Hagop M. Kantarjian, MD
High drug prices are the number one health-care concern of many Americans. The average price of a cancer drug rose from less than $10,000/yr before 2000 to more than $170,000/yr in 2017.1-3 Between 1995 and 2013, the launch price of cancer drugs increased by 10% to 12% every year, and the average wholesale prices of drugs have increased at unprecedented rates.4,5 The annual price of drugs already on the market has increased by an average of 25%, despite competition.6 Cancer drug spending has doubled since 2013 and is expected to double again by 2022.7 This suggests that, unlike in other industries, traditional free-market forces are not working well in health care. Other measures are needed.
Because of the current health-care environment,8 Americans are now also burdened with higher insurance premiums, high out-of-pocket costs, high deductibles, and high copay prescription expenses.9-11 Instead of “choosing wisely,” patients with cancer are choosing to abandon or delay treatment,12 which increases mortality.13 Today, patients with cancer may pay 20% to 30% out of pocket for prescription drug costs, which can easily consume an average family budget.
Given these developments, the Trump Administration has proposed a plan to reduce drug prices in the United States. This editorial is an abbreviated version of an in-depth analysis of that plan.14
Why Are Market Forces Not Lowering Prices?
Market forces work well for drug companies, among the most profitable U.S. industries (20% return on investment), but not for patients. Why is that?
The 2003 Medicare Prescription Drug, Improvement, and Modernization Act (MMA)6,15 included a “noninterference clause”—influenced by the pharmaceutical lobby as a condition to supporting the MMA—which prohibits Medicare from negotiating drug prices. The MMA also included, under Medicare Part D, a standard prescription benefit that forces Medicare to pay for drugs at prices imposed by manufacturers.16
[T]raditional free-market forces are not working well in health care. Other measures are needed.— Hagop M. Kantarjian, MD
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Before the MMA was passed, claims were made that the government does not negotiate effectively but that free-market forces would drive drug prices down to reasonable levels. History showed otherwise, and passage of the MMA became a true financial bonanza for drug companies, resulting in massive increases in drug prices and profits.17,18 If market forces failed to lower prices to reasonable levels, what are the alternative options?
Proposed Solutions to Reduce Cancer Drug Prices
Effective solutions, outlined in many commentaries and editorials, are already part of the health-care policies of other countries. They include the following strategies:
1. Allow Medicare to negotiate drug prices. The U.S. Department of Veterans Affairs, a government agency, does it effectively, as do governments of almost all other countries.
2. Mandate that annual price increases of more than 5% to 10%, adjusted for inflation, be justified by additional research discoveries or benefits after the drug launch, as is the case in other countries.19
3. Allow importation of prescription drugs for personal use across international borders. This is already part of the practice of “medical tourism,” for drugs as well as for many medical and surgical procedures. The price of generic imatinib is $20,000 to $143,000/yr in the United States, $3,000 to $8,000/yr in Canada, and $400/yr in India.20
4. Create a process that would begin after U.S. Food and Drug Administration (FDA) approval, to recommend a fair price based on objective benefits (value-based pricing). Many countries (eg, Canada, European Union, Australia, Japan) have already established mechanisms that recommend a fair price based on a drug’s objective benefits as part of the premarket process.21,22 This is one reason why these countries have lower cancer drug prices.
5. Develop treatment guidelines that include price as part of the drug “value.” This has been proposed by cancer societies,23 but the enthusiasm of these organizations to advocate for lower drug prices has somewhat waned. In 2016, Schnipper and colleagues updated the ASCO Value Framework, which defines value as a combination of clinical benefit, side effects, and improvement in patient symptoms or quality of life in the context of cost.24 However, follow-up studies could not substantiate its benefit.25,26 Other cancer societies (eg, American Society of Hematology, American Cancer Society, Leukemia & Lymphoma Society) have vague or no positions on the issue.*
6. Monitor buyouts of generics manufacturers by large companies, which are aimed to create de facto monopolies for drugs with few alternatives. And monitor and penalize pay-for-delay and anticompetitive strategies used by pharmaceutical companies to delay the availability of generics.27
7. Require the FDA to develop faster and less expensive approval mechanisms. This was discussed by Dr. Scott Gottlieb, the current FDA commissioner.28 An update on the FDA’s current backlog of the number of drugs under consideration, as well as the timelines and costs of FDA approvals, is needed.
8. Require companies to publish the cost of research that justifies the launch price.
‘American Patients First’ Plan to Lower Drug Prices
The administration under President Obama did not address high cancer drug prices effectively, but many of these suggested solutions were embraced by the 2016 presidential candidates. In May 2018, President Trump announced his administration’s plan to lower drug prices, and the U.S. Department of Health and Human Services (HHS) released the document, “American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.”29 HHS Secretary Alex Azar stated that the drug industry’s repeated mantra that it must make large profits to pay for research and innovation was a tired point, and he maintained that the biggest problem was simple: drug prices are too high.30
Effective solutions [to the problem of high drug prices], outlined in many commentaries and editorials, are already part of the health-care policies of other countries.— Hagop M. Kantarjian, MD
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Many health-care experts, reviewing the American Patients First initiative, concluded that the plan is necessary but not sufficient to bend the curve of rising drug prices in the near or long term.31-37 The 50 broad directives of the blueprint can be distilled to 6:
1. Utilize currently available and effective tools to lower drug prices for older people. However, the best strategy to accomplish this—to allow Medicare to negotiate—is off the table. Allowing Medicare to negotiate was one of the President’s campaign promises and should be preserved.
2. Eliminate foreign governments’ “free-riding off of American investment in innovation,” and pressure other countries to pay more for drugs. The “foreign free-riders” myth was invented by the drug industry in the late 1990s and is resurrected whenever the industry is under pressure from campaigns denouncing high prices. This myth has been debunked repeatedly and discussed in several publications.14,38-41 The reality is: Americans pay twice—once to fund research the drug industry profits from and a second time for unjustified high prices, 3 to 10 times more than other countries.19,20 Other countries will not be pressured to pay more for drugs and will not follow our policies that would make cancer drugs unaffordable to their citizens.
3. Require drug advertisements to include the price. The American drug industry’s domestic advertising expenditures in 2017 were $23.3 billion, including $6.1 billion in direct-to-consumer campaigns.42,43 This creates new false markets that increase costs and can be harmful. In fact, it contributed to the current opioid catastrophe in the United States, which in 2017 caused more than 70,000 overdose deaths.44,45 The massive “Go Boldly” campaign, paid for by PhRMA (the drug industry lobbying group), delivers the false subliminal message that if drug prices are controlled, discoveries that cure Alzheimer’s disease and dementia may not happen. This is of course false. Requiring drug advertisements to include the price is useful—a good reminder to patients and the public of the hardships associated with high drug prices.
Many health-care experts, reviewing the ‘American Patients First’ initiative, concluded that the plan is necessary but not sufficient to bend the curve of rising drug prices in the near or long term.— Hagop M. Kantarjian, MD
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4. Prohibit “contract clauses” that prevent pharmacists from telling patients that paying cash for a drug might be less expensive than buying it through insurance. This is a positive step.
5. Prevent “pay-for-delay” and other strategies that companies employ to keep generics off the market. This will also help lower drug prices by stimulating competition.
6. Examine whether the existing rebate system constitutes an illegal form of kickback. As background to this point: The price a patient pays for a drug is determined by a complex process that includes four main players: drug companies; pharmacy benefit managers and third-party administrators of prescription drug programs; insurance companies; and hospital pharmacy outlets and retail pharmacies.14 The drug companies are the most influential contributors to prices, having created a process that gives them complete power to set the launch price of a newly approved drug and to increase the price of existing drugs at will. The pharmacy benefit managers have developed complex rebate schemes that may allow them to profit from both insurers and manufacturers (discussed in detail in reference 14). Drug companies have tried to shift the blame to pharmacy benefit managers, accusing them of fueling higher prices. Unable to grasp the intricate issues, many Americans have given up understanding who is to blame, thus permitting the “blame-game campaign” to reach its objective—an indefinite delay in any substantive legislation that can realistically lower prices.
How Should the Blueprint Be Modified?
In the opinion of many health-care experts, the “American Patients First” blueprint incorporates six necessary but insufficient steps to reduce high cancer drug prices. To be truly effective, it needs to consider and incorporate additional proposals—for example: allow Medicare to negotiate; reduce the launch price of newly approved drugs; prohibit unjustified annual increases of prices; and protect patients from high deductibles and excessive out-of-pocket expenses (which lead to abandoning treatment, worse outcomes, and deaths).
The “American Patients First” blueprint asks 150 questions, seeking additional guidance from health-care experts. This analysis may stimulate further discussion concerning effective solutions to reduce the unaffordable high cancer drug prices. ■
Dr. Kantarjian is Professor and Chair of the Department of Leukemia at The University of Texas MD Anderson Cancer Center, Houston.
Disclaimer: This commentary represents the views of the author and may not necessarily reflect the views of ASCO or The ASCO Post.
DISCLOSURE: Dr. Kantarjian has received honoraria from AbbVie, Amgen, Ariad, Bristol-Myers Squibb, Immunogen, Orsenix, and Pfizer. Dr. Kantarjian’s institution has received research funding from Amgen, Ariad, Astex Pharmaceuticals, Bristol-Myers Squibb, Novartis, and Pfizer.
*Editor’s note: As we went to press, ASCO published an updated analysis of its Value Framework in collaboration with the European Society for Medical Oncology; see related article below.
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