Monday, July 27, 2015


They ask, sometime in pure ignorance and oft times with incredulity, “why is cancer care so expensive?”

The rabbit hole is deep and dark, but if you shine the light, you can see the trail of the smoking caterpillar. 

Some try to create cost algorithm based on survival benefit of a drug on cancer care, others are trying to legislate lower costs, while still others reach out for subsidies from the eternal fountain of taxpayer wealth. Life in these United States is indeed interesting.

While searching for a gradient to seek the fissures of thought, let me break it down by category:

Drug development: The claim is that bringing a new drug to market is valued at $2.6 Billion (of which $1.2 Billion are time costs). ① 
Incurred in this cost is the old premise that of the 5000 drugs tested only one enters the market, showing benefit in the petri dish, mouse model and then through human Phase I and II trials leading to FDA approval. That $1.4 billion in actual expense is amortized over the next 7 years of patent protection with a certain Return on Investment or ROI for the risk undertaken by the company. There are quite a few “wrong-headed methodologies” in use there. ② However not all costs are related to drug development, some are purely annual price increases to keep up with the earnings per share (EPS).

Insurers: The Cost to insurers is defrayed easily by the price of the premiums. In essence for all the talk of “Risk Mitigation” from the insurers, there is little risk involved, except the agency risk of losing a bonus for the managers should the benchmark of the stock price not reach the intended target. Overall unless you happen to take some real wild risks like AIG with Credit Default Swaps and the like, your chance as an insurer of an extremal event is nigh impossible. ③ Meanwhile as the money trail indicates that the Insurers paid $102 million to lobby the congress to tweak the Obamacare and in return the Health Care Index has risen by 305% over the past three years! Stupendous Returns eh?

Supply and Demand: If a drug is developed for a condition that afflicts only a few souls, it is given an orphan drug status. The price of the drug development will always be high to amortize the drug development costs. But a drug for an affliction of the masses should not be that expensive. The case in point is a company named Dendreon and their drug product Provenge used for Prostate Cancer. The Provenge cost was $93,000 per treatment and enhanced survival by only 4 months led to the eventual decline in the fortunes of that company into a bankruptcy. ④ 

The fault line in this exceedingly pure appearing surface had been discovered. But there were two important lessons from that case; one, the concept of using immunity against malignancies and two, careful how you price the product with limited benefit. Careful of the faint light that beckons, like a mirage, and then dies. 

Oncologists in delivery of care: Much is made of the physician who uses the expensive medicine for his or her own benefit. Fortunately except in a select few unfortunate cases, the majority of the physicians use cancer drugs based on the data they have for the fullest benefit to their patients. This might appear a heresy to the journalists since it does not follow their narrative, but based on talking with my colleagues, the foregoing is a fact. The problem in most cases is the transparency of the drug cost itself. We as oncologists offer treatment on the basis of the best benefit against the malignancy and not necessarily based on cost to benefit ratio. We are after all doctors and not businessmen or women. Our purpose is to heal. And therein is the crux of the matter. Big Pharma and Biotech companies know our ethos and price their products according to their cost plus ROIs. Unfortunately more often than not the “studies” being quoted are based on a low “n” and tortured statistics based on assumptions that carry their argument. The studies are touted as the next best thing since sliced bread! ⑤. The fault may not fall too far from the physicians either at times when more expensive drugs are used where cheaper ones would suffice. The human dignity is best served through truth.

Mini-incrementalism:  There are very few large leaps in oncology patient care, more of the medical literature litters the landscape with mini-incrementalism in benefits through the tortured use of Progression Free Survival or PFS. Unfortunately half of those studies cannot be verified or validated. The purpose in some cases is a continuous source of incremental revenue. This is by far the most destructive force in medicine today. Read here on...PFS

800lb Gorilla: The Insurer-Lobbyist-Expert-Middling-Manager remains the big culprit. Realizing that from 1970 to 2009 physician population increased minimally  less than 5% in spite of the total population of the United States that grew to 320 million, the administrators however grew by over 3000% according to the Bureau of Labor Statistics (BLS).

To apply the Supply – Demand metrics to the oncology dilemma is akin to creating a skin in the game for the two main entities concerned; the patient and the physician. If the patient cannot afford the medication then the volume will dry up and the cost of the product will of necessity go down as long as the intermediaries are not in the process of processing these payments and extracting their bounty. Already China rejected the patent for Solvadi ($84,000 drug against Hepatitis C) India and France successfully negotiated the cost at 70% less. But in truth if one looks at the cost of the Hepatitis C infection, its complications and overall health costs of are for the illness, the cost of Solvadi is actually a fraction of that expense ⑥. Using mandated price controls however is a top-down measure that governments and policy makers use in an attempt to control price and show how they are working for the public benefit. Alas price controls never achieve their objective of cost reduction but in effect becomes the force du jour for control of care and higher prices.

We have come a long way baby! True. But where we are going is not that long. At this rate it will be a long hard winter soon and the chilling frost will last a very long time. 


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