sugar
Prescriptions when they don’t need a drug (e.g.,
methylphenidate)
A brand-name drug when a generic could be taken,
An expensive drug when a less expensive alternative would
work as well (e.g., esomeprazole for heartburn), or
A very costly drug that provides little benefit (? bevacizumab)
Covering very expensive drugs may be done for only
some, and at the same time divert limited funds from
more effective health care, particularly for the poor
Can we afford these drugs?

Bevacizumab (Avastin) (monoclonal antibody to block
blood vessel growth) = $4,000-$9,000/month


Cetuximab (Erbitux) (monoclonal antibody to block cell
growth) = $17,000/month


For treating non-Hodgkin’s lymphoma
SIR-Spheres (radioactive microspheres) = $14,000/dose,
with an overall cost = $150,000?


For treating metastatic colon cancer; also head and neck cancer
Ibritumomab (Zevalin) (monoclonal antibody that binds a
radioactive isotope) = $24,000/month


For treating metastatic colon cancer; also lung and breast cancer
For treating liver metastases from colon cancer
Depends on their benefit—commonly measured in
QALYs
QALYs

QALY = quality adjusted life year
A treatment provides one QALY if it prolongs life for
one additional year in perfect health
 A treatment provides 10 QALYs if it provides 10 extra
years of life in perfect health or if it provides 20 extra
years of life at a quality of life that’s half that of
perfect health
 Allows comparison of treatments for different medical
problems (e.g., hemodialysis and coronary artery bypass
surgery)


Cost-effectiveness can be measured by calculating how much
it costs per QALY of benefit for a particular treatment
When is a treatment cost-effective?

“Expensive” more than $100,000/QALY

NICE rarely accepts above $45,000


“Reasonable” up to $50,000/QALY


NICE may accept up to $45,000
“Very Efficient” less than $25,000/QALY


Steinbrook R, NEJM. 359;19:1977-1981
NICE accepts when no more than $30,000
Most writers use $50-100,000 as upper limit of good
value, but public preferences suggest upper limit over
$250,000

Hirth RA, et al., Medical Decision Making. 2000;20:332342
Some sample QALYs (2002 dollars)
Harvard Public Health Review (Fall 2004)







< $0 (If the cost per QALY is less than zero, the intervention actually saves
money)
Flu vaccine for the elderly
Under $10,000
Beta-blocker drugs post-heart attack in high-risk patients
$10,000 to $20,000
Combination antiretroviral therapy for certain patients infected with the AIDS virus
$15,000 to $20,000
Colonoscopy every five to 10 years for women age 50 and up
$20,000 to $50,000
Antihypertensive medications in adults age 35-64 with high blood pressure but no
coronary heart disease
Lung transplant in UK (Anyanwu AC et al. J Thorac Cardiovasc Surg 2002;123:411-420)
$50,000-$100,000
Dialysis for patients with end-stage kidney disease
Antibiotic prophylaxis during dental procedures for persons at moderate to high risk
of bacterial endocarditis ($88,000) (Med Decis Making. 2005;25(3):308-20)
Over $500,000
CT and MRI scans for children with headache and an intermediate risk of brain
tumor
COST/QALY: Selected Medicare services
Condition/Treatment
Cost per QALY
Treatment for Erectile Dysfunction
$6,400/QALY
*Physician Counseling for Smoking
$7,200/QALY
Total Hip Replacement
$9,900/QALY
*Outreach for Flu and Pneumonia
$13,000/QALY
Treatment of Major Depression
$20,000/QALY
Gastric Bypass Surgery
$20,000/QALY
Treatment for Osteoporosis
$38,000/QALY
*Screening For Colon Cancer
$40,000/QALY
Implantable Cardioverter Defibrillator
$75,000/QALY
Lung-Volume Reduction Surgery
$98,000/QALY
Tight Control of Diabetes
$154,000/QALY
*Treating Elevated Cholesterol ( + 1 risk factor)
$200,000/QALY
Resuscitation After Cardiac Arrest
$270,000/QALY
Left Ventricular Assist Device
$900,000/QALY
The example of bevacizumab



2007 sales of $2.3 billion in US ($3.5 billion
worldwide) to treat about 100,000 patients with
advanced lung, colon or breast cancer
Genentech price: $4,000-$9,000 a month
Cost to private insurers: As high as $100,000 a
year


NY Times, July 6, 2008
What’s the benefit?
Phase III trial of bevacizumab in metastatic colon cancer
100
• Median survival: 15.6 vs 20.3 mo (HR=0.66, P<0.001)
• Error bars represent 95% confidence intervals
Percent surviving
80
Median survival benefit:
4.7 months or 30% increase
60
40
Treatment Group
20
IFL + placebo (n=411)
IFL + Avastin (n=402)
0
0
6
12
18
Duration of survival (mo)
Hurwitz H, et al. N Eng J Med. 2004;350:2335-2342
24
30
Examining the cost and cost-effectiveness of
adding bevacizumab to chemo in metastatic
colon cancer



Randomized trial compared chemotherapy alone vs.
chemotherapy + bevacizumab
Bevacizumab regimen prolonged median survival from
15.6 to 20.3 months (p<0.001)
Cost of extra 4.7 months?



$101,500 (assuming $5,000 per month for bevacizumab)
$259,149 per year of life gained (not quality adjusted)
Other studies have found a cost per QALY between $143,000
and $171,000 for bevacizumab


Howard DH, et al. Arch Intern Med 2010;170:537-542
NICE decided not to recommend for NHS coverage
Examining the cost and cost-effectiveness of
adding bevacizumab to chemo in advanced
non-small cell lung cancer



Randomized trial compared chemotherapy alone
vs. chemotherapy + bevacizumab
Bevacizumab regimen prolonged median survival
from 10.2 to 12.5 months (p=0.007)
Cost of extra 2.3 months?
$66,270-$80,343
 $345,762 per year of life gained (assuming $66,270
cost)


Grusenmeyer PA, Gralla RJ. J. Clin. Oncology.
2006;24(18S):6057.
Do oncologists believe bevacizumab
offers good value?


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Survey of 139 academic med oncologists at two hospitals in
Boston; 90 responded (65% of sample)
Designed to estimate cost-effectiveness of bevacizumab.
Participants asked: How much of a survival benefit would
be needed to justify a drug that costs $70,000 a year more
than standard therapy? Does bevacizumab offer “good
value” for the money?
Mean implied cost-effectiveness threshold for bevacizumab
was $320,000/QALY (median at $280,000).
Only 25 percent of the oncologists thought bevacizumab
provides a good value—those who thought it did not provide
good value tended to underestimate survival benefit or
overestimate costs

Nadler E, Eckert B, Neumann PJ. The Oncologist 2006;11:90-95
Do patients believe bevacizumab
offers good value?

Study of willingness to pay and consumer value for five
high-cost drugs



Bevacizumab, trastuzumab, rituximab, imatinib-mesylate,
erlotinib
A 25 percent reduction in out-of-pocket costs to patients
increases by 5 percent the likelihood that patients will
initiate treatment
Value to the patients was four times the total cost to
patients and insurers of the drugs. However, the valuecost ratio was lower for the oral drugs (for which cost
sharing is lower and for which the ratio was less than one
for more than half of the patients)

Goldman DP et al., Health Sciences Res. 2010;45:115-132


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Is it cost-effective to add erlotinib to
gemcitabine in advanced pancreatic
cancer?
Cost effectiveness analysis of erlotinib in
pancreatic cancer
Study enrolled 569 patients and compared
gemcitabine alone versus gemcitabine plus erlotinib
Median survival improved from 6.0 to 6.4 months
Cost of extra 0.4 months?
Erlotinib adds $16,613 retail for six months or
 $498,379 per year of life gained ($332,252 per year of
life gained for a 4 month course of therapy)


Grubbs SS et al., J. Clin. Oncology. 2006;24(18S):6048
Cost-effectiveness analysis of
trastuzumab in the adjuvant setting
for treatment of HER2+ breast cancer
Trastuzumab (a monoclonal antibody) associated
with a 52% reduction in disease recurrence and
33% reduction in death.


Romond EH, et al. NEJM. 2005;353:1673-1684.
Over a lifetime, cost per QALY $27,800 (range
$18-39,000)

Garrison LP et al. J Clin Oncology. 2006;24(18S):6023
Expensive new drugs and the poor

Cost pressures are similar for privately insured and
publicly insured (or uninsured), but the pressures
are accentuated with the poor
Program and personal budgets are tighter
 Trade-offs are more tangible—when a state’s Medicaid
budget rises, spending on other public services (e.g.,
schools) may decline, and this can pit poor against
other taxpayers

Growth in Medicaid spending
(Medicaid expenditures as percentage
of total state spending)
1987
1997
2007
Iowa
Indiana
Ohio
Illinois
New York
5.0
10.7
10.6
10.1
16.6
13.4
17.6
20.8
23.7
33.4
16.7
21.4
25.9
28.4
28.7
All States
9.8
20.0
21.1
Medicaid expenditures ($ billions)
for outpatient prescription drugs
30
25
20
15
10
5
0
1991
1993
1995
1997
1999
2001
In 2003, Medicaid spent $33.7 billion on drugs (19% of national
spending for drugs and more than 10% of the Medicaid budget).
Expensive new drugs and the poor

Difficult to protect the poor when it’s only the
poor whose interests are at stake
Political decisions driven by interest group advocacy,
and the poor often fare poorly in such a system (but
sometimes their interests coincide with those of more
effective advocates—see formulary restrictions)
 Need to link the fortunes of the poor to those of
others (Medicaid versus Medicare) and need other
systemic reforms to address the wasteful spending
problems

Impact of 2010 health care legislation

Health care disparities should be narrowed
because of expanded access to care. However,
 The
maintenance of a multi-tiered system will
preserve a good deal of the disparity between rich
and poor.
 Most
of the newly-insured poor will receive coverage
through Medicaid
 Not
enough done to counteract the incentives for
inefficient spending on health care
 Still
largely maintains the fee-for-service model
Need to reduce over-prescribing

Important social pressures
The identifiable victim versus saving statistical lives (low
osmolar contrast media and the Canadian experience)
 Physician relationships with industry (consulting fees for
opinion leaders)
 Physician reimbursement (more generous reimbursement
leads to more costly regimens for metastatic cancer)
 Patient desire for a prescription (direct-to-consumer
advertising and cyclyooxygenase-2-inhibitors (coxibs) for
arthritis (e.g., rofecoxib))


Counter-regulation is critical (e.g., preferred drug lists,
global budgets), but some regulations cause more
harm than good (e.g., prescription caps)
QALYs
Major
stroke
0
1
Perfect
health
Dead
Recurrent
stroke
Writing a grant
proposal