Rising prices for new targeted therapeutics threatens their own success

August 14, 2015

One cancer drug alone could wipe out Canada’s total budget of $12B for prescription drugs. Can this last?

Drug companies bringing out new targeted therapies for rare disorders are asking, and getting, eye-popping prices. Examples include Kalydeco® for one type of Cystic Fibrosis, reported to cost CAD$300,000 per year, or the recently marketed Solaris® for which Alexion tried to get CAD$700,000 per year for Canadian patients (even higher than it was charging U.S. patients). Drug companies argue that these costs are justified because the drugs are showing dramatic results for patients. But because these are for a very small number of patients, and only a few have been marketed so far, our healthcare system may be able to absorb the cost – there are only 90 patients in Canada that might benefit from Solaris, for example. But this won’t always be the case – there are 7,000 rare disorders that may be amenable to drug treatment, and treatments are typically needed life-long.

What really brings it home are the escalating prices for some new targeted therapies for cancer.

Prominent oncologist Dr. Leornard Saltz of the Memorial Sloan Kettering Cancer Center took aim at these at the recent American Society of Clinical Oncology (ASCO) meeting. At the plenary speech, Dr. Saltz focused on the expected high cost of new combination treatment for metastatic melanoma from Bristol-Myers Squibb Co. Although he welcomed the arrival of a “truly, truly remarkable” new therapy, “he said that combining the drugs would cost around $295,000 a patient over nearly one year, which he called unsustainable. If all U.S. patients with metastatic cancer took drugs priced at $295,000 a year, it would cost $174 billion to treat them all for just one year” reports the Wall Street Journal.

Given that Canada’s total public spend on prescription drugs is about $12B, and adjusting for Canada’s population size, that would pretty much wipe out Canada’s total budget for prescription drugs.

Not all new drug pricing seems so far out of line. Although the recently released Hepatitis C drug Harvoni® costs over $1,000 per pill, and a complete course of treatment costs approximately CAD$85,000, this is a one-time treatment with near 100% cure rate for a potentially lethal disease with a very high cost burden (see our July 2015 article about this new treatment). And as outlined in an accompanying article, “Can personalized cancer care be cost-effective?” selecting the best targeted treatment for a patient’s cancer by genetic analysis of their tumour has been shown to be both cost effective and to give better outcomes.

The focus needs to be on how to appropriately price new drugs. The CBC looked into the Solaris story, pointing out that the cost of such drugs has little to do with the development and manufacturing costs. The CBC article also pointed out that much of the basic discovery costs came out of the public purse in the form of academic research funding, which drug companies do not factor into their pricing. Barry Werth of the MIT Technology Review looked into the high prices for two new drugs, Kalydeco® and Zaltrap®, and cites veteran drug maker and former Genzyme CEO Henri Termeer as saying “In determining the price for a drug, companies ask themselves questions that have next to nothing to do with the drugs’ costs. It is not a science […] It is a feel.”

Two efforts underway in Canada should help realign drug pricing. Ontario’s MaRS EXCITE program helps companies develop the evidentiary bundle, including an economic analysis, that a company can bring to the bargaining table to provide a more rational approach to drug pricing. The project “PACE-‘Omics,” led by Alberta’s Drs. Christopher McCabe and Tania Bubela, funded by Genome Canada, aims to develop better decision-making tools “to give policymakers and investors the tools they need to make the right investment decisions on technology development, regulatory pathways, cost-effectiveness and benefit to the Canadian healthcare system.” Together these approaches should help bring a better informed approach to establishing sustainable prices for new drugs.

By: Kathryn Deuchars, Director, Ontario Personalized Medicine Network